Japanese carmakers - free from European import quotas this year - have been caught unprepared for the sharp rise in diesel sales.
Diesel makers with the latest common-rail technology are winning sales at the expense of Japanese companies, said analyst Peter Schmidt of AID in Warwick, England. He said Japanese diesel technology lags behind that of European companies.
'The diesel market is virtually nonexistent in Japan and North America, so they are having to catch up in Europe,' he said.
The three fastest-declining brands in Europe during the first nine months of 2000 are Mazda (-14.8 percent), Honda (-13.7 percent) and Mitsubishi (-12.7 percent). All three lack state-of-the-art diesels.
Japanese makers combined are down 3.1 percent for the year - the total helped by the strong performance of the Toyota Yaris.
In the first nine months the diesel engine share has risen to 32 percent of the total western European market, up from 27 percent in 1999.
The growth in diesels has thrown model-mix predictions into confusion.
Schmidt said the growth has been caused by massive rises in fuel costs in Europe.
'People are becoming more price conscious about fuel and have switched on to the fact that diesel can be 25 percent cheaper to buy and can return 50 percent more kilometers for every tank ful,' he said. 'Even we have been surprised. A year ago we predicted diesels would take 33 percent of the western European market share by 2002, and people told us we were being far too optimistic. It has reached 32 percent already.'
'Carmakers have been surprised by the demand. They just can't produce diesel-engined models fast enough.'