Hybrids Technology

[QiuQiu]

Toyota vs. the world

Rivals are leery, but if hybrid market develops, the automaker's technology will be a cash cow

By Mark Rechtin
AUTOWEEK

April 9, 2005

Environmentalists pitch business case for hybrids
Hybrid demand hard to gauge

LOS ANGELES – Toyota is going all-in on hybrids and its gamble is part of one of the industry's highest-stakes poker games.

While other automakers are hedging their bets, fearing that stiff development costs and higher sticker prices of hybrids will limit the technology to a niche, Toyota stands to benefit handsomely if its rivals are wrong.

Toyota is the only automaker developing production hybrid powertrains for front-and rear-drive vehicles, for both cars and trucks, and for four-, six-and eight-cylinder engines.

"Eventually all of our vehicles" will be offered with a hybrid option, says Jim Press, chief operating officer of Toyota Motor Sales U.S.A.

Hybrids use an internal combustion engine and an electric motor to power the wheels.

Toyota believes a large pool of consumers will want hybrids to boost fuel efficiency or performance. Hybrids also provide a technological halo for all Toyota vehicles.

And Toyota's heavy spending is creating patents – 650 and counting – that could provide an edge over competitors. As one indication of that, Ford licenses some of Toyota's technology for the Escape hybrid.

Toyota sees even more advantages if fuel cell vehicles are a major commercial success. Fuel cell vehicles will use a lot of hybrid technology, potentially creating decades of income from licensing deals.

Fuel cells use hydrogen to create pollution-free power.

K.G. Duleep, managing director of transportation for Energy and Environmental Analysis in Arlington, Va., sees "a lot of carryover between hybrids and fuel cells in the electronics and motors. Toyota could have a real competitive advantage in developing fuel cells. It's one of the few companies that has the money to do everything."

Even if fuel cells fail to become a significant alternative to the internal combustion engine, Toyota will be well-positioned in a proven alternative to save fuel: hybrids.

Other automakers are wary. They are unsure how many people will pay a premium for hybrid technology, estimated by analyst Duleep at $3,500 per vehicle. Some even have criticized Toyota by calling the Prius hybrid a massive PR campaign to deflect attention from Toyota's big pickups and SUVs.

Honda and Ford are selling hybrids in the United States but are proceeding more deliberately than Toyota. Nissan is licensing the Toyota technology and plans an Altima hybrid in 2006.

General Motors is planning full-sized hybrid-powertrain pickups and SUVs in 2007 at the earliest. Many European automakers are concentrating on diesel technology instead.

Toyota doesn't have a stranglehold on hybrid technology, of course. Breakthroughs are possible with any emerging research effort.

Ford and Honda are learning from their early work, and GM's December deal with DaimlerChrysler will accelerate those companies' hybrid development. And Hyundai is working at its gleaming new South Korean R&D studio.

And while Toyota does not have all of its products on the road, the hybrid plan has the full weight of the company behind it. President Fujio Cho calls it "the core technology of the future."

Eric Noble, president of the Car Lab consulting firm in Orange, sees Toyota as the "800-pound gorilla of hybrid technology."

He believes Toyota will have a lock on licensing its intellectual property. Licensing the technology from Toyota is "smarter than parallel competing development, especially when no one can keep up in spending with Toyota," Noble says. "It's nothing to be ashamed of."

Toyota's 650 hybrid patents cover the "power flow" of the hybrid system, encompassing the system's control logic, as well as primary power source, secondary energy storage system and the motor-generator system.

Toyota spent about $800 million developing the Prius, estimates analyst Duleep. "But a lot of Toyota's basic R&D in Prius is being applied to other vehicles, too," Duleep says.

The price tag of the Prius is about the same as developing a drivetrain from scratch – with significantly more fiscal upside if hybrids take off. Toyota officials say their hybrids are breaking even, even at this early stage of development.

And, since Toyota has about $30 billion in cash, money is not an issue.

Toyota's push into hybrids is about much more than market share. Toyota desires the intellectual property rights for the heart of the fuel cell propulsion system of the future, says Dave Hermance, executive engineer for environmental engineering for Toyota Technical Center U.S.A.

"To the extent that the future is fuel cell, it's a hybrid fuel cell," Hermance says. "All the work we do today lets us be the low-cost provider to three-fourths of the fuel cell system."

Fuel cells might eliminate gasoline-powered engines, but the hybrid's electric motors will still propel the car, and the electronics will convert the direct-current power of the fuel cell and battery over to alternating current, Hermance says.

If Toyota plays its cards right, other automakers will have to pay licensing fees to Toyota for every fuel cell car it builds.

Toyota is building its own power controllers and motors and has a joint-venture with Panasonic to build batteries, says analyst Duleep. "Everyone else is depending on large Tier 1 suppliers like Siemens or Hitachi for their components."

While Toyota is moving ahead full bore, marketers at Honda are pausing to examine the depth of the market. This change comes even though Honda was the first automaker to have three hybrid vehicles for U.S. sale.

"We want to get a better sense for the depth of the (hybrid) market and the preference of the marketplace, then move forward in any number of directions," says Dan Bonawitz, vice president of corporate planning and logistics at American Honda.

Honda still plans to launch the 2006 Civic with new-generation hybrid technology, but Honda is looking into other technologies, including natural gas.

Bonawitz has declined to say when Honda or Acura would add another nameplate with a hybrid powertrain. He also downplays the idea of Honda building larger hybrid vehicles, along the lines of the Lexus RX 400h and Toyota Highlander.

"As you move up into bigger vehicles such as SUVs and minivans, there is more frontal area and weight, and you start getting a certain diminishing return" in terms of fuel economy, Bonawitz says.

Ford, like Toyota, advertises the green halo of its hybrid, the Escape Hybrid. Ford Division expects to sell about 20,000 Escape Hybrids in 2005.

It will start selling hybrid versions of the Mercury Mariner in the fall and the Mazda Tribute in 2007. The Mariner and Tribute are sister vehicles of the Escape.

Ford's second-generation hybrid technology will debut in the Ford Fusion and Mercury Milan sedans in 2008.

Ford says it developed the Escape Hybrid powertrain, but the methods used to switch from electric to gasoline power and to operate the regenerative brakes were similar to Toyota's. So, Ford says, it licensed some of the processes that Toyota patented as a legal precaution.

Then there are the pessimists. Once the early adopters buy their Priuses, the pessimists say, demand will not grow enough to satisfy all entrants.

Nissan CEO Carlos Ghosn sees the cost-benefit equation as too risky.

Hybrids "make a nice story," Ghosn said in January, "but they're not a good business story yet, because the value is lower than their cost."

Nissan is covering its bases by licensing Toyota technology and offering it in the Altima in 2006.

At the Detroit auto show in January, GM Vice Chairman Robert Lutz belittled Toyota's thrust into hybrids as little more than "an advertising expense."

"We business-cased it, took a hard, analytical look and thought the engineering and investment were irresponsible vis-a-vis our shareholders," he said.

GM's attitude irks Roland Hwang, vehicles policy director for the Natural Resources Defense Council.

"GM is particularly troubling to us. It has been the ringleader in opposing new (environmental) standards. Hybrids are not about PR. It's a serious market," Hwang says. "GM has shown a lot of bling-bling concepts, but we're still waiting for the vehicles."

GM's first full hybrid system, on full-sized SUVs and pickups, won't arrive until 2007 at the earliest.

"People say we're a little late to the market," says Larry Nitz, executive director of GM's hybrid program. "This is a marathon, not a sprint."

Consumer research by J.D. Power and Associates shows most mainstream buyers are interested in hybrids mostly for fuel economy, not for environmental benefits.

For customers who want fuel economy to save money, there are many other cheaper technologies available, such as cylinder deactivation, clean diesel, turbocharging, ethanol and six-speed transmissions, which all give fuel economy benefits at a lower cost by hybrids.

But analyst Noble warns against automakers believing internal-combustion advances will be enough to thwart hybrids.

"Any of the internal combustion technologies the others are proposing can be incorporated into hybrids anyway," he says. "While others wait, Toyota's lead will increase with market experience, and they will advance their technological edge."



What fun! Lost in the shuffle on Oscar night

By Mark Vaughn
AUTOWEEK

April 9, 2005

What could be more glamorous than a night at the Oscars? Would a night near the Oscars and sort of near the celebrities count? Or would it be cause for yet another restraining order?

For the 2005 Academy Awards, we had a plan to drive a limo to the big show, spiriting around someone famous, or maybe not so famous, hanging out in the parking lot while drunken celebs staggered back to their limos, maybe witness a famous couple duking it out, maybe console the heartbroken starlet whose cheatin' movie star boyfriend had just laid down the straw that broke the camel's back. . . .


We had big ideas. But it turns out that a reporter, even one for a lowly car magazine, is not what the stars are looking for in a driver.

We thought we had a line briefly with John Lassiter, who made "The Incredibles," which wound up winning the Oscar for best animated feature.

But Lassiter, who spoke at the AutoWeek Design Forum in January, drove himself to the show (we are not making this up) in his own Oscar Mayer Wienermobile.

So we turned to Toyota.

For the past three years, Toyota has supplied the rich and famous with eco-lovin' hybrids on Oscar night so they could show that they cared, too. If the general public then associated Toyota with earth-friendly, environmental sensitivity, so much the better.

Toyota subcontracts the actual star-getting to a little earth-lovin' advertising and marketing firm in Culver City called Big Imagination. Big set us up with – are you ready for this? – Orlando Bloom's manager and his entourage.

Yes, we were driving a Toyota Prius full of middle managers at a Hollywood talent agency. While they were all very polite and made for a friendly group, and while we enjoyed the driving-them-around part, they were not at all famous.

They didn't even go to the Oscars, only the parties afterward.

And during the show, unless you have the bright pink pass, the bright green pass and your tickets, you can't get any closer than a half-mile to the Kodak Theatre.

So during the actual Oscars, we hung with all the limo drivers a few blocks up Highland at the Hollywood Bowl. There were more than 1,000 limos there, every stretch Lincoln in the greater L.A. area, plus a few from Las Vegas.

We browsed the lot. The vast majority of limos were Lincolns, with a few Cadillacs and even a stretch Chrysler 300C. With four hours to kill while the Oscars droned on, we talked to some drivers.

"I'm probably the only guy here who isn't an actor or a screenwriter," said Marcus Benham, a driver for BLS Limos.

Did he have any memorable moments he could share?

"Being in the business, I can't say," Benham said, though he did add the titillating, gossipy tidbit that his clients tended to be "professional and businesslike."

We wandered back to our Prius and ran the route the entourage of the manager of Orlando Bloom would take: first a party at Chateau Marmot, then a private party in the Hollywood Hills. We picked them up and drove them to Chateau Marmot, where they hung for about two or three hours.

When we came to retrieve them, it turns out a Prius in front of us was the actual Orlando Bloom car. While we wouldn't know Orlando Bloom from an algae bloom, this is what we were told.

And so it was off to a huge parking garage off Sunset, where the famous and not-so-famous were shuttled to the private party at that private residence.

We sat in that parking garage for another four hours.

"You must sleep," said a valet guy, looking at us. "Go to your car and sleep."

We tried, but were awakened by the shouts of what turned out to be Sean P. Diddy Combs.

Now that cat had an entourage! P. Diddy led in a black Rolls-Royce Phantom, followed by a white Rolls-Royce Phantom, followed by Cadillacs and Suburbans stretching around the block and out of sight.

P. Diddy himself hung out the window, waking us from the sleep we were not having. We got out to see.

"Naw, we got this, we all got this," said the world's greatest partier, referring to some kind of pass that allowed the truly cool to avoid the shuttles and go straight to the party.

P. gave a signal and the entire entourage turned around – Phantoms, Caddys, 'Burbans and all – then tore off into the night.

We went back to our Prius, thinking that, if it came to it, the entourage of Sean P. Diddy Combs could kick the butt of the entourage of the manager of Orlando Bloom. Though we got better gas mileage.



Environmentalists pitch business case for hybrids

AUTOWEEK

April 9, 2005

LOS ANGELES – Some environmentalists are employing pragmatism to push hybrids.

A TV commercial produced by the Natural Resources Defense Council avoids simple altruism. Instead, it pitches a business case for the gasoline-saving vehicles.


"Do it for jobs . . . lead the industry . . . put American know-how to work," the commercial says. It was shown on cable TV in the Detroit area during the North American International Auto Show in January.

Roland Hwang, the council's vehicles policy director, says it is time for activists to stop being shrill. So the council is asking Congress to grant tax credits to Detroit automakers that convert obsolete factories to build hybrids.

The liberal lobbying group is even meeting with right-wing groups that want to increase national security by reducing dependence on foreign oil. The strange bedfellows can gain by pooling their resources for the common goal of fuel economy.

"This is not just coming from the left," Hwang says.

Still, Hwang can't resist a jab at the automakers.

"I will praise Toyota for its hybrid technology," he says. "But it is using it in a way that enhances performance at the expense of fuel savings. It calls into question whether they are really walking the walk."

The company is marketing the Lexus RX 400h hybrid SUV more for its 7.3-second 0 to 60 mph acceleration than for its 30-mpg efficiency.

Dave Hermance, an engineer for Toyota Technical Center U.S.A., counters:

"You put hybrids on everything for maximum fuel efficiency, and you'll put yourself out of business. We want to do a number of different flavors of hybrids. Then there's more chance to be accepted by the American consumer."



Hybrid demand hard to gauge

By Mark Rechtin
AUTOWEEK

April 9, 2005

LOS ANGELES – Long-term customer demand for hybrids is difficult to predict.

Estimates of annual U.S. hybrid sales in 2010 run from a conservative 535,000 by J.D. Power and Associates to 3.5 million in a Booz Allen Hamilton forecast.


In 2004, the U.S. market totaled 16.9 million vehicles.

The forecast from J.D. Power assumes a $4,000 premium for a hybrid vehicle. The Booz Allen Hamilton forecast assumes price parity when hybrids achieve high volumes and economies of scale.

Another confusing factor: Both projections include so-called mild hybrids, which use a device that merely stops the engine when the vehicle stops. In true hybrids, electric motors provide propulsion.

Toyota sees rising demand. Its internal research in late 2004 showed that 50 percent of consumers were familiar with the workings of hybrid vehicles, and 26 percent had intentions to buy a hybrid.

That's double the figures of 18 months before.

Toyota expects to sell 300,000 hybrids worldwide in 2006, climbing to 2 million annual units worldwide by 2010.

So far only the Prius hybrid is a huge success. It sold 53,991 U.S. units in 2004, and there is a six-month wait in some areas.

With production ramped up, Toyota estimates it can easily sell 100,000 U.S. units annually. It also wants to sell about 25,000 units each of the Lexus RX 400h and the Toyota Highlander hybrid, which go on sale this year. Both will have waiting lists.

But other automakers have modest results with hybrids.

Honda sold 25,571 Civic hybrids in 2004, right on its annual target. In addition to maintaining Civic sales, Honda also wants to sell 25,000 Accord hybrids this year.

Honda has no incentives on its hybrids. Honda's Insight can be obtained only by special order.

Meanwhile, Ford, which is constrained by limited quantities of hybrid batteries, says it expects to sell about 20,000 hybrids in 2005.

Some contend that the Prius has sold well because its futuristic design allows owners to broadcast the message: "Look at me, I'm concerned about the environment."

But most hybrids will have little design differentiation. That could hurt sales, says Dan Bonawitz, American Honda vice president of corporate planning and logistics.

Sales of hybrid versions of the Honda Accord and Civic also are slowed by price premiums, Bonawitz says.

The Honda Civic Hybrid carries a $2,390 premium over a gasoline-powered Civic EX, while the Accord hybrid carries a $3,290 premium over a gasoline-powered Accord V-6 EX.

Bonawitz says high rebates on such competitors as the Ford Focus and Chevrolet Malibu magnify the price gap.

[conan]

Toyota (and Honda) VS the world, I'm with the Japanese duo!

[szli]

And I hope Americans will stop making and buying those monstrous 5000-8000 cc engines ! Minyak sudah ngak banyak kok masih enak enak saja tuh bakar BBM di mesin cc gede !

Cuman entah kapan hybrid masuk Indo. Feeling saya masih LAMA... BBG saja ngak ada yang mau, meskipun lebih bersih dan murah !

[szli]

Dan mudah mudahan hybrid ini nanti jangan seperti Concorde. A technological marvel, but a total commercial failure ultimately.

I read that every hybrid sold in Japan was subsidized by the Japanese government, and still lose money !

Tapi lebih enak di subsidi hybrid dari pada subsidi BBM ala Indonesia, ya bung Conan.

[conan]

Hybrids will soon become profitable for their makers, rest assured, Mr. Szli. It's all about volume.

[conan]

Tapi lebih enak di subsidi hybrid dari pada subsidi BBM ala Indonesia, ya bung Conan.

Bukan 'lebih enak', bung Szli, tapi 'lebih baik'. For the better (read : sake of the world and future generations).

Subsidi untuk mobil hybrid and other environmentally friendly and energy-efficient products akan sangat meningkatkan kualitas hidup kita dan menghemat resources untuk generations to come.

Subsidi BBM hanya akan mendorong orang untuk semakin 'gila' memakai minyak bumi yang jumlahnya terbatas, yang akan menyebabkan persediaan minyak bumi habis sebelum 'waktu'nya, yaitu sebelum generasi berikut menemukan sumber2 energi alternatif untuk menggantikan minyak bumi.

Surely you agree with me on this one?