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A lot of car makers recently released sales figures. Most of the numbers were not very good; this has been attributed to supply disruptions due to the big earthquake in Japan, as well as a slowing of the economy. Nevertheless, they tended to be better than the dismal numbers that were expected.

In one little-noticed area, however, sales were soaring. Diesel engine sales in the United States are taking off at a rate far above expert predictions. With much higher fuel prices caused by heavy taxation, European carmakers have long specialized in producing reasonably priced, more fuel-efficient small cars and trucks fueled by diesel. Diesel engines use 30-40% less crude oil to go the same number of miles as gasoline-fueled vehicles.

German carmaker Volkswagen (OTCPK:VLKAF) has brought its know-how to America. Its luxury car brand, Audi, was one of the first to introduce "clean diesel" technology to the US.. Overall Audi sales were up by 13.6% over May 2010, fueled by intense demand for those models offering diesel. Sales of the A3, for example, increased by 33.9% with the "TDI clean diesel" accounting for 55%. Sales of the Audi Q7 sport-utility vehicle showed an increase of 26.9%, with diesel amounting to 40% of the total.

In the mid-priced car market, Volkswagen sales were up by 28%, again led by its diesel offerings. "Clean diesel" TDI models accounted for more than 22 percent of all May sales. Fresh from this success, Volkswagen is making plans to vastly increase its sales in the US for all of its cars. The German carmaker recently opened a new manufacturing facility in Chattanooga, Tennessee. The Tennessee assembly plant will build a newly designed Passat that will sell for about $7,000 less than its German-built models. This will allow direct price competition, for the first time, with the market-leading Ford (NYSE:F) Fusion, Toyota (NYSE:TM) Camry, Honda (NYSE:HMC) Accord and Hyundai (OTC:HYMLF) Sonata.

Volkswagen expects to build 150,000 American Passats in 2012. The new Passat factory will produce clean TDI diesel engines made in America. The diesel version of the Passat has been able to achieve 43 mpg on the highway compared to 32 mpg for the 2.5-liter gasoline version. According to Rebecca Lindland, senior analyst for IHS Automotive, diesel car sales have increased by 48 percent over last year because consumers are looking for better fuel efficiency. In comparison, hybrid car purchases rose 25 percent.

Volkswagen expects annual US sales of 800,000 vehicles by 2018 from last year's 256,830, which was the company's best showing since 2003. It expects its Audi brand sales to rise an additional 200,000 over the same period. Volkswagen is vastly underestimating its future sales figures if it continues to be the only mass market automaker in America offering diesel engine cars. As the demand for oil worldwide continues to rise, and the price moves higher and higher, the demand for diesel will also move higher.

Other automakers can no longer afford to ignore diesel. Cummins Inc. is developing a four-cylinder diesel engine aimed at giving full-sized, light-duty American pickups the power of a small V-8 and overall fuel economy of 28 mpg. By comparison, a full-sized Nissan (OTCPK:NSANF) Titan pickup gets an average of 15 mpg. According to the U.S. Department of Energy, if diesel vehicles make up 30 percent of the U.S. market share by 2020, the U.S. could save 350,000 barrels of oil a day, reducing the country’s dependence on foreign oil.

Ford, however, alone among automakers, recently indicated that it had no intention of introducing diesel to North America, even though it sells huge numbers of them in Europe. Ford says that it will rely on EcoBoost gasoline engines, which use turbocharging, direct injection and other technologies to boost fuel economy. But, In spite of the hype, no "Ecoboost" engine model achieves fuel efficiency remotely resembling diesel engines. The only real alternative to diesel are hybrids.

Hybrid vehicles have both high manufacturing and high maintenance costs because of the batteries. This makes diesel a cheaper alternative in spite of the fact that platinum must be used, instead of palladium, in catalytic converters. If diesel catches on in North America, as now seems to be the case, platinum prices could rise quickly to $4,000+ per troy ounce. However, even at that price, the cost of the platinum amounts to only a few hundred extra dollars, out of a total $29,700 paid for a new car on average, as noted here.

Aside from the initial cost, after about 100,000 miles, hybrid owners often must put up $4,000 for new batteries. In contrast, the average useful life of a well-maintained diesel engine is about two to three times longer than an equivalent gasoline engine, further reducing the cost of ownership. If maximum fuel efficiency is desired, and the cost of batteries is not an issue, Volkswagen has developed a diesel/electric hybrid that gets an average of about 70 mpg. Meanwhile, GM, Peugeot (OTCPK:PEUGF) and Mercedes Benz have all announced plans to develop super-high fuel efficiency diesel hybrids.

About 39% of current platinum demand is from catalytic conversion of vehicle exhaust emissions. An average of about eight grams of platinum are used for each small diesel engine, compared to only about one gram for gasoline engines. The expert-beating success of Volkswagen's diesel-fueled cars in America and elsewhere, as well as the expected roll-out of similar products from other manufacturers, will fuel higher levels of platinum demand, even if economic growth declines and the total number of new cars produced falls.

You can learn more about how to invest in platinum here and here.

Source: Soaring Sales of Diesel Cars Support Higher Platinum Prices

Additional disclosure: Long precious metals.