DaimlerChrysler wants looser strings on diesel tax credit

Harry Stoffer | Automotive News / May 1, 2007 - 3:28 pm / WASHINGTON -- A DaimlerChrysler executive today asked Congress to ease a restriction on federal tax credits so that more consumers would have an incentive to buy vehicles with diesel engines.

The restriction requires a diesel to run as cleanly as the average gasoline engine. Suspending the restriction would be an "important step in Congress's pursuit of a multifaceted U.S. advanced technology vehicle strategy," said Mark Chernoby in prepared testimony before a Senate subcommittee.

Chernoby is vice president of advanced vehicle engineering for DaimlerChrysler. The testimony came in a hearing by a subcommittee of the Senate Finance Committee on federal incentives for advanced technology vehicles.

A 2005 law provides tax credits -- in some cases more than $3,000 -- for buyers of vehicles with fuel-saving technology. But all tax credits so far have gone to buyers of gasoline-electric hybrids.

No diesel has qualified because the law requires tailpipe emissions to be at least as low as those of the average gasoline engine under new clean-air rules. Those rules are being phased in during the 2004-09 model years.

Diesels on the market comply with clean air regulations. But their emissions will remain higher than those of the average gasoline engine until at least 2009.

Selling more diesels this year and in 2008 would help establish "a marketplace foothold" for the technology in a broad array of vehicles, Chernoby said.

On average, he said, a diesel-powered Jeep Grand Cherokee would use 418 fewer gallons of fuel each year than one with a gasoline engine. That's a far bigger fuel savings than a hybrid Honda Civic achieves compared with a gasoline-only Civic, Chernoby said.

Buyers of the hybrid Civic qualify for a federal tax credit of about $2,100. If the special diesel emissions requirement did not exist, the buyer of a diesel Grand Cherokee would qualify for a credit of $900 to $1,200, says DaimlerChrysler spokesman Colin McBean.

Sen. Joseph Biden, D-Del., has introduced a bill that would roll back the emissions requirement for diesel tax credits. Lawmakers are considering whether to enact additional federal incentives as part of their broader plans to cut petroleum use and reduce greenhouse gas emissions.

Other witnesses at today's hearing represented A123Systems, a maker of advanced batteries; Tesla Motors Inc., which is building an electric sports car; Shell Hydrogen LLC, a fuel provider; and the University of Michigan Transportation Research Institute.