SEATTLE (AP) _ A sleek, hand-made car powered by a four-cylinder diesel engine has won a Mexico-to-Canada fuel efficiency rally with an average of 103.7 miles per gallon.

The gullwing-doored Avion used less than $15 worth of fuel to reach the finish line Wednesday in the Three Flags Econorallye event, beating the record of 88.2 mpg set last year.

The Avion, running a Volkswagen engine, was driven by its designers, Craig Henderson of Bellingham and Bill Green of Berkeley, Calif.

''We were a bit surprised ourselves at the car's performance and mileage,'' Henderson said after the team crossed the finish line at the Seattle Center.

The seven cars set out from Los Angeles on Aug. 5, first heading to the Mexican border and then north to the Canadian border at a predetermined average speed over the 1,759-mile assigned course.

The best mileage the Avion logged was 114 mpg from Eugene to Portland, Ore., Henderson said.

The rally was organized by the Fuel-Efficient Vehicle Association of Seattle and sponsored by the oil company Unocal. The group was founded by alumni of Western Washington University's Vehicle Research Institute. The drivers of the Avion and the second-place Viking VI were current or former students at the institute.

''The purpose of the rally is to show that a car built with today's technology can get better than 100 mpg,'' said association spokesman Bill McRae. ''We want to provide a test environment for people with ideas to improve fuel efficiency by using the best industry technology.

The Viking VI, last year's winner, also broke its own record with an average of 89 mpg. It was driven by Mark Small, Dave Clark and Mark Prince of Western Washington.

Bill Fraser and Kelly Habeck of Mankato State University drove the third- place Honda CRX, which logged an average mpg of 73.51.

The CRX, donated by American Honda to the university for fuel efficiency and emissions research, had one of its four cylinders disabled in order to improve fuel efficiency, said Fraser, 23. That made it hard going on hills, but otherwise the car performed well, he added.

A three-cylinder Chevrolet Sprint off the showroom floor took fourth at 65.4 mpg, driven by Harold Bisel and Dennis Boos, both of Fresno, Calif. A Suzuki Samurai JX, driven by Dan Wing of Millbrae, Calif., and Walter Taucher of Edmonds, was fifth with 40.1 mpg.

An Oldsmobile Delta 88, driven by automotive journalist Leon Mandel and car expert Kevin McElwain, who had the only air conditioner in the group, posted 32.14 mpg for sixth place.

The Cyclone, a radically altered 1972 Opel Manta, was seventh with an average 23.01 mpg. It was driven by Kim Hall of Bellevue and Kevin Whitman of Seattle.