In good news for consumers, the average price of gasoline per gallon in the U.S. last week was down nearly $0.29 from the same period in 2005. Given this development, the timing of Honda Motors'
Honda revealed over the weekend that it plans to introduce a diesel engine that meets the California emissions standards, the world's toughest, within three years. These same regulations have precluded German companies DaimlerChrysler
Obviously, if Honda can introduce such a diesel at a reasonable price, Daimler and Volkswagen have a lot to worry about. But then, so do makers of hybrid vehicles, including the hybrid leader, Toyota
But depending on the model, hybrids may command a steeper premium than diesels. And just like hybrids, diesels are eligible for federal tax credits. As for the price of diesel fuel, most modern diesels can run on pure biodiesel, although Honda has not said whether its engine can utilize the biologically derived fuel. Additional biodiesel production continues to come online, so diesel prices should stabilize in the near future.
Honda admits that it still has some technical issues to work out before its diesel engine hits the market. What's more, it has its own hybrid line, and there's the chance that its diesel product could cannibalize some sales. But if the Japanese firm can make good on its plans, it will up the pressure on its competitors.
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Fool contributor Brian Gorman does not own shares in any of the companies mentioned.