Mercedes Benz, the luxury arm of Daimler-Chrysler AG, plans to introduce a new generation of diesel powered vehicles in Japan this fall. Mercedes hopes that a re-engineered diesel engine can spur sales in a country where diesel technology is seen as dirty and outdated compared to gasoline.

Mercedes Chairman, Dr. Dieter Zetsche, announced the company's plans to enter the Japanese market with diesel automobiles at the 34th annual Tokyo Motor show after showcasing some of the company's latest technologies. The company introduced several new technologies, including a hybrid diesel engine that can get 80 miles to the gallon in its F600 concept car.

Our aim,” says Mercedes Chairman Dr. Dieter Zetsche, “is also to convince Japanese drivers of the advantages offered by our up-to-date diesel technology.”

Mercedes, along with other manufacturers, has previously sold diesel automobiles in Japan. However, tough emissions regulations introduced by Japan dropped the market share of diesel cars from 6% in 1990 to almost nothing today. The fact that automobile makers couldn't, or didn't, meet these requirements has left a negative impression on Japanese auto consumers.

In Japan when you say diesel engine, everyone thinks of rattling, smelly, dirty engines, says Tatsuo Yoshida, an analyst at Merrill Lynch in Tokyo. Demand is almost nil at this moment.

Nonetheless, Mercedes will introduce its E-Class sedans with the latest 320 CDI V6 diesel engine in Japan. The new car is no slouch, accelerating from 0-60 in 6.6 seconds, with a top speed of 155 mph, and with an impressive 37mpg highway fuel economy. The fuel economy reflects diesel's greater mileage compared to gasoline.

However, even more relevant to diesel's commercial success in Japan is the development of a cleaner 'green diesel.' Today's new diesel engines actually produce less CO2 emissions than gasoline engines, while nitrogen emissions have been greatly reduced. This is an important selling point in a country that hosted the Kyoto Protocol.

“You still have the economic advantage -- but without any additional burden for the environment, says Hans Tempel, CEO of DaimlerChrysler Japan.

Research performed by the Yano Research Institute in Tokyo shows that diesel engine penetration could reach 11% in Japan by 2015 on the strength of new technology. If Mercedes can establish its diesel automobiles in Japan today, they will be in a great position to be the reigning diesel champions of tomorrow.