And now, GM says it has a hybrid that can beat Toyota

Every throne has its challengers, or pretenders in some cases, and Toyota’s hybrid crown is finally getting a bit of a test. Not only has Ford said its Fusion hybrid will have a better fuel economy rating than the Camry hybrid, but General Motors is making a play to beat Toyota, too.

In a couple months, Saturn will start selling a hybrid version of its Vue with the two-mode system that powers the hybrid Chevy Tahoe, GMC Yukon and Cadillac Escalade. (Saturn already sells a mild hybrid system in the VUE) GM still doesn’t have a government rating for the two-mode Vue’s fuel economy, but indications are that it will beat the hybrid Toyota Highlander by a nose. GM says it will be the most efficient V-6 hybrid of any kind. They say it will get a 50% boost over the current V-6-powered Vue. That would put the fuel economy at 27 mpg, compared with 26 for the Highlander hybrid. We’ll see what the government says when the car goes through the paces.

If GM delivers, the Vue looks promising. Its direct-injection V-6 and electric motor combo will deliver 252 horsepower. The Highlander would trump the Vue’s power with 270 hp. But GM is hinting that they might have a price advantage. The Vue two-mode will sell at a base price of $33,000—about $700 cheaper than the Highlander base price. A plug-in hybrid version that promises even better fuel economy is coming in 2010.

The tough part will be making the Vue a big seller. Saturn sold 3,265 of the existing Vue hybrids last year. Toyota sold more than 19,000 Highlander hybrids. And even GM insiders will admit that Saturn’s marketing budget is razor thin. If they have a great hybrid, will anyone know? Plus, what’s to become of Saturn? In its turnaround plan sent to Congress in December, GM named Saturn as one of four brands that are in for some kind of strategic review. The brand could be sold or shuttered. That won’t happen before the Vue hybrid goes on sale. But it’s a big question for the brand. And it’s not good publicity.

Forget about making money on this car. GM’s two-mode system is hugely expensive. That’s the price you pay when it’s a rival is on its third-generation hybrid system and GM is just working on Gen 2. The two-mode system can be as much as $10,000 a car in cost, but the customer’s premium is about $5,000. At least GM is pushing ahead in the hybrid game though.

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