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VW has started launching TDI “value editions” of select models to better position diesel as a money-saving option on par with hybrids

The value Jetta starts at $22,115, including shipping, with a TDI engine and a manual transmission -- a $2,300 price cut that has bolstered its position as the least expensive diesel car on the U.S. market. That puts it squarely between the base Toyota Prius C ($19,890, including shipping) and the base Toyota Prius ($25,010, including shipping).

The strategy underscores how Toyota is playing catch-up in a fundamental field, as rivals gain on the automaker's top fleet average fuel economy in the United States with big advancements in such fuel-saving technologies as direct injection, turbocharging and stop-start systems. For years, Toyota has focused on its best-selling gasoline-electric hybrid systems. It hasn't abandoned that track.

Toyota is seeking fuel economy increases of up to 30 percent and cost cuts on key components of up to 50 percent.

"Just like putting something beautiful on top of your hairdo, by using kanzashi through such things as turbocharging or downsizing, you can improve the performance of the engine."Kanzashi add-ons may include direct fuel injection, exhaust gas recirculation systems or stop-start technologies that turn off the engine when the vehicle stops.

The EPA's annual report on fuel economy trends, which calculates automakers' fleet average fuel economy based on sales, shows Toyota losing ground to rivals such as Nissan and Mazda. For example, in 2010, Toyota's U.S. fleet average fuel economy was 25.4 mpg. In 2013, it was 25.2 mpg. Meanwhile, Mazda improved from 24.4 mpg in 2010 to 27.5 mpg in 2013, and Nissan rose from 23.3 mpg to 24.6 mpg during the period.

"Eventually we think this is where the technology is going, but right now we don't know what the reaction of U.S. customers will be," he said. "So probably right up until the last moment, we will have to be ready with both and watch customer feedback."

2012 in the United States

At that time, about 55 percent of buyers were choosing the TDI engine -- far more than the company had projected.

But with nearly 900,000 more Sonata owners on the road since the outgoing model's debut, and a chance to build a broader, more sustainable following, "We have to be more careful," Zuchowski said.

But Hyundai says the car's suspension and steering have been redesigned for better ride and handling. The interior also is new, with greater use of soft-touch materials and more countermeasures against road noise. Also, high-tech features and advanced safety equipment -- plus a starting price that Zuchowski says won't stray far from the outgoing model's sticker of just over $22,000, with shipping -- will help the Sonata retain the value image that has been a key purchase reason for the sedan, Hyundai says.

With 6.6 million Camrys on the road, Toyota understands well the delicate balance Hyundai is seeking. The Camry's large, loyal following has allowed it -- compelled it -- to stick with safe, modest designs and driving characteristics, generation after generation.

But when the current generation was launched in late 2011, mostly to yawns from auto critics, the sportier SE model became the best- selling trim package. Toyota took the hint.

Every piece of sheet metal except the roof has been changed, as have more than 2,000 part numbers. For some automakers, that constitutes a redesign.

Both products will land in a mid-sized market that has been roiled by intense competition, not only within the segment but also from fast-growing crossovers. At 2.6 million units in 2013, sales in the segment grew just 1 percent from the previous year,

No one feels this more than Toyota, which is fighting to continue the Camry's 12-year streak as America's best-selling car against a strong challenge from the Nissan Altima. Toyota has spent more on Camry incentives, yet had a lower mean transaction price, than its top four competitors -- the Altima, Honda Accord, Ford Fusion and the Sonata -- every month since November 2012, according to TrueCar.

Carter hopes the investment in the new-look Camry will allow Toyota to dial back on incentive spending. "One way to lower incentives is to increase demand, and that's what this car is about," Carter said. But if competitors should raise their incentives, Toyota won't sit still. Said Carter: "This is a competitive market. And we're going to compete."

For its seventh generation, Hyundai says the Sonata has “evolved into a more refined premium vehicle” that “provides a luxury feel of a car from the segment above.”

The Sonata became Hyundai’s top-selling car, with sales topping 200,000 units in 2011, 2012 and 2013. But sales have slowed since fresher competing models such as the Honda Accord, Ford Fusion, Nissan Altima and Toyota Camry hit the market, with sales dipping by 12 percent last year and off another 28 percent through the first two months of 2014.

Another worrying trend for Toyota could be slipping owner loyalty.

Camry owners who bought another Camry stayed level, at 30 percent,

To price cars competitively, it tried offsetting the cost of its sophisticated mechanics by stripping out features and using entry-level trims in the Passat and Jetta.

ranks 23rd out of 33 brands, with 120 problems reported for every 100 new cars within the first 90 days.

"The Passat is up against a redesigned Nissan Altima, a redesigned Honda Accord and a redesigned (Ford) Fusion - all undercutting VW on pricing," said Alec Gutierrez, an analyst with Kelley Blue Book, which tracks U.S. car values.