Excerpted from BusinessWeek, “Toyota, Honda Heat Up the Hybrid War”, by Ian Rowley, March 27, 2009
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Honda and Toyota are launching hybrid cars in quick succession—and neither one is skimping when it comes to generating hype. The Honda Insight boasts a sub-$20,000 sticker price, fuel economy of 40 miles per gallon in the city and 43 mpg on the highway, and is arguably more fun to drive. The latest Toyota Prius is larger than its Honda rival, gets better mileage, and (unlike the Insight) has an EV mode, where the driver instructs the car via the touch of a button to run solely on battery power. However, the soon-to-be-released Prius is expected to be more expensive, with a U.S. sticker price starting at around $23,000.
Toyota is also planning a smaller, cheaper hybrid based on its Yaris platform to take on the Insight. “We are going to compete by expanding our hybrid vehicle lineup to smaller hybrids.”
Toyota is also taking the unusual step of selling a cheaper version of the current Prius alongside the new one. “There will be demand for the two to co-exist,” Toyota said at the unveiling of the new car for the Japanese market. This cheaper Prius, like the Insight, will go on sale in Japan for less than $20,000.
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Analysts question, however, the impact of launching a cheap version of the old Prius alongside the new one. They worry the older Prius may eat into sales of the new Prius and similar-sized models such as the Corolla, or that it might force Toyota to cut prices of nonhybrid models.
The new Prius may go on sale in Japan for as little as $20,900, which would be $3,000 cheaper than the current model—even though the new Prius has a larger engine and is more luxurious.
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It is feasible, though, that both companies can win the hybrid war. For one thing, the rivalry is helping to bring the “hybrid premium”—the incremental cost of making hybrids compared with regular vehicles—down to levels where owning is as much about economic sense as sending an “I’m green” message.
Improved production efficiency is just as important. Honda can now make 250,000 hybrid cars a year at its Suzuka plant. Increased scale is making it easier to bring down costs. The company increased the number of workers assembling battery modules from 20 to 54. But by increasing automation, Honda now has the capacity to produce 1,000 packs a day, vs. about 250 before the Insight went into production.
At Toyota, engineers didn’t quite manage to reduce the size and cost of the Prius’ new-generation hybrid system by half, but both have been reduced by 25% to 35%, compared with the current second-generation model.
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In a deep recession, meeting sales targets will be tough for both companies. Still, even if sales disappoint, the new models will help the two Japanese companies maintain their dominant market share in hybrids. Although rivals are launching more gas-electric vehicles, no other automaker is yet close to producing hybrids in the hundreds of thousands.
Edit by DAF
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Full article:
http://www.businessweek.com/print/globalbiz/content/mar2009/gb20090327_626019.htm
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