Hybrids in the United States.doc

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Hybrids in the United States.doc

  1. 1. Hybrids in the United States: The Insight, Prius, Civic and the Future Sara Dukes EDGE Winter 2004 March 12, 2004
  2. 2. Sara Dukes EDGE Winter 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).
  3. 3. 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
  4. 4. 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.
  5. 5. The following is a comparison of the hybrid Civic and conventional Civic in terms of toxic emissions: Fuel Vehicle emissions (estimated per (estimated, per year in pounds) year) Consumption Carbon dioxide Carbon monoxide Nitrogen oxides Hydrocarbons 2003 HONDA CIVIC HYBRID 263 gal 5,089 lb 79.9 lb 0.8 lb .08 lb 47.7 mpg, SULEV 12,500 miles/year 2003HONDA CIVIC 370 gal 7,176 lb 135 lb 7.4 lb 3 lb 33.8 mpg, ULEV 12,500 miles/year (hybridcars.com) Honda Insight: Toyota Prius Honda Civic Hybrid City 61 City 60 City 48 Highway 68 Highway 51 Highway 51 (hybridcars.com) 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
  6. 6. 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
  7. 7. 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
  8. 8. 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 (motortrend.com). 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 mainstream market. 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
  9. 9. 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
  10. 10. 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
  11. 11. 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.
  12. 12. • 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.
  13. 13. 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 (theautochannel.com). 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 demand.
  14. 14. References Nice, Karim. “How Hybrid Cars Work-Hybrid Efficiency.” http://auto.howstuffworks.com/hybrid-car6.htm Brown, Warren. “Toyota Unveils Hybrid Truck in Detroit.” http://www.washingtonpost.com/wp-dyn/articles/A3726-2004Jan9.html “About Honda and the Insight.” http://www.insightcentral.net Popely, Rick. “Wave of hybrid trucks coming to market.” Chicago Tribune. January 30, 2004. http://www.bradenton.com/mld/bradenton/classifieds/automotive/7833590.htm Moore, Bill. “Toyota Prius Jump Starts Hybrid Car Competition.” http://www.evworld.com/archives/testdrives/prius.html. “The New Hybrid Cars.” http://eartheasy.com/live_hybrid_cars.htm “Aluminum offers structural strength at decreased weight.” http://www.autoaluminum.org/ford.htm “Toyota may build hybrids in U.S. as early as 2006.” http://www.theautochannel.com/F/ news/2004/02/13/180285.html Flint, Jerry. “Don’t count on Hybrids.” June 3, 2002. http://www.forbes.com/2002/06/03/0603flint.html Eisenstein, Paul. “Hybrids come of Age.” http://www.realtor.org/rmomag.nsf/pages/featureoct03green http://www.hybridcars.com/ “Hybrid Cars.” http://www.carez.com/channels/ecoinfo/hybrid “The Hybrids are Coming.” March 11, 2002. http://www.planetsave.com/ViewStory.asp?ID=2226 “Toyota Special Report.” March 31, 2002. http://www.toyota.co.jp/en/special/pdf/SpecialRed_part2.pdf
  15. 15. “Smart Buying Essentials: 2004 Alternative Fuel and Hybrid Vehicle Guide.” http://www.intellichoice.com/carBuying101/AlternativeGuide.cfm Isidore, Chris. “GM: Hybrid cars make no sense.” January 6, 2004. http://money.cnn.com/2004/01/06/pf/autos/detroit_gm_hybrids/ “Motor Trend Announces 2004 Car of the Year.” November 20, 2003. http://www.motortrend.com/roadtests/alternative/112_031120_coy/

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