It's the engines that keep the Q from competing effectively with the ATRs right? Is there a smaller engine out there that will narrow the costs gap between the Q and the ATR?
It's more than that. The Q400 is heavy and overbuilt. Expensive to build and requires more maintenance. Airport fees are higher. The ATR is completely basic and really cheap.
On the engine front there is the PW127, same as what powers the ATR. Would be fine for the Q300, but the Q400 is on the heavy side for that.
If you are talking about the Q400 VS ATR72, there's a Long Range Cruise Speed mode that is around the same speed and fuel consumption of the ATR72 (275kt). This is at least what is promoted by the Q400 guys.
Still the acquisition cost is is higher for the Q400
The Q400 burns somewhat more fuel than the ATR, even in long range cruise speed mode.
One thing that would Be interesting To know.
What The CO2 footprint comparison between The Q400 and The ATR72-600?
Almost certainly lower for the ATR. Burns less fuel and is much simpler to build, requires less resources. No APU for example.
One of the biggest challenges for ATR at the moment is the latest generation of turbofans. The A220 and E2 (even A320neo) are really making themselves felt. For the Q400, that challenge is even worse. That leaves the short and rough field market, but with the new STOL ATR 42-600 and various other improvements, DHC will have to invest a lot to match it. They still haven't gotten round to fitting more silent 6-bladed propellers or developed a new cabin on any of them, apart from the Q400.