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GM thinks the economic and environmental aspects of its upcoming hybrids will get buyers interested.

"There are three reasons why they might want to come to us: It makes business sense because the vehicles use less fuel and consumers will save money," said Ken Stewart, GM's marketing director for new ventures. "Trucks and SUVs are more in line with the choice people are making, anyway. And third, hybrids will appeal to people who want the newest, latest and most high-tech vehicles."

GM's strategy will not mimic that of Toyota Motor Corp. or Honda Motor Co., which made their initial foray into hybrid powertrains on small cars. The two have sold a combined 90,000 gasoline-electric cars in the United States since 2000.

In California, GM's full-sized trucks sell well against the Ford F-150, Dodge Ram and Toyota Tundra.

This fall, GM will make available to fleets a version of its full-sized Chevrolet and GMC pickups equipped with an integrated electric motor. The motor enables fuel-saving start-stop operation and acts as a booster for the engine under acceleration.

Retail sales of the trucks begin in 2004. GM claims the V-8-powered truck will get about 10 percent better fuel economy.

In 2005, GM will add a hybrid version of the Saturn Vue SUV that is expected to deliver about 40 mpg on the highway. In 2006, GM plans to roll out its first gasoline-electric car, a hybrid Chevrolet Malibu. In 2007, a hybrid version of the Chevrolet Equinox compact SUV is scheduled for production. GM says it will have the ability to build 1 million hybrids by 2007.

But GM will have plenty of competition. Toyota is planning to offer hybrid versions of the Sienna minivan and Lexus RX 330 and Highlander SUVs, while Ford will launch a hybrid version of the Escape SUV and Futura mid-sized sedan.

GM officials say they will be closely watching customer acceptance of the Lexus hybrid SUV as a gauge for how consumers will accept hybrids in a mainstream vehicle.

A recent study by J.D. Power and Associates projects hybrid sales of 500,000 units yearly by the end of the decade.
http://www.nytimes.com/2003/08/24/automobiles/24hybr.html

On the Way: A Bumper Crop

By CHERYL JENSEN

Americans bought 38,000 gas-electric hybrid vehicles last year, and sales are likely to reach 54,000 in 2003, according to a recent study by J. D. Power & Associates, the big market-research firm.

That is only the beginning, if J. D. Power's predictions pan out: the firm expects 500,000 annual hybrid sales by 2008 and 872,000 by 2013. Since only three hybrid cars are currently available, reaching those lofty figures will require new varieties of hybrids - and they are certainly on the way.

In 1999, America's first hybrid, the Honda Insight, went on sale. The Toyota Prius made its United States debut the next year (although it had been on sale in Japan since 1997), and the Honda Civic Hybrid followed in 2002.

"The Japanese, at least Honda and Toyota, have already put their second-generation vehicles on the road,'' said David Friedman, senior engineer with the Union of Concerned Scientists, an advocacy group. "The Big Three haven't even put out their first hybrid."

Walter McManus, executive director of Global Forecasting at J. D. Power, said hybrid sales had been limited so far because the technology had been used only in compact cars. J. D. Power found that consumers would prefer hybrids comparable to vehicles they already own. Sport utility owners, for example, want hybrid S.U.V.'s.

"That's about to change, and when it does we'll see sales increase dramatically," Mr. McManus said, adding that by 2005, trucks may account for 39 percent of hybrid sales. New choices will come late next year, when the Ford Escape HEV and a hybrid version of the Lexus RX 330 go on sale. When Ford first announced the Escape hybrid, the on-sale date was 2003.

These vehicles will be joined by full-size hybrid pickups from General Motors . Mr. Friedman said his group considered those trucks "half hearted" hybrids, since much of their fuel savings will come from conventional technology like a starter motor that shuts off the engine when the vehicle stops.

"Honda and Toyota vehicles exemplify what you can do with hybrid technology, and the Ford Escape and Saturn Vue will likely do that as well," he said. "The other G.M. vehicles will have improved fuel economy, and that's a good thing, but they fall far short of where hybrid technology can take you."

Here is a list of hybrid vehicles that have been announced for sale, based on information from automakers and the Union of Concerned Scientists:

FORD MOTOR COMPANY: Escape HEV (compact sport utility), available late summer 2004; Futura (midsize sedan), to be announced. Canceled: Hybrid version of Explorer (midsize sport utility).

GENERAL MOTORS: 2005 Chevrolet Silverado and GMC Sierra (full-size pickup trucks); available late fall 2004; 2006 Saturn Vue (compact utility wagon); available late 2005; 2007 Chevrolet Equinox (compact sport utility), July 2006; 2008 Chevrolet Malibu (midsize sedan), January 2007; 2008 Chevrolet Tahoe and GMC Yukon (full-size sport utilities), to start production in 2007.

DAIMLERCHRYSLER : Dodge Ram Contractor Special (full-size pickup, based on Dodge Ram 2500 Quad Cab), due in late 2004. Indefinitely postponed: Dodge Durango TTR (full-size sport utility).

TOYOTA: Lexus RX 400H (luxury utility wagon), on sale fall 2004; Highlander (midsize utility wagon) expected to follow the RX by a few months.
http://money.cnn.com/2003/08/27/pf/autos/bc.autos.toyota.hybrid.reut/

Toyota Takes the Hybrid Lead

Toyota got an early start with Prius and is moving ahead as the redesigned version goes on sale.

August 27, 2003: 1:57 PM EDT

TOKYO (Reuters) - You could call it one of the biggest upsets in the global car industry's century-old competition.

Toyota Motor Corp (AD :Research ,Estimates ), the world's third-biggest auto maker, began learning how to build cars 66 years ago by taking apart a Chevy sedan in an empty warehouse. But now it's forcing bigger rivals to play catch-up in the race to offer greener cars.

Next week, Japan's top auto maker will unveil a production version of the second-generation gasoline-electric hybrid car, the Prius, distancing itself from competitors as it promises better fuel economy and a larger, more comfortable car than its predecessor at the unchanged sticker price of $20,000.

Since the first Prius debuted in 1997, Honda Motor Co. Ltd. (HMC :Research ,Estimates ) has been the only other car maker to put mass-market gas-electric hybrids on the road.

The excuse offered by laggards, including Chevrolet maker General Motors Corp. (GM :Research ,Estimates ), was that developing hybrids was a waste of time and money since they were only a short-term solution until no-emission fuel-cell vehicles (FCVs) took over.

Hybrids use electric motors and battery packs to improve fuel efficiency, boosting power during acceleration and reclaiming energy when braking and coasting, but still need gasoline to run.

"Others are going to have to step up plans to develop hybrids too," Hiroyuki Watanabe, Toyota's senior managing executive in charge of the hybrid business, told Reuters last week.

That, albeit belatedly, is the plan for many big auto makers.

Later this year, the world's top two automakers, GM and Ford Motor Co. (F:Research ,Estimates ), will begin selling hybrids to fleet customers, and next year offer them to retail customers -- seven years behind Toyota.

From niche to mainstream

Gasoline-electric hybrids are the most fuel-efficient mass-market vehicles on the road now, with a four-seater offering between 45 and 52 miles per gallon -- about twice that of comparable gasoline-powered cars.

Toyota has sold about 150,000 units cumulatively since December 1997, and has promised to offer the power plant on most of its models in the near future. It hopes to sell 300,000 hybrids a year by 2005 -- an aim Watanabe admits is ambitious.

"It's a very tough goal," he said.

To help reach the target, Toyota is discussing supplying hybrids to other auto makers. It already has an agreement with Japan's Nissan Motor Co. Ltd. (NSANY :Research ,Estimates ) -- also one of the initial sceptics -- which plans to sell its first hybrid vehicle in 2006.

By raising volume, Toyota hopes to slash the high production costs and make hybrids a de facto standard for alternative-fuel cars for now. Toyota says its hybrids are already profitable, but Honda says it still makes little, if any, money on them.

Toyota's initial bet looks likely to pay off.

Auto industry researcher J.D. Power recently forecast that in 10 years, one in every 20 cars sold in the United States will be a hybrid against one in 442 last year, as the power plant is offered in a wider range of vehicles.

In a few years, competition will be in full swing as Toyota's share of the U.S. hybrid market drops to 26 percent from half now, while GM takes a quarter and Ford grabs 16 percent, it said.

Long road ahead

While the road seems to be mapped out for hybrids in the United States, they are still far from catching on globally.

Despite the higher price of gasoline elsewhere, hybrids only enjoy mild acceptance in Japan and virtually none in Europe.

Europeans are keener on diesel, which is cheaper and more fuel-efficient than gasoline, although they emit higher levels of harmful nitrogen oxide and particulate matter.

"The Europeans are working on a range of technologies but they still prefer working with diesels, first and foremost," said Morgan Stanley analyst Nicolas Hirth. "And typically, the stronger they are in diesel, the less concerned they are in hybrids."

The divergence in regional tastes for fuel doesn't end there.

Brazil is trying to bring back cars that run on cane-based ethanol since sugar cane is abundant there. Iceland would prefer fuel-cell vehicles as it moves towards a hydrogen-based society.

But unlike Toyota, which sits on a $25 billion pile of cash, most makers can only afford to focus on a few technologies due to high research and development costs.

Despite the highly publicized push by the likes of DaimlerChrysler (DCX :Research ,Estimates ) and GM into the fuel-cell field, Toyota is beating them there too: last December it became the world's first car maker to put a saleable FCV on the road with its own fuel-cell stack.

And for the diesel-thirsty drivers in Europe, Toyota is working on diesel-electric hybrids. Watanabe said they will be a must when Europe lowers its limit on carbon dioxide emissions to 120 grams/km in 2012.

Soaring gas prices and a tax deduction for ecology-friendly gas-electric cars may sway some buyers, but if you'd rather go cheap than go green, nirvana is still a ways off.

 By Des Toups

Hybrids, those fuel-sipping cars that use both gasoline and batteries but never require recharging, seem to make a world of sense as gasoline prices blow past $2 a gallon. They pollute less, they consume less, and they make you feel good. But do they make sense if you’re simply trying to save money? Not yet.

Sized like compact cars but priced like midsized ones, current hybrids are an expensive way to save gasoline. If you spend more on a hybrid car than you'd have spent otherwise, you're unlikely to ever get your money back -- even if you got rid of a gigantic, fuel-sucking SUV.

Right now, a cheap compact is a better buy than an expensive hybrid. A couple of things could help change that:

The IRS has decided that hybrid vehicles qualify for a one-time tax deduction of up to $2,000. If you’re paying the top 38.6% rate, that’s $772 off your bill, a savings that might tip the balance for many shoppers who’d like something a little greener under their Save-the-Whales bumper stickers.

A number of new hybrids -- sedans, SUVs, even trucks -- are on the way. At least one of the new models is no more costly than its similarly sized, gasoline-powered kin.

The choices

So far, there are just three models on U.S. roads:

Honda Insight: $21,740 with automatic and air. EPA rated at 57 mpg city/56 highway. A featherweight two-seater with limited cargo space and an enthusiastic community of drivers who report as much as 100 mpg on their daily commutes. Powered by a tiny, three-cylinder engine with an occasional assist from the batteries, which recharge by reclaiming the energy expended when you slow down or brake. Also available with a five-speed manual transmission.

Honda Civic Hybrid: $21,010 with automatic and air. 48 city/47 highway. Just like your neighbor’s Civic, but more expensive and a lot less thirsty. Same engine technology as the Insight, only the gasoline engine is bigger. Also available with a five-speed manual transmission.

Toyota Prius: $20,475 with automatic and air. 52 city/ 45 highway. Uniquely styled compact sedan that, unlike the Hondas, can run off battery power alone at very low speeds, making it as quiet as a golf cart in the Safeway parking lot. Automatic only.

In the fall, Toyota will bring out a larger, faster, more economical Prius that's expected to cost about $20,000, the same as the old model. Buy it instead of a similarly sized and priced Camry and every nickel saved on gasoline would truly be money in the bank.

A hybrid version of the Ford Escape sport-utility should hit showrooms in 2004.

Forgo an SUV and save a bundle

Whether or not the purchase of one of these fuel-sipping machines makes financial sense depends on the alternative. You'll save a small fortune if you opt for a hybrid over a larger sedan or sport-utility. Buy that Civic Hybrid instead of a 20-mpg Accord V-6 and you’ll see a savings of $656 a year on $1.50 gasoline, not to mention a few thousand on the purchase price. Commute in the hybrid rather than a 13-mpg sport-utility and you’d save $1,262, not to mention a tankful or two of guilt.

Apples-to-apples comparisons are less kind. A garden-variety Civic LX sedan sells for about $16,500 and returns 31 mpg in the city, 38 on the highway. Using the city mileage figure (which most people would achieve in day-in, day-out driving), you’d spend $725 a year to drive 15,000 miles on $1.50 gasoline. The Civic Hybrid would consume $469 worth, a savings of just $256 a year. (At $2 a gallon, the savings is about $342 a year.)

Without the tax deduction (and recognizing the time value of money), a hybrid owner would never earn back the $4,000-plus premium for his car. Lop $772 off the cost of the hybrid and the picture improves, but it’s still no deal. But every dime increase in the price of gasoline pulls the break-even point closer.

Some states offer incentives that sweeten the deal even further. Oregon, for example, offers dollar-for-dollar credit against state income tax up to $1,500. Maryland offers a break on sales tax. There are little perks, too: Several states allow solo drivers in these hybrid cars to use the carpool lanes, and some cities offer free parking. Check with your local bureaucrats before you buy.

The clock is ticking

If you’re considering buying one of these high-mileage commuters, you have until the end of 2003 to claim the full deduction (under present law, anyway; Congress is considering new incentives). The deduction is an adjustment to your gross income and doesn’t require that you itemize to benefit. The IRS is still tinkering with specifics but has issued a clarification spelling out that the deduction will be accepted.

The 40,000 or so buyers of these three cars since they began hitting showrooms in late 1999 can file an amended return to claim the deduction, the IRS says.

Don't ignore the traditional risks behind any car purchase: Hybrids have proved reliable so far -- these are Hondas and Toyotas, after all -- but their history is limited. Warranties on the hybrid-related systems are eight years, but replacing those systems after the warranty expires could cost thousands (The battery pack in a Honda is estimated at $3,000.). And resale value is still a big question mark.

So far, resale values for the Insight have been especially disappointing compared with most Hondas. Despite a $4,000-plus difference when new, the price gap between a 2-year-old Insight and a run-of-the-mill, 2-year-old Civic LX sedan is very narrow. That's a big opportunity for hybrid-vehicle fans who don't mind forgoing the tax deduction (which applies only to the original owners) but want to pick up one of these lightweight two-seaters on the cheap.

And of course, though you never have to plug one of these babies into your wall socket, there are certain compromises – less room and less power, for instance, than their traditional counterparts. You can read more about them at MSN Autos by following the links at left.

By August Cole , CBS.MarketWatch.com

Last Update: 3:30 AM ET Aug. 23, 2003

SAN FRANCISCO (CBS.MW) -- When General Motors and DaimlerChrysler dropped their lawsuit against California's Air Resource Board last week, they signaled just how important the hybrid-vehicle market is going to become not just in the West but nationwide.

There's just one problem. Japanese automaker Toyota already has a lead in the segment, and that has caught the attention of marketing and financial analysts alike.

While pushing a range of products from the popular Camry sedan to thirsty V8-powered SUVs and large trucks, Toyota has also been working the other end of the U.S. market with its electric-and-gasoline powered Prius sedan for a few years.

The car's diminutive stature belies its importance as the solid beginning of the company's accelerated push into the hybrid electric vehicle, or HEV, market.

Rivals, who know that a bigger Prius is due this fall and that a Lexus hybrid SUV is also on the way sometime next year, are on notice.

"GM, Ford, Chrysler, most of the smaller Japanese brands have one enormous fear. It's called Toyota," said Art Spinella of CNW Marketing in Brandon, Ore.

"When Toyota says it's going to get heavily into the hybrid market and address the environmental concerns, you're spitting in the wind if you think you can run against that kind of attitude or competitor," he added.

And when it comes to marketing cars, experts inside and outside the industry agree that these trends start in California.

Navigating the current

GM and DaimlerChrysler said they dropped the lawsuits against the California Air Resource Board's 2001 zero-emission vehicle regulation after the new language and rules were added this year to accommodate hybrid and more efficient gasoline-powered car development. With the new rules established in April, fuel cell development also comes in to play.

The rewritten zero-emissions vehicle rules specifically addressed the companies' concerns, said Jerry Martin, spokesman for CARB, while still holding true to the group's mission: protecting public health.

The new rules should help bring about hybrid and fuel cell developments that can be expected to make all cars more efficient. Previous legislation designed to push the development of electric cars never really took hold within the industry or among consumers.

For the average consumer, there aren't a lot of choices for hybrid electric vehicles. Honda's Civic and Toyota's Prius are among the most visible and best known.

The automakers involved argue that consumers should lead the way on product development, not government regulators asking for rules that go against what people appear to want.

"You can't mandate a vehicle that doesn't have the utility that customers expect," said DaimlerChrysler's spokeswoman Kathy Graham.

GM spokesman Dave Barthmuss made a similar point. "ZEVs aren't going to shape any product development at all. Consumer choice is going to shape product development," he said. "The idea is to provide as much choice as possible all the while meeting California's clean-air targets."

Toyota, which designed Prius around a hybrid gas-electric drivetrain, also said it's up to consumers. "It's our feeling that the customer is king or queen. The market will tell us what kind of products to produce," said Ed LaRocque, Toyota national manager for advanced technology vehicles.

Consumer acceptance rising

There are signs that newly energy-aware drivers may be ready to try something different. Despite the tepid reception for all-electric cars, more Californians in particular appear to be ready to give hybrids a try.

According to data from Spinella, the acceptance of hybrids priced at over $20,000 is at 18 percent in 2003, up from 5 percent in 1999. Toyota sold about 22,000 Prius in 2002, a small number for the automaker overall but an important inroad to establish itself in the sector among dealers and customers alike.

Yet fuel economy is low on the list of priorities for buyers, according to DaimlerChrysler's ( DCX :news ,chart ,profile ) Graham. It typically ranks 20th or lower, she said.

From Wall Street's perspective, the "green" light is worth watching.

"The industry looks to be embracing HEVs now more than they appeared to a year ago because all vehicles, including fuel cell and diesel powered, will be HEVs in the future. And it looks like Toyota's HEV cost and driving performance is better than most thought," wrote Ron Tadross, auto analyst at Banc of America.

In GM's ( GM :news ,chart ,profile ) case, the company is going to take some of its most popular vehicles and offer hybrid gas-electric engines as an option. Honda's approach was similar with the Civic. Other automakers like Ford ( F:news ,chart ,profile ) are also getting ready with their products.

To find examples of what the zero-emission vehicle push has meant to drivers, CARB's Martin points to the growing list of ultra-efficient gasoline powered cars called partial-zero-emission vehicles, or P-ZEVs.

It's an accomplished clique with cars like Ford's Focus and BMW's 325 along with offerings from Honda ( HMC :news ,chart ,profile ) and Toyota ( TM :news ,chart ,profile ), among others. That list is proof enough for CARB's Martin that the pursuit of higher emissions standards has paid off for consumers.

To see if it will ultimately pay off for the automakers and their shareholders, look no further than California.

It's an important state. Toyota, for one, makes about a third of its U.S. vehicle sales there. If buyers are to begin accepting hybrids as something more than cars for the hemp-and-homeopathy crowd, chances are the revolution will start in California. Toyota wants to sell 300,000 hybrids globally in 2005, with about 40 percent in the U.S.

"Hybrid can also mean performance as well as a clean-air solution," said Toyota's LaRocque. And a car's fun factor is one thing that you can't legislate.

August Cole is spot news editor at CBS.MarketWatch.com in San Francisco.

http://www.asahi.com/english/business/K2003090300322.html

Race to sell eco-friendly cars spurred by new Prius debut

The Asahi Shimbun

Toyota Motor Corp.'s second-generation Prius hybrid car is expected to spur global competition in the key market for environmentally friendly cars.

Toyota has developed the new Prius model for full-fledged mass production, rather than the limited production of its predecessor.

The automaker plans to install the hybrid system-which combines an electric motor and a gasoline engine-in other larger models, such as sports utility vehicles.

The new Prius, which went on sale Monday, is equipped with an enhanced hybrid system that uses a 1.5-liter gasoline engine.

The model has attained a fuel efficiency of 35.5 kilometers per liter, a 15 percent improvement over the original Prius and beating the previous world-record 35 km/l of Honda Motor Co.'s Insight model.

Equally important, carbon dioxide emissions from the new Prius have been reduced to about 60 percent of those of conventional cars.

The new model, redesigned six years after the debut of the original Prius, makes use of more weight-saving aluminum components. Its new hybrid system converts the inertia of deceleration into electricity more efficiently than did the older model, using its electric drive motor as a generator.

Selling for between 2.15 million and 2.57 million yen, the new model will cost about 30,000 yen less than the previous model, the company says.

Toyota is targeting monthly sales of 5,000 vehicles during the new Prius' first year on the market, and 3,000 thereafter. Monthly sales of the older model recently averaged about 1,000 units.

In its efforts to make its hybrid technology a global industry standard, Toyota has agreed to supply the hybrid system to Nissan Motor Co.

Toyota Executive Vice President Akihiko Saito said the nation's top automaker is considering supplying its hybrid system to other makers as well.

Toyota is focusing its development efforts on the hybrid system as well as on a fuel cell system.

The hybrid system is not merely a stopgap measure used until the fuel cell system is put into practical use,'' Toyota President Fujio Cho said Monday. He said the new technology is central to the entire industry's environmental strategy.

Honda, meanwhile, is developing a hybrid system based on its high-performance V-6 engine. The company aims to improve profitability of the system by mass-producing it and boosting sales in the U.S. market.

That is spurring Toyota to seek the advantage in mass-production of the systems.

In the United States, where new legislation will require automakers to gradually enhance the fuel efficiency of light trucks from 2005 to 2007, the Big Three have announced their own plans to market hybrid cars. They had previously been unenthusiastic about the technology.(IHT/Asahi: September 3,2003)

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