VW, Mercedes diesels qualify for tax credit

The new-generation clean diesels at Volkswagen and Mercedes-Benz are the first diesel-powered vehicles whose buyers qualify for a federal alternative-powertrain tax credit.

The 2009 model VW Jetta TDI sedan and Sportwagen and Mercedes GL320, R320 and ML320 Bluetec qualify for the credit, which previously had gone only to hybrid vehicles. Credits range from $900 for the ML to $1,800 on the GL.

The amount is based on an Internal Revenue Service formula that determines how much fuel the diesels will conserve compared with a similar model from 2002, according to Mercedes-Benz.

As with the hybrids, the IRS limits each carmaker to 60,000 alternative-powertrain vehicles whose buyers can get the tax credit.

The four diesels have been designated as advanced lean-burn-technology motor vehicles that meet the requirements of the Alternative Motor Vehicle Credit, according to an IRS letter sent to Mercedes.

Both German brands have touted the tax savings, hoping that will soften the added cost of buying a vehicle powered by more expensive diesel fuel and a more expensive engine. Although the diesels have a mileage advantage of more than 30 percent over similar gasoline models, diesel fuel continues to be considerably more expensive than premium gasoline.

According to the AAA Daily Fuel Gauge Report for Wednesday, Aug. 6, the average national price of diesel was $4.63, down from $4.81 a month ago. That same day, the price of regular unleaded gasoline was $3.86.

VW's diesels went on sale this month. The Jetta TDIs are rated at 29 mpg city and 40 highway. The Mercedes Bluetec light trucks go on sale in October.

This year, BMW will launch a diesel 3-series car and X5 crossover. The automaker hasn't said whether it has applied for lean-burn certification.

Previous-generation diesels — including the VW Jettas and Touareg and Mercedes light trucks, as well as the Jeep Liberty — were not considered clean enough for the credit.

The highest tax credits still go to buyers of hybrids. The IRS has certified four 2009 Ford Motor Co. hybrids as eligible. The highest credit of $3,000 goes to the Escape and Mariner two-wheel-drive hybrid crossovers. The tax credit is good only for vehicles purchased before the end of 2010. 

You can reach Diana T. Kurylko at dkurylko@crain.com.


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