Will High-Priced Fuel Derail Pending Diesel Launches?
April 03, 2008

By Bill Visnic

There’s only one thing worse than three dollars for a gallon of gasoline:  Four dollars — and more — for a gallon of diesel.

Diesel-fuel prices are hitting record highs and this week, in what is emerging as a new-age rite of spring, truckers are protesting and the U.S. House collared executives from the five largest U.S. oil companies to once again do some explainin'.

The diesel-fuel price spurt comes at a rather inconvenient time for several automakers who are laying the finishing touches on U.S. marketing plans for a new generation of diesel-powered passenger vehicles they hope will win the affections of consumers weary of sub-20-mpg fuel economy.

Later this year BMW will offer the option of diesel power in its X5 crossover and best- selling 3-Series model ranges. Volkswagen will launch a new diesel Jetta in the same time frame, with other VW and Audi models to follow. At the recent New York auto show, Nissan unveiled the 2009 Maxima sport sedan, which will have a diesel option for 2010, and rival Honda’s Acura division also plans to let diesel carry its environmental banner for the U.S.

The Detroit Three automakers each will have diesel-engine variants of their full-size pickups beginning in 2010.

Daimler’s Mercedes-Benz is already selling several diesel-powered models, but in just 42 states. Its new Bluetec emissions technology — essentially the same as will be used by BMW and most others — will enable nationwide diesel-powered Mercedes SUVs in the fall.

But will blistering diesel-fuel prices derail the effort to explain the advantages of diesel to the U.S. buying public?

“It’s not a show stopper,” insisted Allen Schaeffer, executive director of the Diesel Technology Forum, a consortium of diesel-related companies and members.

But Schaeffer admitted spiking fuel prices have become “one small footnote” to the pending diesel-vehicle rollout that appeared to have many factors in its favor: high gasoline prices and increasing concern about greenhouse-gas emissions. The roughly 25 percent better fuel economy of diesels goes a long way toward reducing both concerns.

Nonetheless, Schaefer said he believes earnest consumers — many of whom, thanks to high fuel prices, have been educating themselves about their options — must “take the long view” about diesel as an investment. Even if the price of diesel is markedly higher than gasoline, history has shown longer periods of ownership offer demonstrable “payback” on the investment for both the engine and, now, the fuel.

Rich Brekus, BMW North America general manager of product planning and strategy, is preparing to launch the diesel X5 and 3-Series and is mobilizing his company to demonstrate how BMW’s performance orientation and diesel power is a credible — and environmentally responsible — proposition.

Brekus said $4-per-gallon diesel isn’t going to make the job of convincing potentially diesel-wary consumers any easier, but acknowledged “our (sales-) volume expectations are not wild. We have relatively realistic expectations for diesel.”

Brekus also said all BMW's current customers have to feed their gasoline engines premium gasoline, and premium’s price differential with diesel is not as wide. “All fuel prices are going up,” he said.

Photos by Manufacturers
1 - BMW X5 diesel
2 - Audi's diesel line-up

Bill Visnic is a senior editor of Edmunds’ AutoObserver, specializing in product and technical areas. He was senior technical editor at Ward's Automotive Group.

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