Manufacturers plan to unlock US diesel market potential

With automakers scrambling to establish their clean-diesel credentials it is becoming increasingly difficult to keep track of OEM technology choices and plans. The US market is the most fragmented, with two levels of legislation currently in force: CARB's LEV II scheme enforced in California, Maine, Massachusetts, New York and Vermont, and the EPA's less stringent Tier II scheme in place in the remaining 45 states. Currently, the EPA's Tier II scheme requires that a manufacturer's inventory emissions average Bin 5 limits of 0.07g/mile NOx. The Tier II legislation will be fully implemented by 2009 with the removal of bins 9-11 across all models. California's LEV II scheme requires that all passenger car emissions are limited to Bin 5 limits. Therefore, automakers are able to produce 45-state or 50-state compliant diesel cars. The technology pathways available to manufacturers add to the confusion, with in-engine technologies alongside a myriad of aftertreatment options: DPFs, oxycats, SCR systems, LNTs and NOx absorbers.

Routes to compliance

The main division in diesel emissions control strategy is between the European and Japanese OEMs. European OEMs entered 2007-model, clean-diesel passenger cars into the US market using DPFs and LNTs to reduce emissions in line with the 45-state limits. Prior to the launch of the 2007 model ranges, the BlueTec co-operative (DaimlerChrysler, Volkswagen and Audi) formed to jointly market European light-duty diesel in the US. Vehicles produced under the BlueTec mark will use common emissions control technology. The 2007 entries were followed by announcements of 50-state compliant, 2008-model passenger cars using urea-SCR. BMW has been reluctant to work with other German OEMs as part of BlueTec and is currently pursuing a similar technology pathway with its own branding and marketing. To date, German automakers are the only European companies to pursue clean diesel technology for US applications; the costs involved limit its use to the premium and SUV markets.

Japanese OEMs have selected an alternative strategy. By focusing on engine and NOx absorber technology, they hope to achieve 50-state compliance no later than 2009/10. The absorber captures NOx and converts a portion of it to ammonia, which can be used in a downstream SCR catalyst to reduce NOx without the need for urea solution. The strategy pursued by the Japanese OEMs precludes the development of 45-state vehicles and the use of urea-SCR. Therefore, technology lead times will prevent Japanese automakers from entering the US diesel market for some time yet. Toyota has enlisted the diesel know-how of Isuzu with the purchase of a 5.9% stake. This investment is part of Toyota's plan to penetrate the European and US diesel markets. Honda has announced 50-State compliant diesel versions of its Accord, Odyssey, Pilot and Ridgeline by 2010. Nissan has plans for a clean-diesel version of its Maxima, and Subaru is working on a diesel Tribeca.

US manufacturers, traditionally resistant to diesel, have been slow to invest in new compression engine technology (possibly hampered by 2006 losses). However, Ford's participation in the Urea Stakeholders Group suggests that it is planning for diesel, and will favour SCR to achieve Tier II Bin 5 compliance. In June GM announced plans to develop an SCR 50-State compliant version of its V8 Duramax diesel engine for use in heavier pick-up models.

Market share

Political shifts in the US have led to greater pressure on the administration to curb carbon emissions and reduce America's demand for foreign oil. This, coupled with an increasing number of States seeking to independently set CO2 limits - despite the Presidents official refusal to limit CO2 (for fear of damaging the economy) - has dramatically increased the interest in fuel efficient diesel engines.

Leading automotive consultants and analysts have now predicted that by 2015 the light-duty diesel market share in the US will exceed hybrid vehicle share. Automotive forecaster, JD Power, has predicted US light-duty diesel market share to reach more than 10% by 2015, an increase of over 200% when compared to today's 3.2%. In fact, a recent report by Ricardo has highlighted the decrease in demand for hybrids, and predicted that diesel demand will soon outstrip demand for hybrid vehicles. This is based upon a comparison of clean-diesel and hybrid-electric cost premiums and fuel efficiencies. Although both technologies achieve similar fuel economies, the hybrid technology price premium is twice that of clean diesel.

The future

The future growth of the US diesel market is certain. Manufacturers have made huge investments in decreasing harmful emissions, and are ploughing millions into re-branding the unloved fuel. The level of investment in US diesel has attracted the attention of analysts at large investment banks and brokerages, who have given 'buy' ratings to OE and component manufacturers with links to diesel - further increasing the hype surrounding clean-diesel.

OEMs are already considering the next step, combining the diesel engine with hybrid technology. The combination of these two technologies would increase fuel efficiency beyond anything possible today. Toyota is jointly working on clean-diesel engines with Isuzu, and is considering pursuing a diesel-electric hybrid. DaimlerChrysler will complete its diesel-electric hybrid bus prototype this year and is looking at other applications. Peugeot has announced a diesel-electric hybrid version of its 308. However, cost premiums for these efficient vehicles will be high.