Future of Fuel-Efficient Diesel Vehicles in U.S. Market Dims

By Adrienne Roberts Features Dow Jones Newswires

The prospect for efficient diesel cars in the U.S. is dimming, with Mercedes-Benz becoming the latest auto maker to say it is throwing in the towel on the technology due to regulatory scrutiny and a lack of consumer demand.

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Daimler AG, Mercedes-Benz's owner, said Wednesday it is no longer seeking regulatory approval to sell certain diesel passenger cars in the U.S. amid broader scrutiny of the technology after Volkswagen AG's emissions scandal. Mercedes, like other auto makers, will continue selling diesel vehicles marketed to commercial users.

Mercedes primarily sells cars with gasoline engines to U.S. buyers, but has marketed diesel versions of its smaller C-Class sedans or its larger G-Class sport-utility vehicles as a more fuel-efficient alternative. Though popular in Europe, where fuel prices are higher, diesels have struggled to catch on in the U.S. in recent decades.

Diesel engines only account for less than 1% of total car sales in the U.S., mirroring the demand for electric cars in a market dominated by trucks and SUVs powered by increasingly-efficient gasoline engines. General Motors Co. recently started selling a diesel version of its Cruze compact car, advertising it as achieving better than 50 miles per gallon.

The auto maker said Wednesday that it has sold 116 diesel-powered Cruze's, a sliver of the overall deliveries of that car. "We're just getting started on building and shipping Cruze Diesel" a GM spokesman said.

A handful of other auto makers offer diesel engines in passenger cars. Heavy-duty pickup trucks, such as Ford Motor Co.'s F-250 and work vans, however, are often fitted with the technology because of it is considered durable, efficient and good for towing.

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Daimler said getting regulators to green light the technology for passenger cars requires "increased effort" in the wake of heightened scrutiny, making it harder to justify keeping the niche technology alive.

Environmental Protection Agency officials couldn't immediately comment on the decision. Mercedes said it is "leaving the door open" to offer diesel cars and SUVs in the future.

BMW AG sells four diesel models in the U.S. market, with plans to add a diesel model of its 5-Series sedan, according to a BMW spokesman.

Volkswagen's diesel scandal emerged in 2015 when that auto maker admitted it used software designed to cheat on emissions tests. Other auto makers have been subject to investigations, including Daimler and Fiat Chrysler Automobiles NV.

Fiat Chrysler had been selling a diesel version of the Jeep Grand Cherokee and a light-duty Ram pickup, but those vehicles aren't currently available at dealerships. The company anticipates EPA certification "in the next few weeks."

Volkswagen has said it is unlikely to sell diesel passenger cars in the U.S. going forward, and is currently offering hefty incentives to clear inventory of 2015 model-year diesel cars that recently gained regulatory approval for sale.

Daimler said last year it was reviewing its U.S. emissions certification process for Mercedes passenger cars, the company launched an investigation into possible irregularities at the prompting of the Justice Department. Daimler hadn't been accused of wrongdoing in its emissions reporting.

Mercedes vehicles came under fire early in 2016 in a proposed class-action lawsuit filed in relation to the company's BlueTEC diesel technology.

Earlier this year German prosecutors opened an investigation into allegations that an undisclosed number of Daimler employees may have committed fraud linked to sales of the company's diesel-powered cars.

Mercedes sold 11,000 of its diesel models in the U.S. in 2015, the last time the company broke out sales of diesel vehicles in its sales reports.

Mike Colias contributed to this article

Write to Adrienne Roberts at Adrienne.Roberts@wsj.com

(END) Dow Jones Newswires

May 10, 2017 13:08 ET (17:08 GMT)