Reuters reported Monday that Fuji Heavy Industries (parent company of Subaru) is developing a diesel powerplant that could debut in Subaru's European lineup as early as 2007.

After agreeing with major shareholder Toyota Motor last week to adopt Toyota's hybrid powertrain technology for Subaru's planned hybrid models, Fuji is shifting its product development focus to diesel engines. Subaru will launch diesel AWD powertrains before its upcoming hybrid models.

Diesels are key to expanding Subaru's market reach in Europe, where half of all new cars sold are diesel-powered. Subaru will likely launch its new diesel first as an option for the European market Legacy (pictured).

The company forecasts that half of Subaru sales in Europe will be diesels by 2010, and between 10 and 20 percent of its sales in Japan and the U.S. will eventually shift to diesel power.

[Source: Reuters] Thanks for the tip, Jeffrey!

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