A Diesel In Every Drive?

New engines spark a race for market share in Europe

Thanks to breakthroughs in fuel-injection technology, European auto makers are marketing diesel-powered cars that are peppier, cleaner, quieter, and more efficient than ever. They are now one of the fastest-growing segments of Western Europe's 14-million-unit annual auto market. Their share will soar from one-quarter last year to one-third by 2003, says Peter Schmidt, editor of British newsletter Automotive Industry Data. The booming sales have sparked a fight for market dominance, pitting current leader Volkswagen against a rush of new entries from BMW, PSA Peugeot Citroen, Fiat, and Mercedes.

The diesel trend is born of engine envy. Volkswagen has enjoyed near-monopoly status in the European diesel car market, with its Golf TDI by far the best-seller. VW took the lead away from Mercedes-Benz and Peugeot in the early '90s, when it introduced direct-injection technology. Putting fuel and air directly into cylinders improved fuel consumption by 15%, allowing VW to charge premium prices for its cars. The Golf TDI, for example, starts at $16,737, vs. $14,158 for the gas-powered model.

RAIL ROADSTERS. Rivals are now fighting to get a share of those fat margins. They're doing that with the help of Fiat, which invented a new kind of fuel-injection system in 1997 called common rail. Each injector is connected to a single rail that runs the length of the engine, allowing fuel to be pumped at high pressure through shorter fuel lines into each cylinder. Combined with an electronic monitoring system that calculates the exact amount of fuel needed, this method leads to more efficient burning of fuel. Fiat, which offers the system on all of its models, has also sold a manufacturing license to German component maker Robert Bosch Group, and it now supplies several carmakers.

The result is a technology standoff that threaten's VW's dominance. Customers don't care how the fuel gets into cylinders, as long they have an affordable car that's fun to drive. Diesel has long been 30% cheaper than gasoline in Europe, where gasoline prices can top $4 per gallon. And now even performance is no longer an issue. BMW made that point in June last year, when its two-liter, four-cylinder turbo diesel won a 24-hour race in Germany.

A Diesel in Every Drive?
A Diesel in Every Drive?

New diesel entries are coming in all price ranges. Using the Fiat system, Audi and BMW are preparing to launch the first diesel-powered V-8 models by the end of the year, and Mercedes will follow next year. The Audi A-8 version, due in September, will sell for an estimated $65,800. At the lower end, the VW Lupo 3l TDI mini, priced from $14,158, goes on sale this month.

The huge growth rates for diesels could slip in the middle of the next decade, notes Schmidt of AID, as carmakers apply improved fuel-injection technology to gas engines as well. For now, though, any European consumer with an eye on fuel costs just can't seem to resist those snappy new diesels.

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