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Hybrid cars catching on { January 28 2003 } Original Source Link: (May no longer be active)
http://www.nytimes.com/2003/01/28/business/28HYBR.htmlhttp://www.nytimes.com/2003/01/28/business/28HYBR.html
January 28, 2003
Hybrid Cars Are Catching On
By DANNY HAKIM
DETROIT, Jan. 27 — Hybrids, vehicles that save gasoline by combining electric motors with internal combustion engines, are emerging as the first alternative-powered cars to show signs of catching on with automakers and some consumers since the automobile's early days.
Toyota and Honda are already selling tens of thousands of hybrids, and General Motors and Ford, worried about ceding another fast-moving market to the Japanese, have announced plans to join them. The hybrid's rise has been encouraged by pressure from environmentalists and regulators, particularly California rules curbing greenhouse gases and smog-forming pollutants.
"Hybrid technology is one that has great appeal because we don't have to really invent anything; we know they work," said William Clay Ford Jr., Ford's chairman, in a recent speech. "If these vehicles don't get customer acceptance, I really don't know what we do next."
A hybrid's battery is recharged by the internal combustion engine and by collecting energy when the car brakes. The battery powers an electric motor that supplements, or takes over for, the gasoline-powered engine. In the Honda Civic hybrid, an electric motor assists when the car is climbing hills or accelerating sharply. In the Toyota Prius, the electric motor takes over at low speeds. In both, the gas engine shuts off when the car stops.
Hybrids have until now been something of a curiosity and account for a small fraction of overall sales. Only three models — all small cars — are available, one from Toyota and two from Honda, and they cost a few thousand dollars more than conventional cars. About 150,000 have been sold worldwide since hybrids were introduced in the late 1990's, fewer than the number of vehicles typically produced by a single auto factory in a year.
But carmakers now appear ready for a much broader rollout. Earlier this month, at the North American International Auto Show here, G.M. — previously the industry's most vocal skeptic — publicly embraced the technology. The company said it would sell a hybrid version of its Saturn Vue sport utility vehicle in 2005 that would approach 40 miles a gallon in fuel economy, compared with mileage in the low 20's for current models. G.M. said it would offer vehicles with more limited forms of hybrid power, too, promising 10 to 15 percent improvements in fuel economy on four other models by 2007.
Also at the auto show, the annual beauty pageant where the industry trots out its latest designs and biggest pronouncements, Toyota said it would sell the first luxury hybrid, a Lexus sport utility vehicle, starting next year — part of a plan to sell 300,000 hybrids annually by mid-decade.
Ford plans to sell what will probably be the first hybrid sport utility vehicle, a version of the Escape, at the end of this year, and showed off a new hybrid prototype called the Model U.
Even the Army, which pays as much as $400 a gallon in battlefield fuel costs, had a hybrid on display — a hulking diesel combat vehicle, built by G.M., that is one of several prototypes being considered for service within a few years, including hybrid Humvees.
"You run those things on battery power; there's no noise," said Maj. Gen. Ross Thompson III, the head of the army's Tank, Automotive and Armaments Command, explaining the appeal of hybrids for the military. "For a reconnaissance mission, or if you want to not be noticed, you can use the batteries."
A century ago, in 1903, gasoline-powered Oldsmobiles shouldered past steam-powered Locomobiles to become America's top-selling brand. Never again would electric or steam cars rule the road. There is scant suggestion that hybrids may replace gasoline-powered cars in the same way. Among other things, two motors cost more than one.
But Stephen Girsky, an auto analyst at Morgan Stanley, predicts that hybrids could grow to 10 to 15 percent of American vehicle sales, which approached 17 million last year. Government incentives, gas prices and how much manufacturing costs can be reduced will be important factors, he said.
John Casesa, an analyst at Merrill Lynch, said that because the Japanese "view this as a core technology over the next decade," domestic automakers have to respond. "Inevitably, we're moving toward a future with higher fuel economy standards, risk to energy supplies and higher environmental consciousness," he said. "So there's a market pull here."
In addition to representing a response to the latest competitive threat from Japan, Detroit's hybrid plans are good for public relations, especially as hot-selling sport utility vehicles come under increasing criticism for how much gasoline they consume. A recent ad campaign by an evangelical group suggested that Jesus would find sport utilities morally unfit; another, orchestrated by Arianna Huffington, argued that these vehicles increased American reliance on oil from the Middle East.
But there remains considerable debate within the auto industry about whether hybrid technology is too costly to become universal — and whether its advantages are so modest that it represents a diversion from more worthy approaches to improving fuel economy.
"Right now," said Wolfgang Bernhard, chief operating officer of the Chrysler division of DaimlerChrysler, "everybody is jumping on the hybrid bandwagon and saying this is the most important thing and without it the world's going to end. It reminds me of the hype we had around e-business in the early 90's."
Daimler this year plans to sell a small number of hybrid Dodge Ram pickups tailored for contractors, who could use the trucks as mobile power generators. The company's German executives, though, prefer the updated diesel-engine vehicles already prevalent in Europe; diesels achieve 25 percent better mileage than comparable gasoline-powered cars. American environmentalists, worried about emissions of smog-forming pollutants, oppose a broad reintroduction of diesel-powered vehicles.
To Japanese-based carmakers, the choice is clear from an environmental standpoint. Hybrids are "the solution for today," said James E. Press, executive vice president of Toyota Motor Sales U.S.A.
"What's the cost of fuel?" he said. "It's not $1.80 a gallon. It's how much does a war in Iraq cost? How much does the fact you've got 75 years of this stuff left on the planet cost? And then what's the cost of pollution? At some point, the industry has to recognize it."
Last year, Toyota sold more than 20,000 of its Prius subcompacts, making Prius, which gets about 40 miles per gallon, the best-selling hybrid in the United States.
With a base price of $20,500, a Prius costs about $5,000 more than a Toyota Corolla. That is a considerable gap, though Prius buyers can take a $2,000 income tax deduction. Toyota says it now makes some profit on each Prius it sells, if the research-and-development costs are not factored in, but the company will not say how much less profitable hybrids are than its conventional vehicles.
Toyota executives insist that the cost differential can be brought down significantly. For example, Mr. Press said the electric motor in a sport utility vehicle could be configured to power the rear wheels, eliminating the need for, and cost of, a conventional four-wheel-drive system.
In addition, Congress has considered adding more tax benefits for buyers.
Rick Wagoner, G.M.'s chief executive, said such incentives, which could quickly accumulate into a considerable government subsidy, are critical to the future of hybrids, because G.M. does not intend to sell its hybrids at a loss.
"For this to go, it's a team sport," he said. "We're going to need the government in."
G.M.'s hybrid plans were promoted in full-page newspaper ads and greeted as something of a road-to-Damascus conversion. A Sierra Club statement likened the announcement to "Nixon going to China." Nicholas V. Scheele, Ford's chief operating officer, described himself as "baffled," noting that only recently G.M. had dismissed hybrids as too costly.
Lawrence D. Burns, G.M.'s vice president for research and development, attributed the change of heart to the early success of Toyota and Honda and "the uncertain future in 2005 and beyond with regulatory requirements and gasoline prices."
Robert A. Lutz, G.M.'s vice chairman for North American operations, was more blunt. "You just can't fly in the face of public opinion," he told The Detroit News. "It would be self-defeating to constantly say to ourselves, `It's not gonna work, it's not gonna work.' "
Since the days of Thomas A. Edison, the auto industry has been trying to make a credible alternative to the internal combustion engine. Edison himself was a pioneer of the battery-powered car, though he is said to have told a young Henry Ford that his idea for a gasoline engine sounded pretty good.
The first car bought by the government, during Theodore Roosevelt's administration, was a Stanley Steamer, a steam-powered car. In the 1950's, Chrysler was so sure that cars powered by jet engines would be the future that it built a small fleet of them. Today, the industry is convinced that future generations of automobiles will be propelled by hydrogen fuel cells, which generate electricity through a chemical reaction.
If debate continues on hybrids, some clarity is emerging on other alternative technologies. The future seems notably dim for battery powered cars, whose batteries do not last very long and take hours to recharge.
"At the moment I think it's being put to rest," said Fujio Cho, the president of Toyota, adding that his company is "hardly selling any."
Carlos Ghosn, chief executive of Nissan, agreed that battery-powered cars are "completely obsolete," though Nissan continues to lease battery-powered Altra station wagons to California utilities.
Then there is the fuel cell, for environmentalists and even many auto executives the nonpolluting ideal of alternative fuel technologies. Not only did fuel cells power the inside of lunar landers, they emitted water for astronauts to drink. But will they soon supplant the internal combustion engine?
"Today a fuel cell car probably costs about — I'm going to be optimistic — $700,000," Mr. Ghosn said. "We're far from sticker price, eh? We're going to have to get it down to $20,000, $30,000."
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