Article: Chang-Ran Kim from Reuters
Image: Reuters

Diesel cars make up more than half of the European market, but a powerful smear campaign by Tokyo's popular governor in the late 1990s deriding them as smelly, noisy and polluting has all but erased the fuel-efficient cars from Japanese roads.

Nissan was the standout among major automakers in U.S. auto sales data released on Wednesday, surprising investors with a 13.6 percent increase in August sales.

The diesel X-Trail, only available in manual transmission, costs just under 3 million yen ($27,710), carrying a price premium of about 400,000 yen ($3,695) over a comparable gasoline version. Nissan said it hoped to sell about 100 units a month.

"For a long time, we had no diesel cars in Japan," Nissan Chief Operating Officer Toshiyuki Shiga told a news conference. "I'm not sure how much it would spread in the market now, but if it does well we will consider broadening the line-up."

The only other diesel car available in Japan now is Daimler AG's Mercedes-Benz E320 CDI sedan, launched in late 2006. While the company says reception has exceeded its expectations, a sticker price of over 8 million yen ($73,510) has kept sales volumes here at a paltry 100 units a month.

Volkswagen AG, Japan's top-selling foreign brand, is also preparing to offer a diesel car in Japan next year.

Other domestic automakers, including Honda Motor Co, Mitsubishi Motors Corp and Subaru-maker Fuji Heavy Industries Ltd, will be joining Nissan in the segment over the next few years. But conspicuously absent from that list is market leader Toyota Motor Corp, without which proliferation may be difficult.

Toyota, which has 45 percent of the local car market, offers a range of diesel cars to compete in Europe but has preferred to promote hybrid technology, pulling the plug on the last remaining diesel car in Japan, the Land Cruiser Prado, in July 2007.

The Japanese government is also keen on diesel cars and is considering offering consumer incentives from next April, for models that meet the new, tighter emissions standards.

With the stricter regulations in place, diesel cars would be almost as clean as comparable gasoline vehicles, with the added benefit of cheaper fuel.

Nissan said the 2.0-litre X-Trail 20GT, which goes on sale on September 18, gets 30 percent more mileage than a 2.5-litre gasoline engine version with the same power output.

The price difference with the gasoline version can be offset by driving an average 10,000 km (6,200 miles) a year for three years, it said.

Prices of Toyota's and Honda's hybrid cars, meanwhile, are set to fall dramatically next year, although the Japanese government's incentives for gasoline-engine cars have ended.