If ever there was a car made for the times, this would seem to be it: a sporty subcompact that seats five, offers a navigation system, and gets a whopping 65 miles to the gallon. Oh yes, and the car is made by Ford Motor, known widely for lumbering gas hogs.

Ford’s 2009 Fiesta ECOnetic goes on sale in November. But here’s the catch: Despite the car’s potential to transform Ford’s image and help it compete with Toyota Motor and Honda Motor in its home market, the company will sell the little fuel sipper only in Europe. “We know it’s an awesome vehicle,” says Ford America President Mark Fields. “But there are business reasons why we can’t sell it in the U.S.” The main one: The Fiesta ECOnetic runs on diesel.

Yet while half of all cars sold in Europe last year ran on diesel, the U.S. market remains relatively unfriendly to the fuel. Taxes aimed at commercial trucks mean diesel costs anywhere from 40 cents to $1 more per gallon than gasoline. Add to this the success of the Toyota Prius, and you can see why only 3% of cars in the U.S. use diesel. “Americans see hybrids as the darling,” says Global Insight auto analyst Philip Gott, “and diesel as old-tech.”

The question, of course, is whether the U.S. ever will embrace diesel fuel and allow automakers to achieve sufficient scale to make money on such vehicles. California certified VW and Mercedes diesel cars earlier this year, after a four-year ban. James N. Hall, of auto researcher 293 Analysts, says that bellwether state and the Northeast remain “hostile to diesel.” But the risk to Ford is that the fuel takes off, and the carmaker finds itself playing catch-up—despite having a serious diesel contender in its arsenal.