SHANGHAI – Government incentives are the traditional way to get new technology into the market, but making systems modular so they can be used by many automakers will also reduce the cost to final consumers, say two international suppliers.
Type % Fuel savings Cost
Micro 5-10 $200-$1,000
Mild 7-18 $2,000-$3,000
Plug-in 15-45 $5,000-$10,000
The cost of hybridizing vehicles rises significantly with the degree of fuel savings, which means government incentives are probably required to get systems bigger than the start-stop micro hybrids into the field.
Micro hybrids, which can add a little torque as well as restarting an engine at a stop-light, are a marketable added value to cars. They provide a 5-10 percent fuel savings for a cost beginning at around $200 according to Delphi Corp., and in actual urban use where stops are the norm, they can provide much bigger savings that customers notice.
PSA Peugeot-Citroën in France introduced the system in 2003 and plans to have 1 million cars with a second generation system by 2011, when it will simply be a standard feature. Daimler AG has added the system on the Smart and Mercedes-Benz A- and B-Class models.
More sophisticated hybrid systems like the segment leading Toyota Prius that allow driving on electricity alone cost more, adding $2,000-$3,000 of cost for a fuel savings of 7-18 percent, according to Delphi Corp. And at that point, incentives are required to boost sales.
Such hybrids in America are supported by a federal subsidy to consumers up to a certain volume. Prius buyers no longer qualify because so many have been sold, but those buying competitors like the Ford Fusion, Nissan Altima or Saturn Aura get federal tax credits up to $3,000.
“The price (of the Toyota Prius) on Day One was very high, but with support from customers, sales have gone very well,” said Koei Saga, managing officer of Toyota Motor Co. “The second generation Prius will be cheaper than the first generation, because the cost of the system has been cut by at least 50 percent, and the trend is the same for the future.”
Much of the cost of a hybrid is tied to the battery. Toyota is using a nickel-metal hydride battery in the Prius, which is less expensive and more proven than lithium-ion batteries.
Moving up the range to plug-in hybrids like the Chevrolet Volt boosts the price.
Neil De Koker, president and CEO of the OESA, a U.S. supplier organization, said the Volt, which goes on sale in the United States late in 2010 and in China in 2011, will cost “an estimated $40,000 per vehicle to be produced. It will require a tremendous subsidy to sell such cars at higher volumes.”
The high price of the Toyota Prius in China is partly responsible for the relatively slow sales, said Saga. Although it is assembled in China since 2008, many key parts are imported from Japan and are therefore expensive.
BYD Auto is already in production with its Dual Mode hybrid system, and has sold dozens of the F3DM to the local Shenzhen government, said Henry Li, general manager of BYD Auto’s overseas trade division. He did not disclose the cost of the vehicles.
“We have taken hundreds of orders,” he said. “Deliveries started in March and some are on the road. From the second half, they will be available for private persons.”
Chinese companies from SAIC to Chang’an presented hybrid prototypes at Auto Shanghai 2009.
Delphi helped SAIC prepare the Roewe 750 for hybridization with Delphi power electronics, SAIC integration, and a lithium-ion battery from A123. Although the technology is there, it remains costly.
“We need to significantly cut our costs,” said Zhou Bo, president of Chang’an New Energy Vehicles at the 2009 Presidents’ Forum and CBU/CAR‘s 14th Annual International Conference.
After presenting all the benefits of turning a two-wheel drive sport utility or pickup into a four-wheel drive by adding motors to the other wheels, Magna executive Noel Mack admitted that the technology would add significant cost.
However, he said, if a hybridized four-wheel drive is looked at as something fashionable to buy, people would pay the extra money.
Typical options on an upper-end car like metallic paint, leather interior, moon roof and alloy wheels would add $3,800 to the price tag, he said, and the only payback for the owner is image. He argued that paying for a hybrid would also have a payback in a 15 percent fuel savings in a typical driving cycle.
Li Feng, deputy director of the Foton New Energy Vehicle Center, believes in taking a conservative approach toward hybrids that takes consumer acceptance into consideration. While his company is actively developing hybrid and electric commercial vehicles, it is not yet investing in tooling.
“In terms of capacity, we emphasize pull from the market,” he said. “Our investment follows the demand from the market.”
Toyota, the global hybrid leader, is sticking with the technology. Saga said the company has changed its target buyers as the Prius becomes more popular and volumes and better engineering lowered the cost.
“We were’t sure what consumers’ reactions would be in 2000 when we introduced the Prius,” he said. “We did substantial research to identify buyer concerns about new technology, and we learned it was difficult to find those willing to try a new technology.”
The target for the first Prius was people who wanted to “make a statement.”
When the car was improved in 2003 with more power and efficiency, sales took off, and now the buyers are “people with passion who want to make the world a better place,” said Saga. In the United States, the Prius is Toyota’s third best selling car after the Camry and Corolla.
For the new car that will go on sale next month in Japan and next year in China, said Saga, the target is ordinary white-collar workers.
“The new price makes the vehicle more competitive,” he said. “We would like to hybridize all car models, and based on today’s progress, we can achieve that ahead of schedule.”