Hybrid Cars Not Expected to Be Large Market

The industry consensus is that it's only recently that a hybrid could be made for the prices being charged, and that doesn't even begin to cover their enormous development costs.

Published: 04-Feb-2005

id-electric vehicles have been over-hyped from the beginning and continue to get praise way beyond their due, and now it looks like the market and some car company executives are starting to make the case clear.

In its most recent projection on the future of the market for hybrids in the U.S., J. D. Power and Associates is saying that their volume will peak at three percent by 2010. Toyota and Honda will probably still be leading the market then, but their share of market should be way down, with Chevrolet catching up fast.

That works out to about 530,000 vehicles in five years, which is not really that big a volume for the 38 models that J. D. Power projects will be available at that time. In rough Canadian terms, that means that we'll be buying about 50,000 hybrids a year by 2010.

That would be bad news for the industry if it weren't for the fact that they'll probably be losing money on hybrids so the small market split so many ways will limit their damage.

For more on the cost issue related to hybrids, we turn to Carlos Ghosn, the man who most credited with turning Nissan from a candidate for bankruptcy into a model for car companies everywhere.

Speaking at a recent car dealer conference in New Orleans, Ghosn made no secret of his disdain for the hybrid vehicle market as a business enterprise. ''They make a nice story,'' Ghosn said, ''but they're not a good business story yet because the value is lower than their cost.''

Compared to what other auto executives say in private about hybrids, Ghosn was being polite. The industry consensus is that it's only recently that a hybrid could be made for the prices being charged, and that doesn't even begin to cover their enormous development costs.

The Prius only makes sense for Toyota, then, when you write the billions of dollars of development costs off as a public relations expense, though when you consider the over-the-top media response (North American Car of the Year in 2004 and so on) it may have been worth it.

You don't hear about this on the record, by the way, because car company executives don't want to look anti-hybrid, since that can make them look anti-environment and no one wants that.

Power reports that nearly 88,000 hybrids were sold in the U.S. last year, which represented about 0.52 percent of the total light-vehicle market.

With the number of models utilizing a hybrid-electric powertrain expected to increase from eight to 11 in 2005, J. D. Power anticipates hybrid sales will go to more than 200,000 units this year, resulting in a market share of 1.19 percent.

Seventeen hybrid-electric models will be available in the U.S. market by 2006, Power predicts, when sales are expected to climb to more than 260,000 units and market share to 1.53 percent.

By 2011, Power says, there will be 17 cars and 21 light trucks using hybrids, and that's when sales will reaching the three percent mark. That projection of 530,000 vehicles is up slightly from J. D. Power's most recent forecast, by the way.

Anthony Pratt, the senior manager of global powertrain forecasting at J.D. Power-LMC, attributes the small volume primarily to the price premium of US$3,000-$4,000 that Americans must pay for a hybrid compared with a comparable non-hybrid option, and to ''competing technologies such as more fuel-efficient gasoline and diesel options that will be available after 2006.''

Toyota is expected to still have the greatest hybrid share through 2011, Pratt says, though it is likely to drop from 60 to 40 percent.

Honda currently holds 31 percent of the hybrid market, but is expected to see its share slip to 20 percent by 2011.

Pratt says Chevrolet is expected to be the largest U.S.-based brand in the hybrid market, growing its market share to nearly 15 percent by the end of the decade.

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