Diesel provides real savings at the pump and a lower total cost of ownership due to higher residuals. [fimg=left]http://www.cleanmpg.com/photos/data/501/2012_VW_Passat4.jpg[/fimg]Wayne Gerdes - CleanMPG - Oct. 18, 2011 The 2012 VW Passat TDI – $25,900 to start and a 31/43 EPA city/highway rating is yet another great turbo diesel addition for the open road. Oakbrook Terrace, IL -- At the October Midwest Automobile Media Association (MAMA) luncheon, Lars Ullrich, the director of Marketing for Bosch Diesel Systems North America and Jeff Breneman, the Executive Director for the U.S. Coalition for Advanced Diesel Cars were on hand to provide Chicago area journalists a look into the crystal ball to assess the diesel marketplace of today and its future promise for tomorrow. Rising fuel prices and CAFÉ standards through 2025 under the guise of greenhouse gas emissions reduction are prompting consumers and manufacturers alike to consider much more fuel efficient automobiles in both the near and intermediate term. In fact, so much so that there is currently an explosion of 40 + mpgUS city or highway rated automobiles available that did not even exist just three years ago. Think of all the Honda, Hyundai, Kia, Ford and Toyota hybrids and non-hybrids whose Monroney’s now bare the magic 40 mpg rating and you get the idea. Diesel 40 mpg highway rated VW Jetta TDI’s have been with us for quite some time and like the proliferation of fuel efficient hybrid and conventionally powered non-hybrid/non-diesels in recent years, we are going to see many more diesel fueled automobile choices for the North American consumer through all-new turbo diesel offerings just now being planned for near term release. A Look Back Prior to the financial crisis of 2008 and even to this day, we have reported on the promise of diesel as a cursory look through our CleanMPG diesel forums bares witness. As far back as 2005, US consumer based Diesel automobile market share forecasts were running as high as 10% for 2008 looking forward which of course did not occur. In addition, a special diesel powered vehicle was supplied by Honeywell in the form of the 2007 European Honda Civic iCDTi 5-door hatch in which we were allowed to drive for both a review and for a cross country promotion tour that proved to hold tremendous promise for North American foreign oil dependence reduction. It did that and more by allowing a ridiculous 85.5 mpgUS over 1,765 miles of Chicago area commuting! CleanMPG Reviews the 2007 Honda Civic 2.2L iCDTi Turbo Diesel - Shot across the bow. The Diesel invasion of America is about to begin. To put this single drive into perspective, we have driven hundreds of hybrid and non-hybrid/non-diesel vehicles since and nothing other than the very expensive Plug-ins and limited all-electrics have provided anything close to that level of fuel economy! Prior to the crisis, Honda was all but promising to bring their even more fuel efficient 2.2L iDTEC over in an Acura TSX. BMW was readying the launch of their 335d and X5d 3.0L performance turbo diesels. Audi was readying their A3 TDI (2.0L diesel out of the Jetta) and Q7 TDI with the 3.0L diesel plus promising a Q5 TDI to follow soon thereafter and Mercedes was touting their BlueTEC diesel equipped E-Class. [fimg=right]http://www.cleanmpg.com/photos/data/501/1_71_gasoline_-_2_99_diesel_gas_price.jpg[/fimg]In the summer of 2008 the supply and demand for gasoline was turn upside down July of 2008 saw gasoline prices spike to a US national average of $4.16 with diesel climbing even faster and farther reaching an unthinkable $4.77 per gallon just a week later. With the sudden collapse of the economy through the fall and winter months of 2008, a large decline in gasoline demand ensued creating a glut with gas prices falling precipitously. In fact, over a 60% price decline was experienced in just 6-months settling at a US national average of $1.67 per gallon just after Christmas of 2008. Diesel prices during the period fell as well but not nearly as far or as fast. Diesel prices dropped 49% to $2.33 during that same week, leaving an average $0.66 gap between gasoline and diesel at the pump. Traveling through Oklahoma while heading to the LA Auto Show in November of 2008, this particular Shell (shown right) was as foreboding to the future of diesel as an Oklahoma twister about to wreak havoc on a small town in its damage path. No logical person would pay $2.99 for a gallon of diesel when you could buy a gallon of gasoline for $1.71. A diesel automobile purchase no matter the 25 to 30% fuel savings on an mpg basis was anything but the smart choice and spelled doom for the fledgling return of the diesel to American shores. Two additional factors that may have influenced manufacturer’s decisions to delay or cancel diesel releases were the upcoming more stringent EPA automobile emissions requirements and the costs for new and as of yet unproven diesel emissions systems. Diesel – The second dawn of a new era in US fuel efficient transportation With the slightly more expensive diesel to gasoline fuel price differential falling to a more normal and expected 4% year over year average, what is the outlook for diesel in the US? According to Bosch, we should expect to see 10% of all new light duty vehicle sales equipped with a turbo diesel engine by 2015. We have seen this same projection in the past but this time there are a number of very important reasons for this projection to prove accurate. Namely higher fuel costs, future Corporate Average Fuel Economy (CAFÉ’) requirements, education about diesels normally lower Total Cost of Ownership (TCO) and the US consumer’s desire to drive something different than their neighbor and co-workers. Consideration and Take Rate Consideration is the percentage of buyers that would consider purchasing a diesel automobile. As displayed in the graph, consideration of a diesel powered automobile for the average consumers next purchase has risen steadily since the low of 13% in 2006 to the recent somewhat stable 30% in August and September of this year. It helps that VW, Audi and BMW have greased the diesel buyer consideration skids with diesel promotion the last few years which is no different than any other auto manufacturers advert budget. Take Rate Take Rate is the percentage of automobile buyers that actually choose a diesel or hybrid when another conventional powertrain exists for the same vehicle. Of course this would exclude vehicles like the Toyota Prius, Lexus CT200h and Chevrolet Volt since there is no actual true choice for a conventionally powered drivetrain substitute. Take rates for a diesel are six times that of a hybrid. We have to be very careful with this conclusion however as the universe of hybrids is much larger than diesels and some like the BMW ActiveHybrid X6, VW Touareg Hybrid, and Yukon/Tahoe/Silverado Hybrids are so overpriced compared to their conventionally powered counterparts that they skew the Take Rate and Hybrid premium calculations all by themselves. [fflash=right]http://www.youtube.com/v/LrQGsip1ziU?version=3[/fflash]Johan de Nysschen, The President Audi of America: “If one third of the US cars, PU’s and SUVs were diesel powered, America would save one and a half million barrels of oil every day. That is about the same amount of oil that we import from Saudi Arabia.” Total Cost of Ownership Diesel and Hybrids Offer Consumers Much Better Long Term Value The study by researchers at Carnegie Mellon University was underwritten by Bosch and noted diesel's better fuel efficiency and residual value (up to 30 percent higher than traditional multi-port-fuel injection (MPFI) gasoline-powered vehicles) is what made the difference. Nothing ground breaking was released as most here already know. The study, titled "Comparing Resale Prices and Total Cost of Ownership for Gasoline, Hybrid and Diesel Passenger Cars and Trucks," also found that the price differential between a diesel passenger car or hybrid vs. a traditional MPFI gasoline-powered vehicle could be recouped in less than 18 months of driving. In addition, diesels and hybrids deliver on average of 30 percent better fuel economy than their gasoline counterparts. All of this translates to savings for the consumer over the longer run and savings for the country in terms of oil dependence and our mounting trade deficit. For their study, researchers used auction data from Manheim Auctions, a wholesale vehicle operator and Cox Enterprises Inc., to evaluate the actual resale values of diesel and gasoline vehicles. The team then compared resale values with the total cost of owning and operating diesel- and gasoline-fueled passenger cars and light-duty trucks. Both the Hybrid and Diesel come out ahead which makes either a “Best Choice” as we have been promoting for over half a decade. Diesel Fuel Infrastructure Diesel Fuel Infrastructure is already in place with over 80,000 of the 170,000 gas stations in the US carrying diesel fuel. Diesel Market Share In 2010, turbo diesels held a slight market share lead over Hybrids in the US to the tune of 2.6% vs. 2.4%. JD Power and Associates own study is expecting diesel and hybrids share of the US automobile marketplace to rise almost in unison with the following projections through 2020. US Light Duty Vehicle Sales Forecast by Fuel Type Electrics In the JD Power and Associates, US Light Duty Vehicles (LDV) Demand by Fuel Type Breakout graphic posted above, market penetration of EVs of all types will not reach 1% by 2020. The reason is price. After as many as one-hundred stories on the Volt, the electric revolution letdown began on the day the Volt’s pricing was released. It Is Official… Volt Priced at $41,000. 4-seater compacts do not cost $40,000 + USD when the included 16 kWh Li-Ion pack costs just $10,625 USD OEM. The Prius_PHEV pricing released last month brought about a similar disappointment. An additional 3 kWh sized pack does not add $7,000 + to the price of its standard hybrid counterpart. Government entities with unlimited printed dollars from tax payer coffers can afford to purchase fleets of the overly expensive PHEVs. Unfortunately, the reality for most everyone else is the purchase of a Prius PHEV or Volt is out of reach. Reality of the most basic Electric Charging Infrastructure At the Toyota Sustainability Seminar in La Jolla, CA earlier this year, University of Colorado-Boulder Professor of Engineering Jan Kreider was on hand to enlighten us on the realities of an electric vehicle infrastructure build out and the divergence of costs between what the DOE has publically promoted vs. the reality of a public charging station retrofit of a new public parking garage. According to the DOE, the cost of 120V charging is essentially nothing if charging from a 120V wall outlet. Level 2 chargers installed were expected to cost < $2,000 in a standard commercial building retrofit. Level 3 chargers installed in a commercial building retrofit were expected to cost between at $30 to $40,000 USD. A University of Colorado-Boulder Electric Vehicle Infrastructure Study was setup to fact check the DOE. A blind bid contract was created and given to 3 different Boulder area electrical contractors to retrofit a new but existing 300-space parking deck with 90% Level 2 240V chargers and 10% Level 3 480V chargers. When the bids came back, the real world costs to retrofit the buildings parking spaces turned out to be not < $2,000 per parking space but $12,400 USD per 240V connection and $106,000 USD for the 480 V Level 3 charge connections! This was 3 to 6 times greater than DOE estimates for a commercial building retrofit. Jan Kreider, University of Colorado-Boulder Professor of Engineering: Legislation and Technology Neutrality On the legislative front, the Coalition for Advanced Diesel Cars is attempting to level the playing field with the goal of making sure a fuel efficient diesel automobile has the same chance at being parked in your drive as HEVs, PHEVs, BEVs and conventionally powered non-hybrids do today. A statistic of note hampering the diesel automobile, from a fuel economy standpoint, is the fact that the current city/highway EPA test cycles developed in the late 60’s through mid 70’s revealed a 45% highway/55% city split for the typical driver in 1975. Today’s driving reality is completely different with an actual 57% highway, 43% city mix. Imagine the most fuel efficient full hybrids available today with city/highway ratings based on a 43% city/57% highway test cycle? Except for Hyundai/Kia’s excellent highway fuel economy capable mid-sized hybrids, most would find their combined ratings decreased or lowered by a few mpg’s. Similarly, the diesel offerings would find their combined ratings rising. Given the simple fact that a modern day diesel engine driven down the highway is providing close to 40% thermodynamic efficiency by comparison to the best hybrid in the high 30% range and a conventionally powered automobile in the high 20% range, the diesel is a force to be reckoned with. In other words, the EPA test cycle is promoting the less relevant city cycle by comparison to our daily realities due to almost 4 decades of US demographic changes. How future changes to the EPA test cycles and percentage mix is still unknown. However, we can educate future diesel automobile purchasers about the discrepancies in the EPA test cycles and ratings. Diesel Taxation Eliminating the $0.06 excess Federal Diesel Fuel Tax is another area where the field should be leveled. If OTR diesel powered big rigs cause most of the damage to today’s roads and bridge decks, the $0.06 tax per gallon tax is not paying for road maintenance. Similarly, diesel fueled cars are being penalized for using the same fuel while providing the American populace with exactly what diesels are supposed to provide. To save fuel and reduce our dependence on foreign oil. Ethanol? Why do we even bother with US corn based ethanol today? And there are still provisions in the tax code crediting mainly FSP FFV’s with > 100 mpg for CAFÉ purposes Conclusions From the data above, Diesels are finally going to be given a chance to sink or swim on their own merits with a somewhat level playing field in which we can choose one drivetrain type or another. Super diesels in Europe account for 50% of the automobiles on the road and there should be no reason not to expect at least a 10% share here in the US? The across the board fuel savings alone are almost incomprehensible. Ahead we have at least 12-years of stable emissions regulations including future Tier III, therefore, diesel emissions controls are no longer a hurdle. Pricing is inline. Average diesel fuel costs are closing in on gasoline with US refinery upgrades coming online. Diesel automobile pricing is reasonable and TCO is a slam dunk. Is it not about time we see FSP’s with a gas only option now appear with a reasonably priced diesel option as well? In addition, there are number of diesel surprises on the horizon. We know about the previously announced 2012 launches of the Mazda 6, VW Beetle, Audi Q5 and A8. We also have a little knowledge on 2013 launches of the Audi A6 and A7 and the much anticipated 2013 Cruze with the 2.0L Diesel. What has not yet been announced is there are an additional 15 diesel powered automobiles from a number of different manufacturers that have yet to be announced will be released in 2013. We can only speculate as to what we have headed our way A huge thank you to Lars Ullrich, Director of Marketing, Bosch Diesel Systems North America (left), Jeff Breneman, Executive Director, U.S. Coalition for Advanced Diesel Cars (right) and Meghann Payo of Edelman PR who helped bring the presentation to life.