2005 Geneva Auto Show: Diesel, hybrids vie for Europe's car buyers

Geneva March 2, 2005; Michael Shields writing for Reuters reported that hybrid technology is trying to muscle in on Europeans' love of diesel cars in a struggle to set the standard for powering the next generation of autos.

But there is little doubt that diesel engines remain for now the technology of choice for many Europeans who are drawn by the frugal consumption, durability and relatively lower fuel costs.

Executives at the Geneva car show painted sharply different visions of whether the hum of battery-assisted hybrid engines could eventually push aside the purr of new diesel motors while much-hyped hydrogen-powered cars remain stuck in the laboratory.

"We are convinced that the future of diesel is just beginning," declared Eckhard Cordes, head of DaimlerChrysler's: Quote, Profile, Research) premium Mercedes Car Group.

He outlined ambitious plans to expand Mercedes-Benz' diesel lineup 70 years after it became the first carmaker to offer diesels as standard equipment.

"There is a clear trend towards the clean, economical and sporty diesel engine," he said. "Over the past few months registrations of diesel-powered passengers cars across Europe as a whole outstripped petrol vehicles for the first time ever."

Not so fast, countered Yoshio Ishizaka, executive vice president and board member at Japan's Toyota Motor Corp., Profile, Research) , the world's second-biggest carmaker.

"Hybrid is really not an intermediate technology. We think hybrid is the technology we have to see for the future," he told Reuters in an interview, predicting it would become the global standard and even power sports cars some day.

Toyota is having huge success with its hybrid Prius car in the United States, where some Hollywood stars have established their environmentalist credentials by driving the model and regular customers still joint waiting lists to get one.

Hybrid vehicles typically pair a gasoline engine with batteries to boost fuel efficiency, letting them hum along at low speeds on electrical power alone. But this added efficiency puts them just on par with cutting-edge diesel engines.

The popularity of diesels in the U.S. market remains constrained by environmental standards, access to fuel and many customers' perception that they belong in trucks, not cars.

FUEL CELLS STUCK IN LABS

Toyota increased its Prius sales target in Europe to 20,000 this year from the previous goal of 15,000 and versus 8,200 in 2004. It aims to sell 300,000 hybrids around the world in 2006.

Such economies of scale help offset the added cost of making hybrids and allow Toyota make a profit on the models.

"In the initial stage it was rather difficult to make money" but now "we do make a profit," Ishizaka said. "Otherwise we might say we like to limit the numbers, but we are expanding." Even Toyota is hedging its bets, however. It is working hard to boost the percentage of diesel-powered cars it sells in Europe, which currently accounts for around 36 percent of its sales. It is also rolling out a new 2.2-litre diesel motor it makes in Poland.

Other Asian carmakers like South Korea's Hyundai and Japan's Honda are also pushing to beef up European sales by offering more diesels.

Shigeru Takagi, head of Honda's Europe operations, told Reuters that a diesel-powered version of the Civic compact is due in early 2006 and the launch of diesel versions of the CR-V offroader and the FR-V minivan in 2005 would drive sales growth.

It expects one-third of the new Civic brands sold to use diesel-powered engines, he said.

Ford Motor Co.'s (F.N: Quote, Profile, Research) premium brand Jaguar is using diesel to fuel sales growth in Europe, but Ford too is looking to outfit some of its sleek Jaguars and Land Rover offroaders with hybrids, said Joe Greenwell, who heads the two brands.

"We are not talking about next year or even the year after that, but within a five-year timeframe I do anticipate that Jaguar and Land Rover would be looking at having a hybrid version," he told Reuters in an interview.

A contrarian view came from General Motors Europe President Carl-Peter Forster, who said European sales of vehicles with petrol engines could rebound due to climbing costs of building diesel engines to meet new emissions standards.

"Diesels will be very expensive engines," he said. "I think we should expect the gasoline engine, to a certain extent, to bounce back."

Hybrid vehicles are also expensive. "It's a very costly solution. It's two drive trains in one vehicle," he said.

Nevertheless, GM and DaimlerChrysler joined forces last year to work on developing hybrid vehicles.

Executives said fuel-cell cars that run on hydrogen and emit only water vapour were still a distant dream.

"Fuel cell technology is far, far away, maybe 10 or 20 years," Toyota's Ishizaka said. Even if it catches on, fuel cells will still use much of the power technology developed by hybrids, he added. (Additional Reuters reporting by Michael Ellis and Michael Smith)