Regular readers know I'm a fan of diesel cars, having test-driven some terrific models at recent car shows, as well as renting them on past trips to Europe. For drivers who travel mainly highway miles, the fuel economy benefits of dieselization can approach those of hybrids at a much lower initial cost premium. However, at least in the US, combining the two technologies to achieve even greater fuel savings has been cost-prohibitive, while in Europe, where fuel prices are much higher, interest in hybrids languished until fairly recently. Now, two auto makers have announced they will take that step and launch European hybrid-diesel models next year, with impressive fuel economy and emissions results.

Carmakers have known about the efficiency potential of diesel hybrids for a long time. This was the architecture chosen by the Clinton-era Partnership for a New Generation of Vehicles, a US government/industry consortium pursuing the goal of an 80 mpg car. As both Mercedes and Peugeot have determined, there is no technical barrier to building such a car, and the two models announced, although falling somewhat short of the old PNGV goal, are expected to deliver the equivalent of 62 mpg and 57 mpg. That would be respectable for small hybrid sedans competing with the Prius, but it's remarkable for a small crossover SUV and an E-series sedan, respectively. And in addition to fuel efficiency, Peugeot claims its diesel hybrid will emit just under 100 g/km of CO2, roughly matching the lifecycle emissions of an EV recharged on average US grid electricity. I'm also intrigued by the potential for highly-efficient four-wheel drive it creates.

The problem with this configuration, and a primary reason it has faced resistance in the US, results from the combination of relatively low US fuel prices and the diminishing returns to increasing fuel economy. Converting a gasoline model to either a hybrid or a diesel captures the largest, most valuable increment of fuel savings, leaving less fuel--and less money--to be saved by the other technology. As the article in Technology Review notes, achieving an attractive return on the pairing of powertrain technologies requires fuel prices much higher than the roughly $3 per gallon we pay here. So it shouldn't surprise anyone that the first place we'd see this configuration is in Europe, where diesel cars are already well-established--to a much higher degree than hybrids are here. With the average retail price in the EU currently around $6.06/gal. for gasoline (with a range of $5.00-7.11/gal.) and $5.53/gal. for diesel, the incremental savings for going from 40 mpg to 60 mpg still amount to over $500 per year, compared to less than $300 in the US.

The New York Times recently quoted research from the University of Michigan suggesting that cars could achieve 74 mpg by 2035 without drawing energy from the electric grid. With the US new car fleet struggling to reach 35 mpg within a few years, that sounds fanciful, until you see real cars like the Mercedes and Peugeot diesel hybrids. However, unless fuel prices end up rising significantly between now and then--which many expect but is far from certain--the biggest obstacle won't be technology, but justifying the cost, as the performance of baseline vehicles continues to move down the curve.