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VW is moving away from diesels, especially for small vehicles like the Golf where gas-powered options offer similar mileage for a much lower price.

A year after the company was swamped by the revelation that the software in vehicles equipped with small diesel engines also allowed them to defeat emission tests, Volkswagen of America has confirmed it is moving away from diesels in the U.S.

Hinrich Woebcken, Volkswagen of America’s top executive in the U.S, said this week that VW is revising its powertrain strategies. It is still an open question on what vehicles will get which powertrains in the years to come.

“Diesel remains strong and very popular in Europe. The U.S. is very different, but it’s obvious we will not relaunch diesel in the same magnitude as it was before,” Woebcken said during an interview.

Nevertheless, backing away from diesel powertrains in the U.S. will mean that VW is walking away from the millions of dollars it has poured into marketing of diesel-powered cars.

Privately, VW officials also said its move away from diesel was inevitable since the company is also facing stiffer regulations that would have made it harder to sell diesel-powered cars.

(VW reorients its U.S. operations. To find out more, Click Here.)

Volkswagen is counting on competing in more vehicle segments, like SUVs, to bolster is U.S. business.

“We were going to have to face it anyway,” said one official, who was speaking only on background. “The emission test problem only accelerated the timetable.”

In addition, in small cars the size of the Golf diesel is under enormous pressure from new gasoline engines that are nearly as efficient and as powerful but cost hundreds of dollars less.

Woebcken, who joined VW after a 30-year career that included key jobs with German supplier companies and BMW, stressed that VW will continue promoting the notion that Volkswagens are fun to drive but also fun to be in, he said. More VWs will also come with all-wheel-drive.

(VW engineer helping with diesel investigation. Click Here for the story.)

“The will also be fun to drive,” he said.

Woebcken said while VW will continue to offer a broad array of passenger cars, wagons and utility vehicles, the pickup market is out of reach. The midsize pickup truck the Volkswagen Group sells in South America simply would have trouble meeting U.S. safety regulations.

In addition, challenging U.S. truck makers grip on the market would be very, very difficult.

(Despite retreat by some makers, diesel isn’t dead yet. Click Here for the story.)

“Up to now the business case, hasn’t worked out,” he said.

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