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Hybrid Cars: The Slow Drive to Energy Security

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Hybrid Cars: The Slow Drive to Energy Security

The hybrid car market is slowly ramping up. In the past five years the number of hybrid sales numbers in the U.S. grew tenfold from 9,500 in 2000 to 100,000 in 2004. By the end of 2005, the number of hybrid cars on American roads will grow to 300,000, represented by about seven or eight hybrid models, including the two-door Honda Insight, which will have sales of about 2,000 in 2005.

The increasing sales numbers are encouraging, but must be viewed in the context of the overall car market. The 100,000 hybrid car sales in 2004 represent about one-half of one percent of the 17 million new cars sold this year. If every new hybrid driver effectively (and optimistically) doubled fuel economy from 20 mpg to 40 mpg for 40 miles of daily driving, then a gallon per hybrid car would be saved every single day. That's a whopping 100,000 gallons per day chalked up to hybrid car drivers. But, we've only reduced our daily U.S. consumption from 360 million gallons to 359,900,000 gallons.

Market forecasters predict a continued annual doubling of hybrid car sales for the next few years. We could reach the major milestone of one million hybrid cars on American roads somewhere in the 2007 or 2008 timeframe. Again, this is cause for celebration, until you consider that there are approximately 200 million cars in America todayвЂ"and over 700 million vehicles worldwide. If car numbers keep increasing at the present rate, there will be more than a billion cars and trucks on the road across the world in 20 years. Vehicles are now driven two trillion miles each year in the U.S., and there are more cars than adults.

Nevertheless, with the proven success of the Toyota Prius, which won every possible accolade in 2004 (including Motor Trend’s Car of the Year, and the European Car of the Year), the hybrid makers are rolling out new models. Honda recently introduced the Accord hybrid. Ford became the only American automaker so far to join the hybrid market with the introduction of the Escape Hybrid, which won the North American Auto Show’s Truck of the Year Award. Ford is expected to sell about 4,000 Escape Hybrids in 2004, and has targeted total sales for the 2005 Ford Escape Hybrid SUV at 20,000. In the next few years the hybrid bandwagon will be joined by GM, Daimler-Chrysler, Nissan, Hyundai, Volkswagen, Mercedes, and even Porsche.

Power trumps efficiency

A study released in September 2004 by Kenneth Kurani and Thomas Turrentine of UC Davis’s Institute of Transportation Studies indicated that fuel economy is “only one feature of an expensive, complex good which has many implications for lifestyle and image goals.” Kurani and Turrentine add that consumers might value fuel economy more highly if it were “more like shiny paint or a bold body styleвЂ"an attribute with some emotional punch.” The lineup of new 2005 hybrids shows what carmakers think will pack the emotional punch that greater fuel economy apparently lacks:

Ford Escape (Sept. ’04) вЂ" the utility of an SUV at a relatively modest price.

Honda Accord Hybrid (Dec. ’04) вЂ" family sedan with power.

Lexus SUV Hybrid (By March вЂ?05) вЂ" luxury and power in an SUV.

Toyota Highlander Hybrid (Summer ’05) вЂ" a blend of utility and power with a slightly reduced price tag from the Lexus.

Sierra and Silverado Hybrid Pickups (Summer ’05) вЂ" power outlets to run auxiliary devices.

Marketing strategies barely mention the benefits of savings at the pump, savings for the environment, or reduced global threat; instead, we are offered “no compromise” or “guilt-free” messages. In other words, “You don’t have to drive a puny little 1.3 liter shoebox in order to save the world. You can drive a $50,000, luxurious, and screaming fast hybrid SUV.” This marketing strategy will certainly move hybrids past the early adopters into the next layer of the mainstream who may talk the talk about oil dependency issues, but will not give up any creature comforts to walk the walk.

The New York Times points to the Lexus SUV Hybrid to declare, “the hybrid is about to enter the latte generation’s comfort zone.” calls the Ford Escape Hybrid the automotive equivalent of the iPod. You see, hybrids aren’t the solution to world problems; they’re fast and cool.

The net: don’t expect the new hybrids to reach the 60-70 mpg range of the Insight, or the 50s and 40s of the Toyota Prius or Honda Civic Hybrid. You’ll get some incremental improvement raising the SUVs out of the teens and into the 20s, and the family sedans will get bumped up from the 20s to the 30sвЂ"but nothing significant enough to even counterbalance the increase in consumption resulting from more driving, and more cars on the road (leaving aside emerging markets in Asia).

Lack of batteries

The carmakers are clearly opening up new segments of the hybrid market with their “no compromise” marketing strategy. If this expansion comes at the expense of maximizing increases in efficiency, then perhaps overall collective gains can be made up by volume of sales. Lopsided supply and demand have produced hybrid waiting lists of six months or longer.

Earlier this year, Dave Hermance of Toyota told “You’ve got to walk a pretty fine line. You don’t want to rush out and do something foolish, especially since there will be a bunch of new players in the market over the next 12 months. They’ll be a lot of new products. We need to watch that sift out, and see how it goes, see what fraction of that we can get, and what unmet demand there might be then.”

Even if it becomes crystal clear to Toyota and all the other current and future hybrid makers that there really and truly is overwhelming unmet demand, the manufacturers might not be able to respond so quickly. A November story in USA Today explains that the makers of the hybrid’s rechargeable nickel metal hydride batteries could be in very short supply for several years. There are only three major suppliers of the batteries вЂ" Japan's



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