* GM's first diesel car for U.S. market since 1986
* GM says diesel Cruze bests Volkswagen Jetta TDI
* Diesel could make up 7.7 pct of US market by 2018 -analysts
By Deepa Seetharaman
CHICAGO, Feb 7 (Reuters) - General Motors Co will offer a diesel version of its Chevrolet Cruze compact car in North America, marking the largest U.S. automaker's first attempt in nearly three decades to tackle a growing market now dominated by German automakers.
The 2014 Cruze Clean Turbo Diesel, which goes on sale this summer, competes in a segment that could account for 7.7 percent of the U.S. auto market by 2018, up from 3.1 percent in 2012, according to LMC Automotive.
GM engineers adapted the automaker's existing diesel engine already offered in Europe to meet stringent emission standards and more varied temperatures and altitudes in North America.
"It will change perceptions of what a diesel car can be while giving customers another fuel-efficient choice in the Cruze lineup," said Mike Siegrist, one of the main engineers on the diesel Cruze project.
GM showcased the car on Thursday at the Chicago Auto Show. The automaker last produced a diesel car for the U.S. market in 1986.
Diesel-powered cars use about 25 percent less fuel than conventional vehicles, but the fuel's higher price tag relative to gasoline, and its somewhat sporadic availability at U.S. filling stations, have hampered acceptance in the United States.
These vehicles are also dogged by a reputation for producing more pollution than gasoline-powered cars. In an attempt to rebrand the technology, which industry experts say has improved, automakers now call the vehicles "clean diesels."
U.S. diesel sales are now led by Volkswagen AG, which offers the Jetta TDI. Volkswagen's diesel models accounted for 20.6 percent of the automaker's U.S. sales last year. About a quarter of Jetta sales last year were diesel, Volkswagen said.
GM said in a statement that its Cruze diesel, which according to GM testing gets 42 miles per gallon on the highway, was more powerful and faster than the Jetta TDI and competitive with other German offerings.
GM is offering its touchscreen entertainment and navigation system as a standard feature on the diesel Cruze. The vehicle will be built in Lordstown, Ohio, where GM currently builds the gas-powered Cruze. It starts at $25,695, excluding tax and other fees.