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Diesel-gas price gap makes Honda rethink diesels for U.S.

Honda Motor is reconsidering its decision to launch diesel-power vehicles next year in the U.S., where diesel fuel has become much more expensive than gasoline.

"Right now we are re-evaluating, due to trends in gasoline and diesel prices, and the price of raw materials we use in the exhaust clean-up system," according to Honda spokesman David Iida.

Honda's move appears to be solo. But Honda's considered a savvy player in the U.S. market, so others might be tempted to rethink U.S. diesels.

Honda has been promising a four-cylinder diesel next year in a sedan from its Acura luxury brand. After that, it said it would sell larger models, probably SUVs and vans, with V-6 diesels.

Diesel cars typically retail for at least $1,500 more than similar gasoline models, but they get 20% to 40% better mileage.

The average price of diesel fuel, though, is running 40% to 50% more than average gasoline prices, according to data from the Oil Price Information Service. That wipes out cost savings from the diesel's improved mileage.

Iida says Honda will decide "sooner rather than later" on going ahead with U.S. diesels, but wouldn't pin down a date.

Rival Nissan says it still plans to sell a V-6 diesel in the premium Maxima sedan in the U.S. in 2010. But spokesman Scott Vazin says the price premium for diesel fuel is worrisome. "It's why we're putting it on our flagship. We don't know where (fuel prices) will be when we launch, but we expect some pent-up demand. And our perception of the diesel buyer is someone who keeps the car longer," minimizing the drawback of its higher price.

Volkswagen, Jeep, Mercedes-Benz and BMW are selling U.S. diesels. Audi plans a diesel SUV in April. The VW Jetta TDI diesel, about $23,000, is the lowest-priced diesel in the U.S.

Worldwide demand is greater for diesel than for gasoline, keeping the price up even as gasoline has tumbled to less than half its $4.11 peak in July, notes Fred Rozell, price expert at OPIS.

The gap between gasoline and diesel "is higher than it has ever been, and typically those relationships eventually fall back to the norm," Rozell says. "I think the economic slump globally will bring diesel down."

Source;
http://www.usatoday.com/money/autos/2008-12-07-honda-diesel_N.htm