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With the introduction of the New Beetle, Volkswagen is offering the next generation of the 1.9l TDI engine. Several evolutionary changes have been made to the TDI concept to further improve its emissions, efficiency and performance. Emissions performance is improved with increased fuel injection pressure, optimized fuel injectors, calibration modifications, EGR cooling and reduced crevice volume in the combustion chamber. Efficiency is improved with new oil pump, vacuum pump and water pump drive systems and the elimination of an auxiliary driveshaft. Performance and efficiency is improved with the addition of a variable geometry turbocharger, which increases torque at lower engine speeds while preserving performance at higher engine speeds. This paper describes the many enhancements found in this latest generation TDI and gives a brief lookout to the future trends in diesel engine development such as a high pressure injection system with unit injectors.