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Sunday, December 6, 2009

Don't write off diesels yet

In having my students research the green strategies auto companies a few years back, it was clear that Toyota bet heavily on hybrids, Honda on fuel cell cars, and the Germans on diesels. Since then, the Prius has been on a tear, with everyone else scrambling to catch up — but the race isn’t over yet.

On Thursday, the Audi A3 TDI was named “Green Car of the Year” at the LA Auto Show. The judges included Jay Leno and Carroll Shelby (as well as the head of the Sierra Club and Jacquest Cousteau’s son.)

The Audi has the same 2.0 diesel engine as last year’s winner, the Volkswagen Jetta TDI, but wrapped in a sportier package. The Audi gets 42mpg, 50% better than its gasoline equivalent.

For years, Volkswagen’s (and Daimler’s) big Euro-centric bet on turbodiesels seemed myopic as the rest of the world went a different way. Also, we couldn’t even buy them in California because of our own special emissions requirements.

However, with a nationwide shift to low-sulfur diesel in 2006, Volkswagen has been able to offer its “clean diesels” in the US. I think this is a great development, for three reasons.

First, as readers of my other blogs know, I’m a big believer in free markets and competition. Competition for the Prius and other hybrids will only make them better and more efficient, whether or not people choose them or something else.

Second, hybrids and particularly electric vehicles have some serious unresolved issues. They have a high up-front purchase cost — one the government cannot afford to subsidized forever. Their total lifecycle cost is unknown. There is the question of what to do with the battery when the car is junked.

Meanwhile, diesels are a proven 100-year-old technology and are known to last longer than the equivalent gasoline engine, with a lower purchase price than equivalent hybrids. Diesels also scale better to larger vehicles, something the hybrids really haven’t done (the GM “partial hybrid” SUVs notwithstanding).

Finally, if the question is reducing global CO2 emissions, the jury is still out as to what is the best way to do that. Diesel is certainly going to be the approach that Europe uses. Given their high fuel prices and interest in green policies, the penetration rate of high-efficency diesels suggests that they deserve a second look. (It could also indicate a nationalistic industrial policy. Sigh.)

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