Invasion of the Hybrids
Hybrid vehicles are proliferating, and not just because gas prices spiked to above $3 per gallon last year. Auto makers showing off new hybrid vehicles and plans at this week's North American International Auto Show in Detroit realize that having a hybrid vehicle lineup is valuable public relations for their images.
General Motors (GM), Toyota (TM), Ford (F), Hyundai, Honda (HMC), Subaru, and Nissan (NSANY) are all promoting new hybrid vehicles. The total market for these cars, which run on a combination of electricity and gasoline and generally get better gas mileage than gas-only engines, is expected to reach 780,000 vehicles a year by 2012 as new models are introduced, according to J.D. Power & Associates Automotive Forecasting Services. Even so, hybrids would still only make up 4.2% of the vehicles sold.
Ford will have four hybrids on sale by 2008, including the Escape SUV, Mercury Mariner SUV, Ford Fusion, and Mercury Milan. And at this show, Ford also is showing a concept car, the Reflex, which is powered by a diesel-electric hybrid engine. Ford CEO Bill Ford says the company made a big mistake last year by not heavily advertising the Escape, the industry's first hybrid SUV.
"Our people said we would only run a little print advertising, because we would only sell 20,000 and we would sell all we could make, but that was a mistake," says Ford. "Having a hybrid, the first SUV hybrid, is something that carries larger meaning for what the company is stands for and how we want to be perceived." He adds: "We're hiring every hybrid engineer we can find." Ford plans to produce 250,000 hybrids per year by 2010.
GM's long-promised entry into the hybrid market is finally happening. Next year, the Saturn Vue Green Line SUV (the performance Saturns are called Red Line editions) will hit showrooms. It should get almost 30 miles per gallon but with a premium of less than $2,000 over the sticker price of a conventional Vue, says GM Marketing Vice-President Mark LaNeve.
The Vue will be GM's first hybrid, but it will be a so-called "mild hybrid." That means the small SUV won't run in electric-only mode, like the Ford Escape or Toyota (TM) Prius. It mates an electric motor with Saturn's 170-horsepower aluminum V-6 engine for a gas mileage boost of about 15% to 20% above the conventional gas engine.
But beyond that, says LaNeve, GM will sell many more hybrids. In 2008, the Chevrolet Tahoe and Cadillac Escalade full-size SUVS, making their debuts at this week's auto show, will have a hybrid option, LaNeve says. These will be more aggressive hybrids, allowing drivers to accelerate at low speed in electric-only mode, with only the gasoline engine, or both. That gives a 5-mile-per-gallon boost to GM's 19-mgh SUVs. Not much on a real miles-per-gallon basis, but about a 25% gain on a would-be gas guzzler.
GM won't stop there. LaNeve says by decade's end, GM will offer that same aggressive two-mode hybrid system in "every major segment." That means by 2007, the Chevy Equinox SUV and Malibu will have hybrid versions as well. By offering the option in more segments, and through a hybrid development partnership it has with BMW and DaimlerChrysler (DCX), GM is cutting the cost and can put the technology in more vehicles, says GM Chairman and CEO G. Richard Wagoner Jr. "We introduce technologies all the time that don't make money at the start," Wagoner says. "As hybrids become more mainstream, the cost should come down."
Nissan will introduce an Altima hybrid in the fall of this year as its first foray into a gas-electric production vehicle.
But no company plans to have just one offering, and hybrid versions of vehicles such as the Murano SUV, Sentra, and some of Nissan's Infiniti models are widely expected to follow.
Honda has hybrid versions of its Accord and Civic. The company was widely expected to add hybrid vehicles throughout the rest of its lineup, extending the technology to its Acura division. But Takeo Fukui, Honda's president and CEO, says the company is dimming its hybrid plans.
"There are better ways to achieve fuel efficiency than hybrids, which are really only effective in city driving with lots of stop and go," says Fukui. Honda, for example, says it will increase the fuel efficiency of the 6-cylinder engines found in several models -- including the Odyssey minivan, Pilot SUV, and Acura TL -- by 11% to 13%.
And Honda said it will launch a 4-cylinder diesel engine for its small cars by 2010. By then, U.S. diesel fuel will have turned into the cleaner version European cars drink, so U.S. drivers will realize the fuel-efficiency gains provided by diesel -- without the tailpipe-emission trade-off.
PRIUS IN THE LEAD.
Even Hyundai may get in the game. By yearend, the Korean auto maker will sell a hybrid Accent compact in its home market. Hyundai already has developed the hybrid system on its own, which is some feat considering that many larger companies -- such as Nissan and BMW -- have relied on Toyota and GM, respectively, to develop a system.
Hyundai wants to market its system in the U.S., but company executives haven't decided which model would be best, says John Krafcik, vice-president for product development and strategic planning for Hyundai Motor America. "We'll have one," Krafcik says. "The question is which platform."
Toyota is the leader in hybrid technology, with its Prius as the best-selling offering in the segment to date. Toyota also is selling hybrid versions of its Highlander SUV and Lexus RX. The company has announced plans to offer hybrid versions of all its Toyota and Lexus models, and specifically announced a hybrid version of its flagship luxury car, the LS460, which made its debut at the Detroit auto show. "We have been the leaders in this technology, and we don't intend to give that up," says Jim Press, Toyota's top U.S. executive.
Toyota took the wraps off the 2007 Camry here this week, a redesign of America's best-selling car, which will have a hybrid version. The Camry hybrid gets 43 miles per gallon in city driving and 37 miles per gallon on the highway, and the company expects it to represent about 15%, or around 60,000 units, of sales a year.
Just a few years ago, as Toyota was launching the Prius and Honda was launching its small Insight hybrid, other carmakers, especially U.S. and German companies, were unenthusiastic about the technology. Engineers view the dual propulsion system as inefficient, and prefer to channel resources into hydrogen-powered vehicles, which many view as the ultimate replacement to gasoline-powered internal combustion engines.
But the future of hydrogen systems is so sketchy, the costs still so high, and the infrastructure (hydrogen refueling systems and stations) still so far away, that there has been a rush to hybrids. "If you aren't committed to hybrids, then you're seen as being a technological laggard and environmentally careless," says marketing consultant Dennis Keene. Adds Ford Executive Vice-President Mark Fields: "Toyota changed the whole hybrid agenda, but we're a fast follower on this technology and will have a lot to say about the hybrid future in the U.S."
Hybrid systems have gotten much publicity about underdelivering the gas mileage that consumers expect. The Prius, for example, doesn't achieve its maximum fuel efficiency unless the driver spends enough time in stop-and-go traffic to let the electric-only part of the system move the car.
But consumer interest remains high, especially after last year's spike in gas prices. The energy bill President Bush signed last year helps hybrid sales as well. Consumers could slash tax bills by $1,700 to $3,000 depending on the hybrid model they buy, starting this month with a new tax credit. The old $2,000 tax deduction for hybrids was set to go down to just $500 this year before auto makers prevailed on the White House to goose the consumer incentive.
Whether people buy hybrids for fuel economy or fashion, they'll find plenty of choices on the market.