Although the changes needed for using diesel engines are small, Peugeot engineers have elected to radically alter the hybrid design with its first diesel hybrid. In a hybrid such as the Prius, a gasoline engine and an electric motor are bundled in the engine compartment at the front of the car.

In the Peugeot, the diesel engine is in the front, while the electric motor is located in the back of the car and integrated into the rear suspension. The diesel engine drives the front wheels, the electric motor drives the back wheels, and there is no mechanical connection between them. An electronic control system determines what combination of diesel engine and electric motor will be most efficient (or will deliver the best acceleration, if the driver selects the high-performance mode). The startup Bright Automotive is developing a similar setup in a hybrid delivery van that it's producing in a partnership with GM.

Putting the electric motor in the back has a number of advantages, says Vincent Bosso, director of the hybrids program at Peugeot. The arrangement lets the car operate as a four-by-four for added traction in the snow, he says.

The design could also drive down the price. The electric motor package can be mounted to most of the vehicles Peugeot makes without other modifications, such as changing the engine size. This will allow the company to offer the hybrid option on a wide range of vehicles. Increasing the volume of production for the hybrid system is "the way to drive down technology costs in the automotive industry," Bosso says. While Peugeot will first offer the system on vehicles that already command a price premium, the anticipated cost reductions could soon allow the company to offer hybrid technology on cheaper vehicles as well.