New cars on a low-fuel diet

Rising gasoline prices heighten consumer interest in smaller, fuel-sipping vehicles.

With oil prices soaring above $50 a barrel and terrorism surging in the Middle East, it seems appropriate that 2005 becomes the year Americans finally give up big SUVs and turn toward more fuel-efficient vehicles.

From gasoline-electric hybrids to diesel-powered cars to gas-saving technologies in conventional cars, bigness is out. Fuel-sipping is in.

That doesn't mean Americans are returning to the small econo-cars of the 1970s. Instead, they're demanding slightly smaller and more fuel-sipping versions of the practical vehicles they're already familiar with - from small SUVs to the Honda Accord.

"I think there are a lot of people who simply resent paying $2 or $2.50 a gallon when they fill up. It has a psychological effect," says Ron Cogan, publisher of the Green Car Journal in San Luis Obispo, Calif. "It speaks to some people's sense of energy diversity and energy security: The less fuel they have to buy to drive their cars, the better they feel that we're not having to buy fuel from unfriendly places."

Gasoline prices would have to stay above $2 or even $3 a gallon for more than six months for consumers to feel the economic pinch, according to most US auto-industry studies. But already, consumers are expressing more interest in fuel economy than they have in 20 years. In a May 2004 study for the National Renewable Energy Laboratory, for example, 22 percent of respondents rated fuel economy as the most important factor in their next car-buying decision, more than double any year since 1983.

"Fuel economy is one of the strong themes of this model year, influenced most by high gas prices at the pump," says Rik Paul, automotive editor of Consumer Reports in East Haddam, Conn. "When gas prices go up, so does the interest in more economical vehicles. In the past, when fuel prices go back down, that interest wanes."

Indeed, the 2005 model year is shaping up as a key test for the hybrid, says auto analyst Jim Hall. Is it a faddish purchase for people who want to stand out by owning a car that looks different? Or does it fill a deep yearning for new technology that uses less gas? "If this technology really succeeds, in five years we'll just consider it an [engine] option," Mr. Hall says. "That's what really scares a lot of people in the industry ... because they're not ready."

Already, hybrid-leader Toyota has announced it will nearly double US imports of the popular Prius to 100,000 starting next spring. The automaker plans eventually to sell 300,000 hybrids a year in the US, about the annual sales of the popular Ford Expedition.

It's not just hybrids that mark a turn toward efficiency. Diesel-powered vehicles are also seeing a renaissance, with five new models coming on the market this year. (See story, left.) Two - the new Touareg and Passat diesels - are from Volkswagen, the only company that has sold diesels here consistently since 1987. Other new diesels include the Mercedes-Benz E320 CDI, for $49,075, the Jeep Liberty CRD for $25,795, and the redesigned Kia Sportage, due out this spring at an undisclosed price.

The technology's future is cloudy, however, because none of the engines meets more stringent federal emissions requirements coming in 2007. Diesels aren't even sold in the country's most populous areas - California, New York, and most New England states - because they already operate under California's stricter rules. Engineers hope that by the end of 2006, reformulated diesel fuel with dramatically lower sulfur content will allow diesels to burn cleanly enough.

Unlike gasoline engines, diesel engines also burn a wide variety of fuels, including biodiesel, which comes from various forms of vegetation, or biomass. So far biodiesel costs up to twice as much as regular diesel (depending on its biomass content), and produces fewer emissions. With a fairly simple conversion that costs less than $1,000 to install, these engines can burn recycled french-fry oil that drivers can get free.

There are also signs that Americans are inching away from giant SUVs and moving toward smaller, more efficient ones. SUVs account for more than 30 percent of the US automobile market. Add pickups and vans to the mix and the market share hits 50 percent. But sales of the biggest, truck-based SUVs have fallen, despite record cash rebates, according to Edmunds.com. At the same time, sales of small SUVs and minivans have risen by more than 6 percent.

Three of these car-based SUVs will even be available as hybrids for 2005: the Ford Escape, the Lexus 400h, and its sister, the Toyota Highlander. Already, 9,000 car shoppers have put down deposits for the nearly $50,000 Lexus hybrid SUV.

The 400h is expected to achieve 30 miles per gallon on the highway, according to unofficial estimates, a step up from the 25 m.p.g. of its gasoline counterpart. More important, it will have about 270 horsepower - more than the most powerful V6 version.

"In the SUV market, fuel mileage isn't on the shopping list, and performance is, so this should expand the hybrid market and bring new people into hybrids," says Wade Hoyt, a spokesman for Toyota and Lexus.

It's not clear if hybrid buyers are lured by the fuel savings. For example: It would take more than four years for a Toyota Prius to pay back its $3,000 price premium over a comparable Toyota Corolla at a real-world 44 miles per gallon, as tested by Consumer Reports. A Honda Civic hybrid, with a similar price premium but a smaller fuel mileage increase over a regular Civic, would take 10 years to pay back.

The move to fuel efficiency is still in its initial phases. "It's true there are more hybrids this year and more coming," says Dan Becker, a spokesman for the Sierra Club in Washington, "but with 17 million new vehicles sold every year, they're still not making much of a dent."

If gasoline prices continue to rise over the next few years, that equation could change.

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