A Sport Utility You Plug 'N' Drive

How Toyota is turning up the heat in the electric-car market

With a tiny click, the dashboard lit up, the only sign that the near-silent motor was on. A touch on the accelerator, and the silvery RAV4 jumped onto the rain-slick streets of Odaiba, a tiny island of reclaimed land at the foot of Tokyo's Rainbow Bridge.

This was no ordinary RAV4, but an electric version of Toyota Motor Corp.'s popular sport utility. Toyota's September launch of the RAV4 Low Emission Vehicle, combined with the unveiling of a more futuristic hydrogen fuel cell RAV4 in October, served as twin signals that Toyota is charging into the electric-car race.

The new version of the RAV4, powered by nickel metal hydride batteries from Matsushita Electric Industrial Co., is Toyota's first low-emission vehicle (LEV) to go on sale after four generations of prototypes. Nickel metal hydride offers twice the driving range of traditional lead-acid batteries. Marketed in Japan to local governments and utilities and to consumers through Corolla dealerships, Toyota hopes to sell the vehicle in the U.S. next year.

Toyota is still behind General Motors Corp., which will lease its new-from-the-ground-up EV1 two-door passenger car to consumers in the American Southwest beginning this fall. But even though the RAV4LEV is merely an adaptation of an existing model, it can't be discounted. The 24 batteries are neatly concealed under the seating area, and the total weight of the vehicle is only about 200 pounds heavier than a regular RAV4. Its driving range is 215 kilometers, slightly ahead of what competitors offer. Next spring, Honda Motor Co. and Nissan Motor Co. also will put electric vehicles on the market.

NOT CHEAP. Pricing remains a big obstacle. The RAV4LEV is listed at nearly $50,000 in the Japanese market, while a regular RAV4 is just $20,000. The Japanese government picks up half the difference, putting the car on a par with GM's EV1, whose lease value is likely to come in at about $35,000. The price of GM's vehicle could, however, drop to about $27,000 in Los Angeles, where state and local subsidies apply.

Prices can't come down much until volumes rise, and that means the vehicles are not likely to be profitable any time soon. "It's a chicken-and-egg problem, and the makers will probably have to eat it for a few years," says Edward F. Brogan, an analyst at Salomon Brothers Inc. in Tokyo. Another potential problem for Toyota is that Ovonic Battery Co. in Troy, Mich., is engaged in a patent battle with Matsushita over the battery technology.

The Americans are still ahead of Toyota partly because GM invested $300 million in the EV1/Impact program. Ford Motor Co. and Chrysler Corp. are still hedging their bets. Chrysler's previous TE van, introduced in 1993, had a whopping price tag of $120,000 and only sold 51 models in its three-year life. Chrysler's new EPIC will be more reasonably priced when it comes to market in 1997. It involves a conversion of an existing Chrysler minivan rather than a brand-new vehicle. The electric Ford Ranger is also a conversion.

UP TO SPEED. Toyota's entry into the game will turn up the pressure. Ford sources say they are impressed with the RAV4 partly because the company has refined its ride and handling so that it accelerates, brakes, and drives like a normal vehicle. Patent problems aside, Toyota says it has a handle on the technology. Governments "can make regulations, and we can actually meet them," says Masahiro Ohkawa, general manager in Toyota's electric-vehicle division.

Ford, despite its efforts to market an electric Ranger, remains ambivalent about the potential of electric vehicles to have mass market appeal. On Sept. 16, Ford announced it had created an office to develop alternative fuel vehicles. On that day, Ford Chief Executive Alexander J. Trotman drove from Dearborn to Detroit and back (48 kilometers round-trip) in an electric Ranger pickup. However, Trotman took a skeptical tone when he was asked about the growth prospects of electric vehicles. "It's like discerning the momentum of a small insect among a herd of elephants," Trotman said. He had better hope that an insect called the RAV4LEV doesn't grow into a potent new competitor.

Before it's here, it's on the Bloomberg Terminal.