Friday, October 30, 2009

Diesel Demand: Why is Mahindra Alone in Introducing a Mid-size Diesel Pickup to America?

While Mahindra is establishing itself as a clean diesel and diesel/hybrid niche-brand in the United States, domestic manufacturers have no known plans to introduce competitive vehicles in response.

Emissions compliance, development costs, and consumer demand are the main reasons other manufacturers are not developing their own diesel-powered small trucks. Of course these are completely valid reasons. So, how about some Q&A…

Q: Why are small, diesel-powered vehicles so difficult to introduce to the United States?

A: Blame it on California.

The land of CARB and The Governator imposes the harshest emissions requirements on diesel engines in the country. Selling any vehicle in the US is dictated by the ability to sell it in California. This is not necessarily a bad thing.

California’s Tier 2, Bin 5 emissions requirement for particulates (soot) and nitrogen oxides (NOx) are extremely strict. The requirement forces US-bound, passenger car diesels to be very clean. The T2B5 requirement closely mimics European EU5 and EU6 standards. AutoblogGreen has a great article with a graph that explains the standard here: Why can’t Americans have good, small diesels?

Q: Why do automakers expect consumers to pay a premium for small diesel engines in cars, SUV’s and compact light trucks in the US?

A: Price point is reflected by cost.

For a domestic manufacturer, the claimed cost per vehicle for a T2B5 compliant diesel over an equivalent gasoline burning vehicle is $2000 to $5000.

VW is the exception. VW has their TDI diesel firmly planted in its small sedan platform. With a base price of just $1300 over the base price of a gasoline-burning Jetta, the TDI version is an interesting option. Economies of scale are in effect here. VW builds a lot of TDI engines. An engine well regarded for good power and exceptional fuel economy. Maybe one day they will put it in one of their SUV’s sold here, but a compact pickup truck does not appear to be on the horizon.

Q: Why won’t domestic small truck makers develop a small pickup with a compact diesel engine despite the costs?

A: Chicken.

Emissions and cost both come into play here. Manufacturers will claim that the demand doesn’t justify the development of a compact diesel powertrain. The additional cost will then be passed on to consumers, whom they feel won’t want to pay a premium for the technology. Understandably, there is more to converting a current production pickup to diesel. The heat from a diesel engine must be mitigated and room for post-combustion emissions treatment must be made in addition to many other design considerations. This would force a significant redesign of current product or a new truck entirely. However, we would like to see the hard research data on actual demand.

If GM, Ford, and Chrysler were smart (they aren’t), they might put aside corporate pride and jointly develop a shared small diesel engine to put in their own small pickups. Or they could contract the design to a diesel specialist (International, Cummins, Cat, Daimler, etc.). Even more simply, they could revive the GM compact V-8 diesel that was nearly ready for launch before the plug got pulled earlier this year. Maybe they are just scared.

This is their loss. Mahindra is entering the mid-size truck market with their 4-cylinder, 2.2 liter, intercooled, common rail diesel. Mahindra gets to be the pioneer… or the guinea pig, depending on how you look at it.

Small Diesel Future

Certainly other manufacturers will monitor Mahindra’s success or failure in the coming year. Demand for the unusual truck from an unfamiliar source will be the litmus test for others looking to stick a toe in the diesel-powered, small truck waters.

If demand for small, diesel trucks overcomes any consumer hesitation about buying an unproven, Indian-made vehicle with uh… unique aesthetics, maybe a market does exist. Mahindra is poised to show North American consumers that diesel pickups aren’t the big, loud, stinky, and black smoke spewing, trucks and buses they dread getting stuck behind in traffic.

Mahindra will have the edge by being the first to the market, but surely others will follow suit and create a healthy level of competition (if things go to Mahindra's plan). And just maybe, Mahindra becomes the brand that makes diesels in the US a truly viable and readily available option. Time will tell.


Vince said...

Love the blog. I agree that US automaker are chicken. I also think they're lazy. They don't need any help in developing a small diesel. Ford makes the 2.5l and 3.0l Duratorq engines for their non-US Ranger pickups. These engines could easily meet US specs if they really wanted to sell these are here.

Christian J Winfield said...

Glad you enjoy the blog, Vince.
It boggles my mind why they won't take a chance and bring an export market diesel here to test market viability. Great point about the Ford Duratorq engines!