Volkswagen and their Diesel Niche

Most of the major car makers now offer at least one hybrid model which means that consumers can choose cars or vans with improved fuel economy and one that is supposedly better for the environment. But, even as gas prices begin to rebound (currently averaging $2.64/gallon) hybrid sales are down. This bodes poorly for next year when a slew of pure electric and plug-in hybrid cars and vans for sale hit the market — unless gas climbs above $4/gallon, consumers won’t be that interested.

Volkswagen (VW) is one major automaker who hasn’t pursued hybrid technology, choosing to improve and ramp up its diesel engine offerings instead. VW has been building diesels for decades and has engineered its product to the point where customers realize a nice difference in fuel economy (20-40% versus gas) while still being able to produce engines which are fifty state legal. That latter aspect is of great import considering that California has always presented a challenge for diesel engine manufacturers. Yet, VW has found a way to meet even the Golden State’s rigorous emissions threshold.

VW Makes Its Move

Consumers seem to be sitting up and taking notice that clean burning diesels may offer similar benefits to hybrid technology with a price advantage too when comparing similarly equipped models or used vans. In June, VW sales were down by 18% over the same period in 2008, but the automaker still managed to gain market share. Thanks to much steeper drops by GM, Chrysler, Toyota and Honda, VW’s share of the US market increased with its diesel powered cars playing a significant role in helping VW to succeed.

For June, 26% of VW sales and van hire services were cars powered by diesel powerplants. Compare that number to Toyota where about 3-5% of its monthly sales are for hybrid vehicles and you got a real horse race going on. Unfortunately for diesel-less Toyota, diesels have the upper hand and are winning big time.

“Volkswagen of America is encouraged by the momentum of our clean diesel TDI sales,” said Mark Barnes, Chief Operating Officer, Volkswagen of America, Inc. “It appears that U.S. consumers are starting to realize the many benefits of today’s clean diesels–vehicles that attain more than 30 percent better fuel economy while emitting 25 percent less greenhouse gas emission, all without sacrificing driving dynamics,” Barnes added.

Diesel Prices And Hybrid Diesel Technology

Diesel prices have also come down and currently match the price of regular gas. When fuel prices spiked in 2008, diesel was carrying a premium of one dollar a gallon over regular gas, an amount that nearly wiped out the difference in fuel economy. Now with diesel fuel selling at more realistic levels, consumers have taken noticed and are buying them.

VW has said previously that they haven’t ruled out hybrid technology but my bet is that they’ll pair that with their diesel engines at some point to truly deliver unbeatable fuel economy. Should that happen VW could suddenly be transformed into one of the top sellers in the domestic US market and mount a serious challenge to Toyota for global automotive manufacturing leadership.