Hybrids in the United States.docDocument Transcript
Hybrids in the United States: The
Civic and the Future
March 12, 2004
March 12, 2004
Hybrids in the United States: The Insight, Prius,
Civic and the Future
It is no surprise with all the current media attention on wars over oil fields, fuel
shortages and rising gas prices, that a recent survey conducted by J.D. Power and
Associates, a market research firm, found that mileage is becoming one of the top factors
U.S. car buyers are considering. Within the first few months of 2004, one of the most
notable trends is the move of hybrid vehicles into the mainstream. Whether concerned
with saving the environment or saving money, more individuals are choosing fuel-
conserving alternatives. A vehicle is considered a hybrid when it combines two sources
of power. In the case of hybrids currently and readily available to U.S. consumers,
including the Honda Insight, the Toyota Prius, and the Honda Civic Hybrid, the
combination of power comes from gasoline and a rechargeable battery.
Fuel efficiency increases because hybrids can:
• Run on a smaller, more efficient gas engine.
• Recover energy and store it in the battery with regenerative braking. Instead of
just using the brakes to stop the car, the electric motor that drives the hybrid can
also slow the car. In this mode, the electric motor acts as a generator and charges
the batteries while the car is slowing down.
• Sometimes shut off the engine. When stopped in traffic or at stoplight, the engine
is temporarily shut off. It restarts automatically when put back into gear. (This
off-on action is imperceptible to the driver.)
• Use advanced aerodynamics to reduce drag.
• Use low-rolling resistance tires.
• Use lightweight materials (The New Hybrid Cars).
J.D. Power and Associates estimates U.S. hybrids sales could approach
500,000 by 2006. Despite the fact that American automobile manufactures such as Ford,
GM, and Chrysler, have been stubborn in entering the hybrid market, Honda and Toyota
have capitalized on the growing market for hybrids in the U.S within the past few years.
1997-Toyota Prius goes on sale to the public in
Japan. First-year sales are nearly 18,000.
1999-Honda releases the two-door Insight,
the first hybrid car to hit the mass market in
the United States. The Insight wins
numerous awards, and received mileage
ratings of 61 mpg city and 68 mpg highway.
2000-Toyota releases the Toyota Prius, the first
hybrid two-door sedan available in the United States.
2002-Honda introduces the Honda Civic Hybrid,
its second commercially available hybrid gasoline-
electric car. The appearance and drivability of the
Civic Hybrid is identical to the conventional Civic.
2004-The Toyota Prius II wins 2004 Car of the Year Awards from Motor Trend
Magazine and the North America Auto Show (hybridcars.com).
America’s Big Three, Chrysler, General Motors and Ford, have been reluctant to
advance their hybrid programs to compete with the Japanese automakers, despite the
responsiveness to hybrids within the past few years in the U.S. Each company has their
reasons, but ultimately if the U.S. companies create a demand for hybrids, then they may
lose their business to Honda and Toyota, who are releasing second-generation hybrid cars
and already have a grasp on the hybrid technology industry and market.
GM’s vice chairman of product development, Robert Lutz, has said “it just
doesn’t make environmental or economic sense to try to put an expensive dual-
powertrain system into less expensive cars which already get good mileage.” (Isidore,
2004) Rather, he believes, “the only way a company can shoulder the extra cost of a
hybrid system is by putting it on a higher-priced, higher margin vehicle such as a pickup
or sport/utility vehicle. He argues that developing hybrid SUVs and pickups will have a
great positive environmental impact because those vehicles can save more fuel with
hybrid technology than can already fuel-efficient small cars.” (Isidore, 2004) Therefore,
it appears that GM has made the decision to concentrate on designing hybrids systems in
truck and SUV models. In late 2003, GM began selling its first hybrid vehicles, versions
of its Chevrolet Silverado and GMC Sierra pickups, however, they are only available to
fleet customers. These vehicles will be available to retail customers later in 2004.
Increasing the number of fuel-efficient vehicles on the road is important to the
environment. Global warming and the presumption that the Earth’s temperature is on the
rise is often largely attributed to carbon dioxide emissions from the consumption and
burning of fossil fuels. Carbon dioxide, a greenhouse gas, plays a large role in global
warming. A gallon of gasoline weighs just about six pounds. When burned, the carbon
in it combines with oxygen from the air to produce about 19 pounds of carbon dioxide.
Therefore, it is easy to see why cutting back on fossil fuel consumption and carbon
dioxide production is essential to the environment and how fuel-efficient cars can help.
The following is a comparison of the hybrid Civic and conventional Civic in terms of
Fuel Vehicle emissions
(estimated per (estimated, per year in pounds)
Consumption Carbon dioxide Carbon monoxide Nitrogen oxides Hydrocarbons
CIVIC HYBRID 263 gal 5,089 lb 79.9 lb 0.8 lb .08 lb
47.7 mpg, SULEV
CIVIC 370 gal 7,176 lb 135 lb 7.4 lb 3 lb
33.8 mpg, ULEV
Honda Insight: Toyota Prius Honda Civic Hybrid
City 61 City 60 City 48
Highway 68 Highway 51 Highway 51
THE HONDA INSIGHT
The Honda Insight, currently produced in Japan, is a two-door coup with a
hatchback that can hold two passengers. The car weighs only 1875 pounds because it has
an aluminum alloy body. The decrease in overall weight of the car is the main reason
why it is able to get better mileage than the Toyota Prius and the Civic Hybrid, which
have conventional steel bodies. The annual sales target for the U.S. is 6,500 units.
“Honda has never stated just how much it is costing them to produce each Insight, but
have stated that overall they’ll be losing money on the Insight over the first few years
working with this new technology” (About Honda and the Insight). In addition, “Honda
has stated that it expects to begin turning a profit on their endeavors with the Insight with
a ‘few years’. Clearly with all the unique technologies in the Insight, it costs a lot to
develop. Adding to this equation is the fact that at a low production rate of under 10,000
cars annually, there is a lot of cost overhead for each car made” (About Honda and the
Insight). The 2003 base retail price was $19,080-$21,280. The following is a breakdown
of annual sales statistics in the United States for the Honda Insight from when it was
released in 1999 up through 2002:
Sales Statistics for: United States
1999 2000 2001 2002
Monthly Sales: January - 51 294 237
February - 159 340 221
March - 187 424 232
April - 357 573 239
May - 380 903 190
June - 412 439 178
July - 354 323 133
August - 490 305 193
September - 446 300 148
October - 375 506 163
November - 291 242 142
December 17 286 319 140
Annual Sales: 17 3,788 4,726 2,216
Total Insights to Date: 10,730
(About Honda and the Insight)
THE TOYOTA PRIUS
The Toyota Prius is a four-door sedan, capable of carrying five passengers. It has
a conventional steel body and weighs 2,765 pounds. “The Prius is a parallel hybrid,
meaning it combines a gasoline engine and electric motor powered by batteries to propel
the car. An onboard computer system controls how the two power sources are mixed and
matched. From zero to about 25 mph, the car is powered by its nickel-metal hydride
batteries. As the car speeds up, the computer turns on the gasoline engine, blending its
power with the electric motor. As the car reaches cruise speed, some of the power from
the gasoline engine is diverted to generate electricity to recharge battery packs” (Moore).
When acceleration or pick up is needed to pass cars, the batteries kick in, giving the
engine the extra power it needs. The onboard computer controls both systems, optimizing
efficiency, and generating maximum performance, which can get up to 60 city mpg and
about 51 highway mpg. During city driving, the car receives more power from the
battery pack, which allows the engine to automatically turn off when the car has come to
a stop at a red light. The car’s regenerative braking system converts kinetic energy into
electricity to recharge the batteries when the brakes are applied.
Although both the Insight and the Prius shut off the gas engine when the car
comes to a stop, the Insight’s engine automatically restarts when the car begins to move,
while the Prius can operate solely on electric power at low speeds. When the car passes a
set speed, or when the battery is running low, the gasoline engine takes over.
The 2004 base retail price is $19,995. The new Toyota Prius is also receiving
recognition. The Toyota Prius was named the 2004 Motor Trend Car of the Year. This
marked the first time in its 55-year existence that the award, which is “the most coveted
and more recognized award in the automotive industry,” (motortrend.com) was given to a
hybrid vehicle. The decision was made by editorial staff of Motor Trend, who
“conducted testing on 26 new vehicles, from sports cars to minivans, searching for the
automobile that best represented exceptional value, superiority in its class, and the most
significant development on the new-car scene for 2004. All truly new or substantially
revised cars were considered with the condition that they be available for public sale by
January 1, 2004” (motortrend.com). Based on this criteria,
Motor Trend editors found the Toyota Prius to be a user-friendly gas/electric
hybrid capable of delivering an impressive 60 miles per gallon in city driving. It
is the first of such vehicles to move into the automotive mainstream, with
performance, style and quality. Spacious enough to be classified as a midsize
sedan, the Prius’ futuristic bodywork, innovative Hybrid Synergy Drive, pleasing
interior and five-door hatchback design clearly placed it above the competition
THE HONDA CIVIC HYBRID
The Civic is different from the Insight and Prius in that it is the first to use a
mainstream, existing body to house a hybrid system. It looks and feels exactly like the
conventional Civic and other cars. It is a four-door vehicle that can seat up to five
people. Similar to the Prius, it is made with a steel body and weighs 2,732 pounds, and
uses a similar split engine system that maximizes gasoline and electric power to increase
fuel efficiency. With a 2003 base retail price of $20,650, the environmentally friendly
version is likely to cost more than comparable vehicles with gas only engines. This can
be attributed to the additional costs of developing new technology. However, the fact
that visual differences between the conventional civic and the civic hybrid are
undetectable from the road, and the driver is unable to detect performance differences, is
a breakthrough for hybrid technology that may continue to advance their popularity in the
Many cars are tested in Japan before they reach the U.S. market. There are
currently more hybrids in Japan and also more styles of hybrid vehicles, thus the
Japanese are ahead of the U.S. in terms of marketing strategy to sell hybrids. “Japanese
marketing of the Prius has concentrated on promoting test drives by customers visiting
dealerships, in addition to consumer media advertising and an Internet site. Tax
incentives have also helped drive sales in Japan” (Toyota Special Report, 2002).
The success of different types and body styles of hybrid in Japan is often a
predictor to what will become available in the U.S. market.
“In Japan, Toyota has sold a cumulative total of around 73,000 hybrid vehicles
between the 1997 introduction of the Prius and 2002. In June 2001, Toyota
introduced the Estima Hybrid, which sold 11,726 units in the first nine months.
This minivan builds on Toyota’s hybrid technology to offer several new benefits
in addition to environmental friendliness and fuel savings. Using an ingenious
transmission system, the Estima Hybrid is the world’s first hybrid 4-wheel drive
vehicle, not to mention the first hybrid minivan. Since the Estima already existed
as a popular conventional minivan, dealers found it easy to steer consumers
toward considering the Estima Hybrid.” (Toyota Special Report)
Perhaps, the Civic Hybrid will demonstrate similar trends and automakers will
begin to convert popular conventional cars to hybrid models. This in turn may increase
demand for people who find the current hybrid styles and features less appealing. Both
the VW Beetle and Chrysler PT Cruiser, conventional gasoline engine cars that have high
sales and popularity in the U.S., would be good models to convert to hybrids because of
the existing aerodynamic body type.
In terms of advertising in the US, I think that cars are marketed towards certain
niche markets, specific groups broken down by demographics. Research is then done to
find out what each group wants, for example style and features available, then cars are
designed and marketed to target groups. More affluent people may want a car that looks
more expensive while college age kids may want a car that looks fast and stylish.
When Honda came out with the Insight, the actual design was really only
appealing to environmentalists and technology buffs. As the car reached the mainstream
many people were not interested because its size did not meet the needs many people
have for a larger car. In addition, people were skeptical of the new technology and its
ability to perform comparably with similar gasoline cars. Criticisms and misperceptions,
such as its lack of ability to accelerate, its lighter body could not withstand and safely
protect passengers, and its expensive cost seemed to become synonymous with hybrids.
However, the Civic Hybrid is “normal looking,” and weighs as much as any other
compact sedan. Both cars use similar hybrid technology, but the civic is marketed to the
mass market as a standard, 5 person, cargo space, compact car, with plans to sell about
24,000-26,000 a year, while the only 13,000 Insights have been sold since 1999.
In the U.S., it will be important to have a media campaign that changes the
perception of hybrids. People want cars that meet their demands. So far all the testing
has shown that cars and future hybrid SUVs and trucks can equal, if not out perform,
comparable vehicles. The electric motor powered by batteries, which is half of the hybrid
system, can be used to boost power and enhance performance, possibly giving hybrids an
edge over conventional gasoline cars. The electric engine may increase performance,
acceleration, and towing capacity in hybrids. In addition to performance people want cars
that are functional and look appealing.
The current hybrids available in the U.S. probably have not struck a chord with
many people in terms of their style, appeal, and functionality. For example, CEOs and
those individuals who are more affluent often display their status with their vehicle.
Therefore, cars are made with more expensive features so that these individuals can
display their wealth. The currently available hybrid vehicles may not be appealing to
these individuals because certain upgrades are unavailable and for example, everyone
who wants a Prius gets pretty much the same car. College age individuals may find the
current hybrids unappealing because of the cars actual design or look. Young people
want a car that looks fast or “cool,” and these people may not be impressed with the
design of hybrids. Parents want a safe car with room to transport their children and lots
of cargo space. Therefore, the current hybrids may not meet the size demands for a
family vehicle, but as demonstrated in Japan, such a minivan exists. As automakers meet
the demands of Americans, with new styles of hybrids, marketed to the specific appeals
of different groups, people will probably be more willing to adopt the new technology.
But in the meantime, some perceptions created by the initial hybrids must be
overcome. The vehicles are no longer only marketed towards “tree hugging”
environmentalists. Hybrids are capable of out performing comparable gasoline engine
cars. New materials that are capable of making vehicles lighter, such as aluminum, are
equally safe to conventional steel in crash ratings.
Another benefit to hybrid car drivers is legislation allowing hybrid gasoline-electric
cars to use carpool lanes during rush hours, even when the driver is the only person in the
car, making commute times shorter. In most states, drivers can only use the designated
carpool lanes during specific rush hours when there are two or more people in the car,
and in some places the number of people per car is three.
• Arizona, California, and Virginia have all sought federal approval to allow hybrid
gas-electric cars to go solo in rush hour carpool lanes.
• The Federal Highway Administration has not yet ruled on these requests. A
national transportation bill was recently defeated in Congress to extend this
policy to hybrids throughout the country. The 2003 Energy Bill, if it bounces
back from its recent defeat, may extend the right nationally.
• California currently only allows zero-emission vehicles, such as compressed
natural gas vehicles into the carpool lane restrictions. For 100% gas-free cars,
some tolls are also waived during rush hour (hybridcars.com).
Hybrid owners may qualify for a one-time $1500 “clean fuel vehicle” Federal tax
deduction for cars that were bought in 2004. This tax break incentive will decrease by
$500 each year.
J.D. Power and Associates, predicts that by 2008, two-thirds of hybrid vehicles
sold in the United States will be trucks, including SUVs, pickups and vans (Popely,
2004). In early January 2004, Toyota unveiled a full-size hybrid pickup truck that boasts
a big V-8 engine, huge cargo bed, and the ability to tow and haul anything that
comparable trucks, such as the Chevrolet Silverado and Dodge Ram, can tow. The
Hybrid FTX will be available to the U.S. market in the winter of 2006. In the meantime,
Toyota has created a hybrid version of its Highlander SUV that will be available in the
fall of 2004. In addition, Toyota’s luxury brand, Lexus, introduced its first hybrid, the
RX330 SUV, and Ford will begin selling its hybrid, the Escape in the fall of 2004 as well.
“While Toyota executives won’t give numbers for average fuel economy of the hybrid
SUVs until testing is completed, they predict these vehicles will get better mileage than
the average gas-powered compact car,” (Isidore, 2004) increasing from about 21 mpg
now to 35 mpg.
The Ford Escape Hybrid is a full hybrid electric vehicle, with a system similar to
that in the existing hybrid sedans, able to run on its gasoline or electric motor or a
combination of both in order to optimize performance and fuel economy. It is expected
to get 35-40 city mpg. In addition, it will be equipped with four-wheel drive and more
cargo space than the smaller class hybrids currently available.
According to a Reuters report on February 13, 2004, the world’s number two-auto
maker, Toyota Motor Corp, has no definite plans to build hybrid cars in U.S.
manufacturing plants until consumption volumes reach a certain minimum level. Toyota
President Fujio Cho said that hybrids will continue to be exported from Japan until local
sales of the Prius sedan reach 50,000 to 100,000 units a year. Although presently there
are no set plans, Cho said Toyota is aiming to produce hybrids in the U.S. around 2006
Hybrid electric vehicles reduce emissions by increasing average engine
efficiency. The improved fuel economy stretches a tank of gas further, saves you money,
and helps you conserve our limited petroleum resources. Driving performance is
optimized because both the gas engine and electric motor are working, however the
switchover is undetectable by the driver. With the new hybrids reaching the market, you
get all the conveniences of conventional vehicles: spacious seating, storage room and
extended driving range. In addition, carbon dioxide emissions may be cut by as much as
one half. With enough hybrids on the roads, we could easily comply with the Kyoto
Protocol, without sacrificing the performance, comfort, and reliability Americans
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