VW banking on clean diesel technology

VW banking on clean diesel technology

April 16th, 2010 by Mike Pare in Volkswagen

Volkswagen will be North America's only carmaker producing both gasoline and diesel midsize sedans when it starts operation in its Chattanooga plant next year, according to the auto company.

VW is projecting up to 30 percent of its new sedan's sales will hold its clean diesel engines, and it's banking on a marketplace that's changing its opinions about the fuel.

"For most Americans, it's a fairly new technology," said VW spokesman Christian Buhlmann about the company's diesel engines launched in 2008 in the United States.

Contributed rendering This sketch was released by the bBoard of Volkswagen AG to provide a more realistic idea of the car's design. While the New midsze sedan will undergo some degree of design evolution before it begins commercial production. This sketch shows the general outline and concept of the vehicle.

He said the German automaker already is seeing solid diesel sales.

In March, almost 7,000 of VW's 22,000 sales in the U.S. were diesel vehicles, he said.

"One month, it's a quarter. One month, its a third" of sales, Mr. Buhlmann said.

When VW unveiled its TDI (turbo-diesel-injection) engines in the U.S. two years ago, it countered what some Americans recall as the loud and smoky diesels of a generation ago.

The TDI is a cleaner-burning engine than even its gas-powered counterpart in regard to carbon dioxide emissions, according to VW.

Mr. Buhlmann said VW's diesel's achieve better fuel economy than gas power plants as well. For example, the gas-fueled compact Jetta gets an average of 25 miles per gallon, while a similar TDI logs 34 miles per gallon, according to Edmunds.com.

"It offers a tremendous amount of torque," Mr. Buhlmann added about the diesel engine's performance.

FUEL PRICES

Industry analyst Erich Merkle of Autoconomy.com said future diesel sales of the yet-to-be-named sedan will depend a lot on the price of fuel.

"If the price of gas goes up dramatically, (fuel) efficiency becomes more important," Mr. Merkle said. "That's more favorable for diesel."

Currently in Chattanooga, diesel fuel is selling for $2.92 a gallon, about 20 cents more than gas, according to AAA's Fuel Gauge Report.

In addition, the purchase price of diesel vehicles compared to their gas-powered cousins will be a factor on future sales, Mr. Merkle said. TDIs often cost several thousand dollars more than a similar gas alternative.

To help soften the cost, VW officials said its clean diesel vehicles earn an alternative energy federal tax credit. While it's too early to know how much of a credit the sedan will garner, buyers of a Jetta receive $1,300 while the Touareg sport utility vehicle gets $1,150, according to VW.

Meanwhile, VW's future diesel midsize sedan will face stepped-up competition.

VW DIESEL SALES

Vehicle and percent of total U.S. sales in March:

* Touareg, 45 percent

* Golf, 42 percent

* Jetta, 22 percent

Source: VW

Japanese automaker Mazda announced during the New York International Auto Show this month it plans to bring a diesel-powered midsized sedan to the U.S. in 2012.

Additionally, some of VW's competitors sell higher-end diesel vehicles in the U.S.

Still, Mr. Buhlmann said VW is the world market leader in diesel sales.

"No other carmaker is selling more than we do," he said.

VW officials want its new sedan to compete head-to-head with Toyota's Camry and Honda's Accord.