Diesel is set to grow in the United States as an engine choice in light vehicles with the advent of low-sulphur 'clean' diesel and the German brands are looking to capitalise on their technological advantage and popularise it in the region.

But overcoming US consumer perception of diesel technology as noisy, slow and dirty will be a long process and one with an uncertain future, due to possible future emission regulations, according to Global Insight automotive analyst, Paul Newton.

"In this, as in many other areas concerning energy policy in the United States a coherent fuel policy incorporating emission regulations and clear direction from government is required for the technology to take hold," he said in a research note on Friday.

DaimlerChrysler (DCX), Volkswagen (VW) and Audi have announced that they have formed an alliance to promote 'clean' diesel technology in the United States under the combined 'Bluetec' label.

"Details on the alliance will be announced prior to the Los Angeles Auto Show," a DCX spokesperson told Dow Jones Newswires. However, BMW declined to join the alliance, favouring instead its own course of action: "We are in the process of thinking of a name that is different from Bluetec," a spokesperson for BMW said this week.

The introduction of low-sulphur diesel fuel in the United States last month has created a window of opportunity for carmakers from Europe to exploit their global lead on the technology, Newton said. Diesel engines typically achieve 30% better fuel efficiency over petrol equivalents and feature powerful torque characteristics useful in low-rev acceleration and towing. In Europe, diesel engines make up over 50% of new vehicle sales.

"The German alliance will target the US consumers' heightened awareness of fuel economy following record high fuel prices earlier this year and aim to compete with the rise in popularity of petrol-electric hybrid technology, championed by the Japanese brands," he wrote.

The 'Bluetec' system involves a number of technologies such as exhaust gas traps, filters and urea injection. Urea injection systems shoot an ammonia-like acid into the exhaust, radically reducing emissions of oxides of nitrogen (NOX).

Currently, only Mercedes offers diesel engine variants in its passenger cars with the new E-Class sedan, although DCX will offer the same 2.7-litre Bluetec engine in a version of the Jeep Grand Cherokee in the coming year and will look to exploit further opportunities with diesel variants of the R, M and GL-Class models expected to make it to market.

VW withdrew its Mk IV Golf diesel earlier this year as it no longer complies with Bin 5 emissions regulations, but this will be replaced by diesel variants in the future. The latest Golf (now again called the Rabbit in the US)-based crossover model, the Tiguan, scheduled to debut at Los Angeles is expected to be shown in diesel form. VW in Europe has diesel engine options across the entire range of its products and can offer all models available in the United States with diesel options if it wishes.

Audi, meanwhile, will market its new Q7 sports-utility vehicle (SUV) in diesel form.

"The German alliance faces an uphill struggle as public perception of diesel in the United States is poor, largely due to the failed attempts to popularise the technology in the 1980s by General Motors (GM) and ironically VW. Although the technology has moved on considerably in all aspects since then, perception in the United States has not, hence the decision to pool their collective resources," Newton said.

"BMW's decision to go its own way may indicate that it will take a more cautious approach and seek to differentiate itself from its German premium rivals. BMW clearly feels it will be better placed managing its own affairs and the decision also highlights the traditional rivalries that exist between BMW and Mercedes. Traditionally, VW and DCX have had much closer working relationships.

"Looking further ahead, emissions regulations have yet to tackle the issue over maintaining urea injection systems, which require periodic maintenance to retain the emissions benefits, future emission regulations on this and particulate matter further cloud the issue and could potentially consign diesel to a permanent tiny minority in the United States."

Newton added that Toyota and Honda's efforts to popularise hybrids, and the growing proliferation of the technology among the US domestic manufacturers cannot be underestimated. Toyota's hybrid sales broke through the 100,000 barrier last year and also benefit from the huge weight of positive public opinion and perception behind them.

"Added to this, there is currently a scattergun approach to incentives and rebates regarding petrol-electric hybrid technology, which is in desperate need of reform, but nevertheless makes the purchase of hybrid models attractive in some states and makes their purchase attractive when compared to diesel. Interestingly, Toyota's recent acquisition of Isuzu shares, similar to the stake GM sold, is predominantly seen as advancing its diesel capability, giving it access to the technology should a revolution occur in the United States similar to Europe.

"The timing of the call was the result of Isuzu's availability and Watanabe's growing awareness of Toyota's shortfall in diesel expertise. Despite Toyota's efforts to promote hybrids, Europe remained unconvinced. European buyers prefer diesels, which offer improved fuel economy at a lower cost than hybrids," Newton added.

He said the long-term future and potential of large-scale uptake for diesel in the United States depends largely on the investment from the domestic manufacturers and this is unlikely to take the form of anything large-scale until the regulatory environment is clear.

"Automakers will not invest in diesel production capacity for the United States until the next-generation tier-three emissions standards are set. This is because an investment made in diesel capacity in the next three years will continue to be paid for through to 2025.

"Automakers will consequently want to know whether they will be able to meet tier-three standards before investing in production capacity for the United States."

Newton said that, of the domestic manufacturers, GM has some expertise in diesel engines for its large, super-duty pick-ups with the Duramax V8 diesel and has a range of smaller four-cylinder engines used in Europe, but it is potentially the weakest in terms of pipeline and potential to capitalise on a surge in diesel sales, should it happen.

DCX can tap into Mercedes technology from Europe and is best placed with a large range of multi-cylinder engine options. Ford has its UK-based diesel centre, but is restricted in the larger capacity, multi cylinder range needed for the US market.

"However, Ford is rumoured to be working on a V8 diesel for the Range Rover that could serve well in the US market.

"However, platform suitability will inevitably remain an issue when trying to create diesel engine derivatives post the design stage," Newton concluded.