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A Cold Air Intake (or CAI) means that you route the point of air entry (into the intake tract) to a point of fresh air outside of the engine compartment. Because it is not underhood, it is "cold", relative to under hood temps.
FWIU - diesel engines respond favorably (both fuel mileage and power wise) to a cooler/denser intake change. Many gasoline engines tend to respond favorably to (1) CAI for horsepower but (2) WAI for mileage. These are general rules of thumb, and I am sure exceptions apply.
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