Live

Watch CBSN Live

Diesel Cars Elbowing into Hybrid Market

Virginia Tech student Jocelyn Allison needed a new car. Her father, David, who owns a software company in northern Virginia, was footing the bill and favored a car with good mileage. But when he suggested a Toyota Prius, Jocelyn balked at the hybrid's torpedolike shape. "You're not putting me into that," she told him.

2009 Volkswagen Jetta TDI diesel

Until recently, hybrids were the only high-mileage option for buyers like the Allisons. But a new generation of diesels has hit the market, with comparable mileage to their Japanese and U.S. rivals, as well as sleeker European styling. Jocelyn Allison soon found herself tempted by the jaunty looks of the Volkswagen Jetta diesel — which, with mileage nearly equal to the Prius, convinced her dad, too.

Auto-industry observers expect more buyers to follow suit. Although diesels barely registered on national sales figures until recently, industry research firm J.D. Power and Associates says they now make up just under 3 percent of cars sold and projects that they will rise to about 8.5 percent by 2015. (Hybrids — also just below 3 percent now — will grow to a slightly higher 9.5 percent in 2015, the forecasters say.) Volkswagen officials say 65 percent of Jetta wagon buyers and 35 percent of sedan buyers are now choosing the diesel.

One big reason is gas mileage: The Mercedes, Audi, and BMW models often top their gasoline-powered competitors by five miles per gallon or more, and the VW Jetta TDI sedans and wagons beat nearly all competing hybrids in the mileage race. That mileage advantage gives many diesels another edge as well: U.S. buyers are now eligible for federal tax credits ($1,300 for the VW Jetta, for example, and $1,800 for the BMW X5 diesel) that are no longer available on Honda and Toyota hybrids.

Admittedly, diesels have an image problem to overcome. For many car buyers, just the word evokes memories of noisy, smelly, slow diesel models sold here in the 1970s and 1980s. Until recently, California and five other states banned diesels for their contribution to air pollution.

But following a federally mandated switch last year to low-sulfur, clean diesel fuel, German automakers have brought over new technology that eliminates nitrogen oxides and other pollutants from diesel emissions — making the new diesels available for sale in all 50 states. And these next-gen models from Volkswagen, Mercedes-Benz, Audi, and BMW are nothing like their predecessors. Instead, they are sleek, quick, and quiet models from Europe, where diesels account for half of all car sales.

How far diesel sales can rise in the U.S. depends in part on the future cost of fuel. Diesel fuel — historically equal to or lower than gas in cost — spiked last year to about $4.80, or 70 cents more per gallon than regular gas, pushed up by both strong worldwide demand and the U.S. switch to cleaner diesel fuel. Now diesel has fallen back even with gas prices. Energy experts expect both gas and diesel prices to rise with economic recovery, but say it is unclear whether diesel fuel is likely to rise sharply above gas costs again.

Here is a closer look at how the new diesels stack up against hybrids in some crucial categories.

Mileage

With a rating of 40 mpg on the highway and 29 in the city, Volkswagen’s Jetta diesel tops all hybrids except two: the Toyota Prius (48 highway/51 city) and the Ford Fusion hybrid sedan (36 highway/41 city). Auto reviewers and new owners alike reported getting higher highway mileage in the Jetta diesel than its ratings indicate.

In the luxury ranks, the Mercedes-Benz E-class diesel is rated 32 highway/23 city, compared with 25 highway/22 city for the Lexus GS 450h, one of the few hybrid luxury sedans. Among luxury sport utilities, the BMW X5 diesel gets 26 mpg on the highway, beating the Lexus RX 400h hybrid (24 mpg); the Lexus is better in the city, however, with 27 mpg versus the BMW’s 18.

One other thing to consider: While diesels excel on the highway, hybrids shine in stop-and-go city driving. So consider your usual driving habits when making a choice.

Purchase Price

The Jetta TDI sedan, with a likely initial cost of $22,723 including the $1,300 tax credit, stacks up well against hybrid sedans, according to figures compiled by the automotive Web site Edmunds.com. Taking into account initial cost and five years of fuel costs, the Jetta TDI would save about $5,950 versus the Saturn Vue hybrid (with an initial cost of $27,355); $2,850 versus the Ford Fusion hybrid ($26,295); and $700 versus the Toyota Camry hybrid ($23,342). The Toyota Prius, with a selling price of $24,220, is the only hybrid that edges out the Jetta in five-year total cost — by about $400.

In the luxury sector, the Mercedes-Benz E-class diesel, with an initial cost of $53,033, saves $4,800 over five years when compared with the Lexus GS 450h hybrid (price tag $56,550).

Styling and Drivability

For some buyers, it’s not cost and mileage but look and feel that separates the new European models from their Japanese and American hybrid rivals. The distinctive lines of the Toyota Prius give drivers a specific (but not always welcome) identity, says Philip Reed, senior consumer advice editor at Edmunds.com. “The Prius is a fashion statement and a political statement,” Reed said.

Styling was important to Tampa attorney Julian Sanchez when he was shopping for an SUV. After concluding that the Chevrolet Tahoe hybrid was too big, Sanchez opted for a Mercedes GL-class diesel — with slightly lower mileage — because he preferred the look and the driving feel.

Peter Tressel, 48, also says he wanted to avoid the unresponsive steering, odd-feeling brakes, and flashing digital displays that often go with hybrids. A marketing executive in Edina, Minn., Tressel and his partner, Randy Werner, wound up choosing the strong torque and turbo-boosted acceleration of the Jetta. “It just felt like a car with an engine tuned for fun,” he says.


More on MoneyWatch: