Government set to endorse diesel autos?

Implications: The US Government has mandated increased fuel economy for future cars and trucks.  The 35 mpg CAFE standard is a daunting challenge for Detroit as it scrambles to redesign 12-18 mpg trucks and SUVs.  Diesel engines have been proven in the European market and could see the lion's share of future alternative powertrain share growth.

Analysis: By 2020 US automakers will have to meet a 35 mpg fleet average fuel economy standard.  This requires a 40% improvement over current models while still meeting stringent EPA exhaust emissions standards.  While diesels have always had a 20% - 30% fuel efficiency advantage they could, until now, not meet the tightest EPA emissions standards.

In an interim report released this week an independent expert panel working under the National Research Council has finally given modern 'Clean Diesel' engines the green light for future growth.  Updating a 2001 study in which diesels and hybrids both failed to make the cut, the report highlights prospects of 30% - 40% fuel efficiency gains from diesels.

In typical driving conditions for average consumers diesels deliver greater mpg than hybrids.  [If today's hybrids replaced their gasoline engines with diesels their efficiency would increase as well.]  The comparable cost of diesel vs. hybrid options tilts in favor of the conventional powertrain making the sticker price impact lower for diesels as well.  It is important to note that diesels add significant cost vs. conventional gasoline engines: $1K - $4K per vehicle is a common range for car/SUV systems including expensive exhaust emissions components.

Most major OEMs have already announced plans to launch new diesel models over the next 18 months; expectations are that in 5 years diesel share could exceed 12% - 15% of the US light vehicle market.