The Environmental Protection Agency recently announced that diesel vehicles are making a bit of a comeback in the U.S., as fuel efficiency becomes more of a concern.
Auto Remarketing reported on NADA Used Car Guide’s analysis of the diesel market here last week.
NADA determined through comparing two different 3-year-old vehicles and their respective diesel counterparts — the Volkswagen Jetta and Mercedes-Benz ML350 — retention in the diesel models was much stronger.
Another boon for consumers: the comparison also showed considerable annual fuel savings for diesel models.
To help gauge whether the rebounding popularity of diesel vehicles is just a fluke or here to stay, Auto Remarketing chatted with David Paris, NADA UCG automotive analyst.
According to FuelEconomy.gov, diesel engines are more powerful and fuel-efficient than similar-sized gasoline engines.
The site points out diesel models are about 30 to 35 percent more efficient than their gasoline counterparts, plus today’s diesels are much improved over past models.
“Today’s versions offer better performance due to improved technologies, which have allowed for increases in power, acceleration and overall efficiency,” said Paris. “The new engine designs along with noise and vibration damping technologies have made diesels quieter and smoother traveling down the road.”
Another factor pushing the surge in popularity of diesel vehicles is expanding choices in the market, as much of the issue with diesel sales in the past has been lack of options.
“Many automakers have offered diesel engines as options in vehicles overseas for years now, so the technology is there and ready to go,” Paris said.
He offered the example of the Chevrolet Cruze diesel.
In April 2013, Chevrolet announced that they would be offering the model with a clean diesel engine option for North America.
“Globally, this model had been offered with a diesel engine for many years,” Paris added.
And the 2014 Dodge Ram 1500 diesel is another example, as “it’s the first half-ton pickup with a turbo diesel to hit the market,” Paris said.
The Draws of Diesel
One of the biggest draws to new diesel vehicles is fuel efficiency. But as electric vehicles and hybrids become even more affordable, perhaps coming in line with diesel model pricing, will this serve to push diesel unit sales down?
Paris says this isn’t a concern, as the initial choice between gas, diesel, hybrid or electric vehicles ultimately depends on what kind of driving the consumer plans on doing.
“Hybrid and EV vehicles are most practical when used for shorter trips or city driving. EVs are range limited; and while charging stations are becoming more prevalent, it’s still difficult to plan a long distance trip, which hurts their real world usability,” Paris said.
Diesel vehicles, on the other hand, offer similar efficiency as a hybrid or EV, “but their real world versatility is much, much greater,” Paris says.
Diesels are also more well known, as EVs and hybrids are relatively new to the market. Chances of fewer repair surprises might serve to draw shoppers with fuel efficiency on the mind to diesel models.
“And unlike EVs, you don’t have to plug diesels in and their operating range is significantly greater. Diesel engines are also known to produce lots of torque, which is great for SUV and truck buyers who use their vehicles to tow,” Paris noted, highlighting a few other factors that might imply diesel popularity might continue to grow.
Another key factor to look at in judging whether consumers will buy diesel or turn toward hybrid is annual fuel savings.
NADA UCG provided a comparison of the diesel, hybrid and gasoline versions of the 2013 Volkswagen Jetta based on an annual mileage of 15,000.
According to Paris’ calculations, the diesel VW Jetta saved $221 compared to the gasoline version, but costs $559 more to operate than the hybrid.
The diesel model’s average 2013 fuel cost was $1,729, while the annual fuel costs for the hybrid model came in at $1,170.
Though hybrids are, of course, more fuel efficient, there are many plusses when it comes to buying diesel, Paris said, especially if the shopper is planning long trips or prefers well-known technology.
Diesel does provide relief from spending on fuel when compared to their gasoline counterparts, though, but the question remains: will rising gas and diesel costs put a damper on the fuel efficiency plusses of diesel vehicles?
Paris says it won’t have much of an effect, since shoppers buy diesel vehicles for a ranging variety of reasons.
“Rising fuel costs could put a damper on the plusses of diesel vehicles; however, every driver’s situation is different and must be analyzed on a case-by-case basis,” said Paris. “Diesel is not always the best option and depending on individual usage it might make more sense to purchase a gasoline, hybrid or EV model.”
Diesel is Tops for Retention
Another plus NADA UCG pointed out last week was the diesel models' strong retention rates.
For example, according to NADA UCG’s comparison analysis, the Jetta TDI retained 60.1 percent of its original value after three years of depreciation, while the gasoline-only SE model retained 51.6 percent.
The same situation was found for the Mercedes-Benz ML350.
After three years, the ML350 BlueTEC 4MATIC retained 52.3 percent of its original value, while the gasoline-only ML350 4MATIC has retained 47.1 percent.
Paris says the short answer to what factors are pushing retention rates up for diesel models is basic supply and demand.
“Consumer awareness of, and demand for, fuel-efficient yet powerful diesels has grown more rapidly than the number of models available in the marketplace. Rather than dedicate R&D resources to diesels, most OEMs have elected to concentrate on improving gas engines, hybrids and EVs,” Paris explained.