Race to make clean, fuel-sipping cars revs up

Honda pushes clean diesels. GM takes big step with hydrogen. But can anybody outdo gas-electric hybrids?

A global competition to build cleaner and more fuel-efficient cars is moving into a new and serious phase. In the past two weeks:

•Honda announced a new-generation diesel engine with so few emissions that it meets even California's tough clean-air standards, while getting 30 percent better mileage than an equivalent gasoline- powered vehicle. It plans to sell it in the US in 2009.

•General Motors said it would lease more than 100 hydrogen-powered fuel-cell vehicles by next fall and sell them in volume by 2011.

•Daimler-Chrysler's Chrysler group said it would shift its emphasis from brawny truck-based vehicles to small cars, including 10 new fuel-sipping models.

"What we're seeing is a race that's been going on for a while, but is really heating up now," says Ron Cogan, editor and publisher of the Green Car Journal in San Luis Obispo, Calif. "All the automakers are vying to bring out technology that is much cleaner and gets much better mileage."

The push for cleaner, more efficient cars is powered by two forces: the rise in gasoline prices, of course, and new emissions regulations.

Tougher emission rules ahead

Starting in 2009, California and nine other states will mandate diesel emissions rules that are stricter than the federal government's. They will ban sales of diesels that don't measure up.

"We're addressing [fuel- efficiency and vehicle size] issues and moving our product portfolio to a mix that's more in line with the recent realities and market trends," Tom LaSorda, president and chief executive of the Chrysler group, told automotive writers on Monday in Detroit.

The race pits several technologies against each other.

Toyota, which leads the pack in gas-electric hybrid technology, said in July it would develop new technology to enable consumers to plug in their hybrid cars – potentially doubling the mileage of its already efficient hybrids.

Honda, which already boasts the highest mileage hybrid, the Insight, appears to want to retain the clean-car mantle by diversifying into multiple technologies.

Besides its diesel breakthrough, the automaker announced a new flex-fuel vehicle that can burn pure ethanol (for the Brazilian market), an even more efficient conventional gasoline engine, and a fuel-cell car it plans to sell in the US by 2008.

Hybrids are tough to beat

Clean-diesel engines could challenge gas-electric hybrids in the fuel-efficiency arena, says Mr. Cogan of Green Car Journal. But others see hybrids, including plug-in versions, retaining and expanding their early lead in the marketplace.

"Within 10 years, more than half of all new cars sold in developed markets will be hybrids," says a June report by global investment firm Alliance-Bernstein. "Automakers can configure hybrid systems to meet diverse customer preferences for fuel efficiency and performance."

Environmentalists say the green-car push is driven as much by the new emissions regulations as by higher gas prices.

"I can't remember a time when we've had so much interest from the automakers in alternative fuels and technologies," says Roland Hwang, vehicle policy director at the Natural Resources Defense Council in San Francisco. "These auto companies are acting like they finally understand that it's a matter of their own survival in order to be competitive in a clean alternative-fuel vehicle market."

Indeed, it may be a matter of survival.

By aggressively pursuing fuel economy rather than merely meeting minimum federal standards, hard-pressed Ford, General Motors, and Daimler-Chrysler could turn losses into billions in profit, according to a new study by the University of Michigan's Transportation Research Institute.

Surprisingly, each automaker would be financially safer if it followed a "proactive fuel-economy strategy, regardless of what their competitors do," Walter McManus, head of the institute's auto analysis division, said in a prepared statement.

"The dilemma the Detroit automakers face," he added, "is that while they may believe that they cannot afford to make fuel economy a high priority, in actuality, it turns out that they cannot afford not to."

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