Idk
VAG were good in Marketing, Audi´s Slogan in Germany is "the lead trough technology".
Well the lead in technology always seemed to have others, but with Audi took often the pole position in the race to the scrapyard.
This C3 was for one year available with that engine, but the consumption in reality just was about 6 liters. Not bad, but not realy different then other engines.
And the first passenger car with direct injection Diesel came years before from Fiat, an 2.0 inline 4 in the Croma which was used till they switched to common rail in 1997, while VW/Audi continued to produce their pump-nozzle injection for ages, and refused to do necessary updates. While the french cars all had particle filters for years, VW just started experimenting in their customers cars in about 2005.. while talking about it since end of the 1980s.
In the end this were the reasons for their Diesel Emission theater, they just couldnt catch up with the competition anymore.