Toyota and Honda reportedly will use the Paris motor show this week to raise sales of diesel-powered vehicles in Western Europe in an effort to catch up with local rivals.

According to Bloomberg News, Toyota will unveil what it claims is the world’s cleanest diesel engine, which will go on sale next year, while Honda will display diesel-powered FR-V minivan and CR-V sport utility models it plans to sell in Europe in 2005.

The report said Toyota and Honda aim to take a larger share in Europe, the world’s biggest market for diesel-powered cars, to lessen their dependence on North America. Analysts estimate Europe accounts for less than 5% of the two carmakers’ operating profit, compared with more than 60% from North America, analysts estimate.

“It’s vital for Japanese automakers to have more options in diesels in Europe to raise sales, profit and brand image,” Atsushi Osa, a fund manager at Sumitomo Mitsui Asset Management in Tokyo, told Bloomberg. “Europe is probably the most competitive market in the world, and it will take time.”

Toyota’s unit sales, including both diesel and petrol-powered vehicles, rose 9% in Western Europe in the first eight months of 2004, while Honda gained 11%, the report said. For Toyota, diesel vehicles make up about 30% of its total sales in Europe. Honda, which will have four diesel-powered vehicles in 2005, wants to increase sales of diesel vehicles to 30% next year from 10% now, the company’s general manager, Toshiaki Nakagawa, told the news agency.

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Japanese carmakers lagged behind rivals like Volkswagen and PSA Peugeot Citroën in releasing diesels, in part due to the cost of developing the engines, for which Europe is the biggest market, Koji Endo, an analyst at Credit Suisse First Boston Japan, reportedly said.

According to Bloomberg News, more than 40% of the 15 million vehicles sold annually in Europe have diesel engines. Toyota had 5.1% of the West European market in the first eight months of the year, while Honda had 1.5%.

Endo told the news agency that developing a diesel-powered vehicle is 30% to 50% less profitable than developing a new petrol-powered vehicle for the two carmakers because they do not get the same economies of scale – the average cost of developing a new engine was roughly $US725 million to $910 million.

Graeme Maxton, managing director at Autopolis, an automotive consultancy, told Bloomberg News that diesel vehicles cost about €2,000, or about $2,400, more than petrol-powered cars but Europeans are willing to pay more because diesel fuel is taxed less and diesel engines have 30% to 40% better fuel economy.

The report said Toyota’s president, Fujio Cho, expects a third consecutive operating profit in Europe this fiscal year, helped by demand for diesel-powered Corolla and Yaris compact cars, and plans to release a Lexus luxury diesel by 2006.

At the Paris show, Toyota reportedly will unveil the D-4D diesel engine concept, which it says will have the world’s lowest combined emissions of nitrogen oxide and particulate matter for diesel engines in the 1.9-liter to 2.2-litre category. The company will begin producing a version of the engine next year.

Honda will add diesel versions of the CR-V sport utility (with a particulate filter) and include a diesel engine option for its new FR-V minivan. That will increase Honda’s European diesel offerings to four model lines, Bloomberg News said.

The report said Toyota wants to raise European vehicle sales by 9% to 980,000 cars, during the current business year and to 1.2 million units a year by 2010 and aims to boost its sales of the Lexus luxury models in Europe as part of its strategy of increasing global market share to 15% in the next decade from 12% now.

According to Bloomberg News, Lexus sales in Europe are less than a fifth of what it sells in the United States, because it lacks diesels to compete with Mercedes and BMW.

“The European market is vital for Toyota to really become a global player,” Cho said in July, according to Bloomberg News. “We need to offer more products that are suited to each market, like diesels.”