Excerpted from Washington Post, “The Car of the Future — but at What Cost?”, Steven Mufson, November 25, 2008
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Hybrid Vehicles Are Popular, but Making Them Profitable Is a Challenge
Sen. Charles E. Schumer said last week. “We need a business model based on cars of the future, and we already know what that future is: the plug-in hybrid electric car.
“But the car company Schumer and other lawmakers envision for the future could turn out to be a money-losing operation, not part of a “sustainable U.S. auto industry.
“That’s because car manufacturers still haven’t figured out how to produce hybrid and plug-in vehicles cheaply enough to make money on them.
After a decade of relative success with its hybrid Prius, Toyota has sold about a million of the cars and is still widely believed by analysts to be losing money on each one sold.
U.S. lawmakers want the companies to produce automobiles of the future, using advanced technologies and featuring hybrid or plug-in vehicles.But there’s no guarantee that the new business model would be any more viable than the current one.
Automobile experts estimate that the battery in a plug-in vehicle could add at least $8,000 to the cost of a car, maybe considerably more.
Most Americans will be unwilling to pay the extra price, especially if gasoline prices languish around $2 a gallon.
One of the mysteries about GM’s plans to introduce the Volt in 2010 is how much it will cost to buy one.
“What’s the Volt going to cost? I would be happy to answer that if you can tell me the price of oil in 2010,” said Robert A. Kruse, GM’s executive director of global vehicle engineering for hybrids, electric vehicles and batteries.
“I can tell you to the penny what it will cost GM, but pricing is much more related to market conditions.”
“In 10 years are they [at GM] going to solve the technological problems with respect to the Volt? Sure,”
“But are they going to be able to stake their survival on it? I’d say they can’t. They have to stake their future on Malibus, the Chevy Cruze, and much more conventional technologies.”
“Do you bet on lighter, smaller, more fuel efficient but ultimately less profitable cars or do you hold back a little on technology development and look at new versions of existing cars.”
Many experts say that gas guzzlers will not fade away as long as Congress fails to impose higher taxes on gasoline to steer people toward fuel-efficient cars.
“I can easily imagine three years from now when public is focused on a new set of priorities . . . that this whole hubrid thing would go poof.”
Obama proposed a $7,500-a-vehicle tax credit for plug-in vehicles during his presidential campaign.
Roughly half of Americans don’t earn enough to take advantage of such a big tax credit.
Many others don’t have the cash to purchase an expensive vehicle then wait for a federal refund.
So, GM and other car companies, while preparing plug-in vehicles, are more likely to live or die based on the sales of conventional cars that get better fuel efficiency through improved transmissions, reduced weight or hybrid technology.
GM says it will offer nine hybrids for sale by the middle of next year.
Reinert says that Toyota will eventually offer hybrid versions of all its car models.Auto industry experts say that the basic problem is that the U.S. industry geared up to make 18 million cars and light trucks a year and that it will be lucky to sell 11 million this year.
“There’s fluff and there’s reality,” Keller said.
“The fluff is the Chevy Volt . . . That’s not going to save GM in the next five years. What will save GM is more small sedans and more crossovers. That’s what people are going to be buying.”Full article:
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