Isuzu and Toyota made a recent announcement about a diesel they’re developing that shines some light on their development of a diesel Toyota Tundra.

GOOD NEWS: While not specifically having anything to do with the Tundra, Toyota’s recent announcement (see link below) contains some enlightening information. The press release indicates that Toyota and Isuzu can recuperate diesel development costs even if the diesel engine they’ve developed only sells 20k units per year. If Toyota can recover their R&D costs on on such a small number of engines, the sales volume needed to justify producing a diesel variant of the Tundra is probably lower than we estimated in our last discussion of a Diesel Toyota Tundra.

If we conservatively assume that Toyota will need to sell 40k diesel engines per year to cover R&D costs, Toyota only needs to boost Tundra sales by 20% to reach their “break-even” point. In 2006, Dodge sold 150k diesels, GM 200k, and Ford about 320k diesel powered pickups. Granted, some of those vehicles were “fleet” heavy duty offerings that Toyota may not compete with, but if Toyota only reaches 10% diesel market share, they’ll more than break-even on their diesel development costs.

Is this an indicator that Toyota is producing a Diesel Tundra? We think so — Toyota continues to demonstrate interest and investment in the diesel market, and the pending passage of new CAFE regulations requiring better fuel economy encourage Toyota to put more emphasis on diesel technology. Considering that Toyota Vice President Kazuo Okamoto has stated the Tundra is going to be Toyota’s first U.S. diesel, consider this another sign that a Diesel Tundra is coming ASAP.

Why do you think the Diesel Tundra will debut in 2009? The industry consensus is that engine development takes 2 - 3 years. Toyota announced a partnership with Isuzu to develop diesel engines in June of this year, the idea being that Toyota would be able to bring diesel variants to market faster with Isuzu’s help. If R&D for a diesel Tundra began immediately after the partnership with Isuzu was solidified, (which is easy to imagine based on the Tundra’s sales performance this year) that would mean that the Tundra diesel engine will be ready for production in 2009 or 2010. We believe that Toyota will most likely assemble the new Tundra diesel engine from components already available, making 2 years a likely time frame.

How big will the Tundra’s diesel engine be? It’s still a mystery. Toyota may be adapting a diesel for the U.S. from one currently in production somewhere else in the world, or they may be developing a completely new engine. The 2007 Tundra Diesel SEMA concept featured an 8.0L Hino engine, but we doubt that will be the final offering…Ford is planning to offer a 4.4L diesel in the F150 in 2010, and Ford will offer a slightly larger version in their SuperDuty line. Certainly not anything as big as the 8.0L Hino though — such a big engine would only worsen emissions and fuel economy. Expect the Tundra diesel in the 6.0L range, with the possibility that Toyota’s first diesel might be a little smaller than everyone else’s (just like their first V8 was).