BMW is bullish about diesel prospects after launching the 320d at £21,345 - £22,645 in SE trim.

Kevin Gaskell, managing director of BMW GB, said: “If we are going to stand any chance of hitting the CO2 targets we committed to at the Kyoto summit, then diesel has to play a major role.” He said huge investments had transformed BMW's diesel engines, but the carmaker still lags behind Audi and Mercedes-Benz in diesel sales.

In 1998 Audi took around 6.5% of the sector and Mercedes 3% while BMW, which has never topped more than 2%, slipped to 0.5%.

However, BMW is forecasting sales of 5,500 diesels next year - more than double the previous highest year of 2,495 in 1994.