Diesel Isn’t the Fuel of the Future

Most automakers are ditching plans to beef up production of diesel cars as a way to meet tougher federal mileage and emissions regulations. They now think that making diesels that are competitively priced will cost a mint and worry that down the road, Uncle Sam will tighten curbs on nitrogen oxide emissions.Beginning this fall, they’ll go like gangbusters on hybrids, with Ford, General Motors, Toyota and Nissan bringing out new hybrid models and more gasoline-electric versions of current vehicles.

Carmakers are betting that costs will come down rapidly, with sticker prices just a few hundred dollars more than gas powered cars by 2015, thanks to advances in technology and increased production. Today, hybrids are still $1,500 to $2,000 more costly than gas versions. The differential for diesels is at least twice that much.

Automakers also fret that no matter what the sticker price on a diesel powered car, most consumers will shy away from buying one. “It is a matter of consumer perception, and the gasoline hybrid gets a lot more green-image mileage in the U.S. than diesels,” says Aaron Bragman, an auto analyst with IHS Global Insight, a business consultancy. No amount of jujitsu advertising can alter most consumers’ perception that it also costs a lot more to fill a car tank with diesel fuel than with gasoline, Bragman says.

From just $107.88 $24.99 for Kiplinger Personal Finance

Be a smarter, better informed investor.

CLICK FOR FREE ISSUE

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

Diesel is still a go for European makers, including Audi, BMW, Mercedes-Benz and Volkswagen, and they plan to increase U.S. sales. Of course, most of these cars will be ultra-spiffy luxury models, whose buyers aren’t much concerned with engine price premiums or fill-up costs. Diesel models are the European automakers’ stock in trade, and the majority of vehicles on the Continent’s roads run on the fuel.

Honda’s planning a different route altogether: Expanding its high mileage gasoline and hybrid offerings over the next few years and then building hydrogen fueled vehicles. It has set up a production plant in Japan to turn out 200 FCX Clarity-brand cars, which will use onboard fuel cells to convert the hydrogen to electricity to power the motor and recharge batteries.

These cars’ only emissions will be water vapor. A tiny fleet of Claritys is getting road trials in California, where consumers are tooling around freeways and local streets, providing feedback to Honda on handling and ease of use. They’re willing to pay $600 a month in lease charges for the chance to drive them.

But you won’t see many hydrogen fueled cars on the road for eight to 10 years. The holdup isn’t technology, but the lack of hydrogen filling stations. There are only about 60, about half of them in California. Elsewhere, filling stations are largely located at airports and used to serve specialty vehicles that ferry luggage and fuel, for example.

For weekly updates on topics to improve your business decisionmaking,

click here.