AUDI now offers the cheapest diesel luxury car in Australia.

Released this week, the A4 2.0 TDI starts at $56,990 for the sole automatic four-door sedan.

This undercuts the Mercedes-Benz C220 CDI Classic by $11,500.

Powering the front wheels is the same 1968cc 2.0-litre four-cylinder pump-injector turbo-diesel unit found in the Audi A3 2.0 TDI and Volkswagen Golf 2.0 TDI.

Its 103kW at 4000rpm power output is overshadowed by a 320Nm at 1750rpm torque top. Helping out is a VTG turbocharger.

In the Audi’s case, owing to its longitudinal layout, the A4’s TDI forgoes the six-speed DSG twin-clutch automatic gearbox featured in the other VW/Audis for a seven-speed continuously variable automatic transmission (CVT).

Audi says the combined average fuel consumption is 6.4 litres per 100km, enabling the 1470kg A4 2.0 TDI CVT to extract almost 1100km from a single 70-litre tank of diesel.

In contrast the C220 CDI sedan, producing 110kW and 340Nm from its 2.1-litre four-cylinder turbo-diesel unit, offers 6.6L/100km.

Refinement issues are addressed by a balancing shaft module containing two counter-rotating shafts that Audi says all but eliminates diesel-engine clatter.

Equipment levels include eight airbags, cruise control, climate control air-conditioning, a trip computer, leather upholstery, heated exterior mirrors, fog lights, front centre armrest, a multi-function steering wheel and 16-inch alloy wheels.

Audi expects the 2.0 TDI to account about 15 to 20 per cent of all A4 sales, but is banking on a conservative 250 units for 2006. This year its A4 tally should peak at about 2400.

Minor cannibalisation of other A4 models such as the 2.0-litre and 1.8T is expected, although Audi believes many TDI buyers will be conquest sales from other marques altogether who are turned on by the keen pricing and high fuel economy.

Currently the larger A6 3.0 TDI turbo-diesel runs at 30 per cent of all A6s shifted. In Europe the TDI accounts for one-in-two A4 sales. Some 50 per cent of Australian Golf sales have been TDI-engined cars.

Audi and Mercedes will not be alone in offering diesel power in this class.

Alfa Romeo has already confirmed that the all-new 156 replacement, the 159, will arrive here in the middle of next year powered by a 147kW 2.4-litre five-cylinder turbo-diesel engine.

Jaguar is reportedly looking very closely at the X-Type diesel in 102kW 2.2-litre four-cylinder guise while BMW is believed to be preparing a 120kW 320d version of the new E90 3 Series for release sometime during 2006.

Lexus has also indicated a strong interest in the 130kW IS220d, although one insider told GoAuto that it would wait until BMW makes a move with the 320d first.

And in the prestige segment below, Peugeot and Citroen have both been surprised by the relatively strong reception their respective 407 and C5 turbo-diesel models have received in Australia.

The price for the single-model 2006 Audi B7 A4 2.0 TDI is $56,990.