VW finds demand 'very high' for cleaner and quieter engines

VW finds demand 'very high' for cleaner and quieter engines

November 13th, 2011 by Mike Pare in Business Around the Region

Stephen Thomas, of Cleveland, Tenn., recently took delivery of a Chattanooga-made diesel Passat.

Photo by Tim Barber/Times Free Press.

Stephen Thomas picked up his new diesel-powered Passat in Chattanooga last week at Village Volkswagen, expecting to save big on fuel costs from his old Saturn Aura.

The Cleveland, Tenn., traveling supervisor said he wasn't disappointed, getting about 42 miles per gallon after putting about 100 miles on the Chattanooga-made VW.

"If you look at it, I'm getting a 50 percent increase," he said.

According to Volkswagen, the company is selling all the diesel versions of the Passat it's making at the Chattanooga assembly plant.

"Demand is very high," said Guenther Scherelis, general manager of communications for VW's Chattanooga operations.

VW hopes its diesel cars will help it stake out a larger share of America's auto market. VW officials said they have set a target that 30 percent of all Passats sold in the U.S. will run with diesel engines.

But other auto companies, such as General Motors and Mazda, are eyeing diesel car sales as they plan to introduce new vehicles to grab a slice of that market. Currently, it's estimated that about 1 percent of U.S. cars are diesel.

Ivan Drury, an analyst for Edmunds.com, said that with fuel prices at historically high levels, people are paying more attention to diesel cars.

He also said that buyers don't see diesels to be as complex as fuel-sipping hybrids.

"People are paying a lot more attention," he said.

VW's Passat TDI [turbocharged direct injection] is rated by the U.S. government 31 miles per gallon in the city and 43 miles per gallon on the highway. That's compared to 21 city and 32 highway for most of its gasoline-powered Passats.

When Village Volkswagen took more than two dozen orders for the all-new Passat before the car officially arrived at showrooms earlier this year, nearly all were for the sedan's diesel version, said Ron Kwiatkowski, the Chattanooga dealership's new vehicle sales manager.

"People like the miles per gallon and the longevity of the diesel," he said.

Allen Schaeffer, executive director of the Diesel Technology Forum in Washington, D.C., said the so-called "clean diesel" technology VW uses has been around for about four years.

"People can see what the new generation offers," he said.

The diesels differ from the older versions Americans knew a generation ago, which were seen as polluting and noisy. Until about a year ago, purchasers of VW's clean diesel autos were eligible for the same "green car" federal tax credit as buyers of hybrids. The benefit expired for diesel vehicles.

Schaeffer, of the nonprofit trade association, said modern diesels are pleasurable to drive, get better fuel economy than comparable gasoline engines and have a lot of torque.

COMPETITION COMING

The Tennessee-made diesel Passat owns that midsize car space, he said.

"Knowing VW and what it has done, there's no reason to believe it won't be a smashing success," Schaeffer said.

But competition is heating up.

According to reports, Mazda could produce a new midsize diesel sedan next year.

The Detroit News reports the diesel version of the popular Chevrolet Cruze is set to arrive in 2013. The Cruze is a little smaller than the Passat and likely would directly compete with the Jetta.

On the high end, Mercedes-Benz' S350 Bluetec will mark the return of a diesel-powered S-Class to America after a 17-year absence, according to Diesel Technology Forum.

Audi, VW's luxury brand, and BMW already have diesel offerings in the U.S.

"We'll see more [diesel cars] down the road," Schaeffer said.

However, Kwiatkowski said he has heard VW can only make a limited number of diesel Passats in Chattanooga because the German plant where the engine is produced can't deliver more to the local factory.

"I understand the demand for diesel has taken off so quickly that the plant in Germany can't produce enough," he said. Kwiatkowski said he has heard rumblings about building another engine plant to produce the diesel power plants.

A question about future diesel use in general is that the fuel is more expensive in the U.S. than gasoline.

Nationally, diesel fuel averaged about $3.91 per gallon last week, compared to $3.40 a gallon for regular unleaded gas, according to AAA's fuelgaugereport.com.

Schaeffer said the cost of diesel is "definitely a consideration." Diesel prices are higher likely due to demand worldwide, he said. Schaeffer said the U.S. exports diesel and noted that much of the rest of the world uses more of the fuel for vehicles as well as farm equipment.

Still, Schaeffer said, the cost difference in the U.S. between diesel and premium fuel is not that much, only about 20 cents.

At the same time, he said, automakers are moving to put more diesel vehicles in their American lineups to meet new and future government fuel efficiency requirements.

Schaeffer said carmakers are looking "at all the possibilities. They're going to need all the tools to continue to make products customers want to buy and sell in a new fuel-economy constrained world."