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Peugeot Pitches Diesel-Electric Car to Catch Toyota

Philippe Varin, CEO of PSA Peugeot Citroen
Philippe Varin, chief executive officer of PSA Peugeot Citroen. Photographer: Antoine Antoniol/Bloomberg

PSA Peugeot Citroen will unveil the world’s first diesel-electric car this week to take on Renault SA’s all-electric strategy as both French carmakers play catch-up to Toyota Motor Corp.

Peugeot, Europe’s second-largest automaker, will use the Paris Motor Show to push a hybrid version of its 3008 crossover hatchback, while Renault sets out its strategy for making battery-powered cars a mass-market success.

Peugeot Chief Executive Officer Philippe Varin and Renault Nissan alliance CEO Carlos Ghosn’s face-off exemplifies industry divisions over the kinds of green technology consumers might embrace. Carmakers are chasing market leader Toyota, whose 1997 gasoline-electric Prius was the world’s first hybrid.

“Renault-Nissan has missed the boat on hybrid technology,” said Naimish Shah, who helps manage $100 billion for New Jersey-based Lord Abbett and sold most of his Renault stock in the first half of the year. “Electric cars are a risky bet as hybrids improve and prices come down.”

Renault and Japanese affiliate Nissan Motor Co. are wagering $4 billion that their battery vehicles will find a mass market amounting to 10 percent of global sales by 2020. Peugeot, which sees half that demand for electric cars, is counting on increasing oil prices and environmental regulations to make the case for diesel hybrids, which are more costly and potentially more efficient than their gas-electric equivalents.

Chevy Volt

Peugeot fell 78.5 cents, or 3.1 percent, to 24.84 euros at 10:09 a.m. in Paris. Renault lost 92.5 cents, or 2.5 percent, to 36.60 euros. The Bloomberg EMEA Auto Manufacturers Index dropped 1.8 percent.

The French companies join an increasingly crowded field of carmakers offering technology with lower emissions. Toyota and Honda Motor Co. are extending their gasoline-electric transmissions from the original mid-sized sedans to smaller models, unlocking bigger markets and economies of scale for their components. Honda will unveil the Jazz subcompact hybrid, to be introduced early in 2011, in Paris.

On the all-electric car front, General Motors Co.’s $41,000 Chevrolet Volt comes to market next month. The Volt will be sold as the Opel Ampera in Europe starting next year. Nissan’s Leaf electric car goes on sale in December.

Peugeot Prices

Unlike hybrids, electric cars are beset by uncertainties over the roll-out of recharging networks, the cost of their larger batteries and their limited range before plugging in becomes necessary. The constraints narrow the potential market because fuel savings outweigh battery costs only for heavy commuters, while trips longer than 80 miles are difficult.

“The problem is that consumers base their choice of car on the few times every year when they do occasionally need to go further afield,” said Bernard Jullien, an industrial economist with French automotive think-tank Gerpisa. “Until we have much lower prices, hybrids will win on continuity. They’re not asking the customer to revolutionize his behavior.”

European prices for the 3008 hybrid will start somewhere above 30,000 euros ($40,400), Peugeot spokesman Jean-Marc Sarret said, compared with 21,600 euros for the basic gasoline version. Peugeot plans to offer the technology, which it calls “Hybrid4”, with three other large car models.

“We’re convinced customers will be prepared to pay more for diesel hybrids because the price-gap is justified by their functionality and fuel efficiency,” Vincent Besson, Peugeot’s product director, said in an e-mail. “Hybrids have a big future because they’re much more versatile than electric cars.”

Toyota City Car

Paris-based Peugeot’s design combines a diesel engine powering the front wheels with an electric rear transmission, offering a range of just 3 kilometers (1.9 miles) in electric-only mode and an average 99 grams of CO2 emissions per kilometer, compared with 89 grams for Toyota’s Prius. Peugeot has said rechargeable “plug-in” versions with bigger batteries and motors will follow in 2014.

Hybridizing diesel creates additional costs that are unacceptable to many consumers, in return for relatively small efficiency gains, Toyota Europe Vice President Michel Gardel said in an interview.

Toyota will show the prototype of a hybrid city-car planned for 2012 in Paris. The hybrid version of Toyota’s Auris compact, introduced to Europe in July, has already sold out its planned 2010 production of 14,000 cars, Gardel said. Toyota delivered more than half a million hybrids last year worldwide and plans to add a plug-in Prius in 2012.

Renault’s Strategy

In France, where hybrids qualify for a 2,000 euro government incentive and electric-car buyers get 5,000 euros, the Auris hybrid comes out 1,300 euros cheaper than the 22,600-euro price tag on its diesel sibling.

Renault is aligning its Zoe electric city-car due in 2012 with the 17,500 euro price of its comparably equipped Clio diesel. The deal excludes the battery, leased for an extra 80 euros to 100 euros per month.

The owner must drive 12,000 kilometers a year to beat combustion-engine running costs, according to a business model that assumes oil will rise to $100 a barrel, said Thierry Koskas, head of Renault’s electric-car program. The current price is around $77 a barrel in New York.

Among the 4 million Europeans who buy subcompacts each year, about 1.6 million meet the mileage conditions needed to save cash by replacing the vehicles with electric cars, Koskas said in an interview at the carmaker’s headquarters in the Paris suburb of Boulogne-Billancourt. Renault expects more than half of them to have made the switch within a decade, he said.

‘Zero Emission’

Unlike GM’s Volt, which includes a small gasoline generator that charges the battery on the move and kicks in after 40 miles to extend the total range by another 300 miles, Renault-Nissan models are limited to 100 miles on a single battery charge.

Renault has a five-year deal to supply 100,000 Fluence electric sedans for Israeli and Danish government-backed recharging networks being deployed by California-based Better Place.

Ghosn’s carmaking alliance chose not to offer range-extended versions of its battery cars even though it would have been able to do so, Koskas said.

“We’re fully aware that going all-electric means we’re not covering the whole market, but we’re convinced electric cars have their place,” he said. “Our cars are zero-emission, not almost-zero-emission.”

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