THE reduction in the special tax on diesel-powered cars has had a generally positive reception from car importers. Only one of the European carmakers, which is acknowledged as the biggest and most successful proponent of diesel technology, has decided not to import diesel models for now.

A BMW Asia spokesman says the German luxury carmaker 'will certainly consider diesel models but that we do not have plans to bring them in immediately'.

But the rest appear more enthusiastic. Among them is Volkswagen, Europe's biggest carmaker and whose diesel technology is considered the benchmark. It will introduce three Touareg SUV models here from July 1, 2008 - a TDI V6, a TDI V10 and an R50, a souped-up version of the Touareg TDI V10 and with a whopping 850 Nm of torque.

'VW is committed to passing on the benefits of diesel by offering customers a powerful ride, yet in a vehicle that is environmentally friendly,' explains Olaf Duebel, managing director of Volkswagen Group Singapore.

He adds that the concept of diesel-powered, environmentally friendly cars is not a new one for Volkswagen.

'We have invested wisely over the decades, into research and development to make Volkswagen a leader in diesel technology. The time is now right to bring diesel cars into Singapore and sharing with our customers a technology that has seen huge successes in many Asian countries,' says Dr Duebel.

He expects his customers to be those who have heard about and have been inquiring about VW diesel cars and the highly successful diesel technology. 'They appreciate a powerful car, yet are concerned enough about the environment to want to go clean and green,' says Dr Duebel.

At Mercedes-Benz, the brand with the three-pointed star says it has always provided the option of importing diesel cars.

'We have an open policy of bringing in any Mercedes-Benz car that the customer wants and this has included diesel models as well, if the customer so desires,' explains Gilbert Kwek, general manager for sales and marketing at Mercedes-Benz Singapore.

Diesel is one of the company's strengths and it has been involved in the technology for more than 70 years.

'We have the accolade of offering the world's first production diesel car, the Mercedes-Benz 260D, in 1935,' says Mr Kwek.

But some observers say the recent cut in diesel tax may not be attractive enough to merit a bigger influx of diesel passenger car models.

Last month, the government announced that from July 1, 2008, the special tax structure for Euro IV private diesel passenger cars will be reduced. Currently, such a diesel car attracts a road tax and a special tax, which is four times the annual road tax. For example, a 1,600cc car's total tax (based on the rate effective in July 2008) will be $743 in road tax plus a special tax of $2,972, or a total of $3,715.

But with the revision, the special tax will be based on a rate of $1.25 per cubic centimetres (cc) of engine capacity. So the same 1,600cc car will have a tax of just $2,743 - almost $1,000 less. But while it is a 25 per cent reduction, the total tax will still be heftier than that of an equivalent petrol-engined car.

'All things being equal, the cut is not significant,' says a spokesman for Chrysler Jeep. 'If the petrol engine and the diesel engine have the same displacement, there will be no savings unless your monthly petrol bill is more than $600. Who drives so much in Singapore?'

But he adds that if the size of the diesel engine is smaller, then it will make sense. For example, a Jeep Wrangler is currently offered here with a 3.7-litre petrol engine. But the same model is also available with a 2.8-litre turbodiesel engine.

'If the diesel engine's capacity is smaller, it will offset the special tax. Then the road tax is the same and since you get 25 to 30 per cent savings with diesel consumption, it makes economic sense,' says the spokesman.

Diesel engines offer superior fuel consumption to petrol units. They also have very high torque, which translates to sportier performance. As a result, Chrysler Jeep is evaluating the demand of a diesel variant. Those who buy a Jeep as a fashion statement will find such a model more economical to maintain, says the spokesman.

'It will also appeal to 4x4 enthusiasts, who understand and appreciate the features and abilities of the Jeep, as the pioneer of this range of vehicles,' he adds.

As for the Japanese carmakers, they are largely unrepresented in the diesel arena.

Honda, for example, will only be able to introduce a diesel model here in 2010 or 2011. This is because its Euro IV 2.2 turbodiesel engine in the Accord and CR-V, currently sold in the UK, is only mated to a manual transmission. An automatic model will only be available with the new Euro V diesel engine.

This article was first published in The Business Times on Mar 5, 2008.