NEXT month Toyota will become the first manufacturer to have cars in the two key fleet markets that help drivers avoid the 3% benefit-in-kind diesel tax penalty. On May 1 it became the first manufacturer to launch a volume car, the Avensis D-4D, that meets the stringent Euro IV emission standards.

On June 2, Toyota will reinforce its position as a leader in clean diesel technology when the lower-medium Corolla D4-D goes on sale.

The Corolla is powered by the same 2.0-litre engine as the Avensis, the second generation, high-pressure common rail unit manufactured at Toyota's plant in Deeside.

The appeal to fleets is that these new diesel engines are not subject to a 3% penalty when assessed under the carbon dioxide-based benefit-in-kind (BIK) tax regime.

By the end of 2003 it expects to sell 1,400 D-4D models, accounting for 20% of total Corolla sales. By the end of 2004, Toyota expects this share to increase to 30%. A Toyota spokesman said: 'We anticipate strong growth, playing our part in the present surge in UK diesel registrations.'

Toyota, he said, like other Japanese manufacturers, had entered the diesel market relatively recently and was now embarking on a catch-up process.

The Corolla T3 three-door costs £13,800 and emits 149g/km of carbon dioxide, attracting a BIK charge of 15% of its P11d price. This would see a 22% tax-payer paying £455 in tax for the 2003/04 tax year. With the 3% penalty, their tax bill would have increased to 18% or £546. This model also qualifies for Band A Vehicle Excise Duty. The rest of the range – emitting 151g/km – falls into Band B. In comparison, the lesser-powered non-Euro IV 89bhp diesel Corolla emits 153g/km.

The new engine not only saves drivers money, its power has been boosted compared to its predecessor in the range – the discontinued 109bhp version found only in the T Spirit five-door.

The 2.0-litre D-4D engine has a maximum power output of 114bhp, giving 0-62mph acceleration in 10.6 seconds and a top speed of 116mph. The combined fuel economy figure is 50.4mpg for the three-door and 49.6mpg for the five-door version.

The spokesman added: 'We have a clear message to fleets on why they should choose a Toyota. We are now the only manufacturer to have two diesels in key fleet segments that avoid the 3% penalty. And we've beaten the 2005 deadline for compliance with the emission legislation by a considerable margin.

'While Euro IV is a dry subject, the fact that our D-4D engine will save drivers money is a sure-fire way of getting fleets' attention.'

The engine is available in T2 five-door, T3 three and five-door and T Spirit five-door models. Prices range from £13,300 for the T2 five-door to £15,300 for the range-topping T Spirit five-door.

Behind the wheel

The new D-4D diesel engine has all the attributes of common rail engineering: reduced noise, smooth acceleration and impressive power. Toyota has improved on its diesel offering by introducing a variable nozzle turbocharger that boosts the power, maintains low emissions and low fuel consumption. The obvious benefit to the driver is that torque is increased at low engine speeds.

The outgoing 109bhp diesel engine had a max torque figure of 184lb-ft at 2,000rpm. The new engine has 206lb-ft at 2,200rpm and believe me, you will notice the difference.

The power is there from a standing start right the way through the gears and the engine remains composed throughout rapid acceleration. The boost in power in the new engine over the 89bhp version and its more-than-two-second gap in 0–62mph time is apparent.

Another bonus is fuel consumption. The test drive covered 100 miles and the fuel gauge barely moved – the most obvious sign of the 50.4mpg figure. The Corolla D-4D's environmental credentials make it eminently affordable in tax and fuel costs.

The one gripe was the gear change action. Smooth gear changes at speed were not easy since the clutch pedal seemed to need pushing right to the floor before the gear engaged.

Driving verdict

This car is a winner in motoring and money terms. But with initially low sales targets and the muted championing of its Euro IV triumphs, I can't help feeling Toyota has done the equivalent of finding the Holy Grail and stuffing it in its sock drawer. This is sad when the arrival of the Euro IV Audi A3 next month, followed later in the year by the Euro IV Vauxhall Astra, Volkswagen Touran and Fiat Punto, means there is little time for Toyota to savour its success.

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Model: Toyota Corolla D-4D
Engine (cc): 1,995
Power (bhp/rpm): 114/3,600
Torque (lb-ft/rpm): 206/2,200
Max speed (mph) 116
0-62mph (secs): 10.6
Fuel consumption (mpg): 50.4 (5-dr 49.6)
CO2 (g/km): 149 (5-dr 151)
Fuel tank capacity (g/lits): 12.1/55
Service intervals (miles): 20,000
On sale: June 2
Prices (OTR): £13,300 – £15,300