The 65 mpg car the U.S. can't have, and Ford won't produce

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The Ford Fiesta ECOnetic is a sporty subcompact car that seats five, it comes with a GPS navigation system and offers a fuel mileage rating of 65 mpg. The vehicle will be available for Europeans in November this year, but Ford won’t produce it in the U.S. because the company says they are expensive to manufacture in America.

If Ford introduces this car, I will bet it will become an instant bestseller, beating out similar fuel efficient cars from Toyota and Honda. But Ford won’t sell it in the U.S. despite the fact it's more eco-friendly than gas-guzzling SUVs and other fuel efficient cars.

One of the reasons Ford says the Fiesta ECOnetic won't make it to the U.S. is because it runs on diesel fuel. German automakers Volkswagen and Mercedes-Benz have long used diesel fuel for their cars and both companies are currently investing in “clean diesel” fuel that is cleaner than gasoline and 30 per cent more fuel-efficient. Ford isn't introducing this technology in the U.S. because the tax on diesel fuel is higher than that on gasoline (prices are usually 40 cents to a dollar more per gallon than gasoline). If the government lowers taxes on diesel, diesel fuel prices will be as competitive as gasoline.

Another reason the automotive industries are hesitating to use diesel is because of the highly popular Toyota Prius, and the fact U.S. customers consider diesel old-technology.

European and Japanese automakers will go ahead with their plans to produce new diesel model cars. Mercedes-Benz will have three cars by next year under the brand name “BlueTec.” Nissan and Honda will introduce diesel cars in the U.S. in 2010. But Ford, which will already have a car in the Europe has no plans to bring it home to the U.S.

Ford said the engines are built in Britain, and as a result the labor costs are high. The Pound Sterling is also a stronger currency than the U.S. dollar. With these high costs, Ford said it will cost $25,700 in the U.S., whereas the Prius hybrid car starts at $24,000. Ford thinks it won’t make enough profit at that price.

Ford will make a gas-powered version of the Fiesta ECOnetic in Mexico, but they are not building the diesel version there. Ford is reportedly losing nearly $1 billion a month in cash reserves, so why not invest in diesel engines? Business Week estimates it will cost $350 million to build a diesel engine plant in Mexico.

Ford America President Mark Fields thinks there won’t be enough demand in North and South American markets. He said Ford has to produce at least 350,000 engines a year to make the venture in Mexico profitable.

While other foreign car manufacturers will be producing diesel powered cars in the U.S., Ford is playing a waiting game. Usually the market rewards the leaders, not the followers, so I suggest Ford think twice before they lose out even more.