Peugeot will unveil the prototype of a new type of fuel-efficient car, a diesel/hybrid, early next year.
Peugeot says that it ahs no plans yet to produce the car, the diesel/hybrid presents a challenge to the petrol/electric hybrids already available.
"Diesel engines deliver equivalent performance to a petrol engine, with fuel consumption reduced by at least 20 percent," says Jean-Martin Folz, the chairman of Peugeot's parent company PSA.
He said the benefits of a petrol/hybrid system are comparable to those gained by replacing petrol engines with dieses.
"Only a diesel/hybrid system is attractive because it offers a real fuel consumption reduction," he said.
Because a diesel engine is more expensive to make than an equivalent petrol one, Folz said PSA is concerned about the cost of a diesel/hybrid, especially with the added expense of an electric drive system.
But Peugeot believes if the industry is serious about making hybrids, diesel/electric is the way to go.
"We will unveil the prototype to show this technology is possible but we don't know if we will make cars with it," said Folz. "This is because we are not yet convinced that there are enough buyers prepared to spend more money to save fuel."
A formal decision on production is likely to be made by mid-2006 but meanwhile PSA is developing a range of hybrid cars and vans developed from diesel-engined models.
Folz says Peugeot believes technical barriers to fuel cell development mean hydrogen-powered cars won't be a commercial reality for at least 15 years.
Peugeot and the former state gas company Gaz de France are also working on natural gas-powered prototypes in the south of France. It's expected that this model will be in production by 2007.
Folz said a real environmentally friendly vehicle is an affordable vehicle, and significant reductions in overall emissions would only be achieved if a large number were bought.
"We must also foster the use of biofuels, as they are immediately available and do fit in the present distribution channels as well as in our current range of engines," he said. "The use of biofuels should not only be part of all government procurement but should receive adequate fiscal support so that biofuels are competitive with fossil fuels.
"Central governments should take measures to encourage the introduction of lower CO2 emissions cars – but such measures must be technology neutral.
"Setting incentives based only on CO2 emissions, and not dependant on the size and engine displacement of the car, is certainly one of the best ways of spending the public funds to contribute to the battle against climate change.
The existing vehicle population is a further problem. "Vehicles over 15 years old pollute 20 or 30 times more than modern car and yet we ignore their major contribution."
PSA Peugeot Citroen is a world leader in diesel engine production, making engines with the lowest CO2 emissions of any conventional engine.