Jaguar will start producing diesel engines later this year, The Car Connection (TCC) website reported, citing Ford COO Nick Sheele as saying that the first will appear by the end of 2003 in the new XJ saloon. Other sources have told TCC that Jaguar will expand diesel availability with the S-type and the X-type to follow. TCC claimed that Jaguar officials ultimately concluded that without a diesel offering, they would miss a significant and fast-growing segment of the European market. They further noted that, in some countries, such as Austria, diesels currently account for 80 percent of new vehicle sales. Sales run about 40 percent continent-wide. TCC added that, though Mercedes will test demand for a diesel E-Class in the US next year, there are, for the moment, no plans to bring the diesel XJ across the Atlantic. That could change if Mercedes builds demand - and American regulators relax tough new emissions standards that could drive diesels out of the US market by 2007, TCC noted.