The primary driver behind most automotive design is not pure engineering for its own sake, but a collection of various “market factors”. One primary market factor – not necessarily a driver of the “free market” (to the extent that that exists anywhere in the world) – is a thing called CAFE. CAFE is an acronym that stands for Corporate Average Fuel Economy; it’s a regulation imposed by the Federal (US) government that attempts to mandate – ahead of “normal” market forces of consumer demand for various products – that automobile manufacturers selling in the US market make vehicles for their various classes of offerings (compact cars, mid-size sedans, SUVs, pickup trucks, large trucks, etc.) that have average fuel economies that meet criteria set by the regulators.
Since most car makers around the world want to sell into the US market, that means that the US federal government dictates what many manufacturers will produce and sell around the world.
In other words, despite what you may want as a consumer, before you even appear in the showroom the manufacturer has been told – by the feds – the ranges into which his offerings must fit. Since CAFE standards for fuel economy have been gradually increasing over time, forcing manufacturers of passenger cars especially to produce more and more fuel-efficient vehicles, manufacturers have generally turned to more efficient 4— and 6-cylinder models simply to meet the miles-per-gallon targets.
Once the fuel efficiency targets have been met, the manufacturers have to work within pricing guides set by their own marketers to make vehicles that will sell for prices that people are willing to pay. While there may be all kinds of great engineering schemes that would coax more and more efficiency (miles per gallon) out of the liquid fuels that we use, there is a practical cost limit to what can be afforded – and what will be paid for.
Most consumers would opt not to pay the cost of a vehicle such as you propose; it simply wouldn’t sell. Even if a handful of people would pay that cost, the manufacturers have to make vehicles by the hundreds of thousands per year to take advantage of the economies of scale that have made them household names in the first place. They won’t build it.
That’s if it’s even practical. I have a sense that even if the engine you propose were technically feasible (and I have strong doubts about that), it would not be advantageous when the cost of routine maintenance and repairs are factored in over the expected life of the vehicle.
Finally, since diesel engines are available in the US market to propel attractive, comfortable and practical passenger vehicles (I had a ride in a diesel-powered Volkswagen Passat last week that gets upwards of 40 miles per gallon), one might ask “Why doesn’t everyone drive that car or one like it?” You can probably answer that yourself: Not many consumers will elect to pay an additional 30%-50% premium on a vehicle that will save them money in the long run when they can spend less money right now for a machine with the same look-and-feel.