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News > Companies
New hype on 'hybrid' cars
January 11, 2000: 5:59 p.m. ET

But U.S. auto industry executives question the prospects for fuel-efficient vehicles
By Staff Writer Chris Isidore
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DETROIT (CNNfn) - Detroit is busy developing and hyping new fuel-efficient cars that its executives don't believe U.S. consumers want or need.
    The cars are known as "hybrid" vehicles, because they combine gasoline engines with electric motors to dramatically reduce fuel consumption.
    At the North American International Auto Show Tuesday, Secretary of Transportation Rodney Slater was on hand as General Motors Corp. (GM) unveiled its concept five-passenger sedan, the Precept. With two electric engines, a three-cylinder diesel engine and an aerodynamic design that eliminates even rear-view mirrors and door handles in the name of reduced air drag, the car can get about 90 miles per gallon.
    

    
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Secretary of Transportation Rodney Slater praising the GM Precept concept car, which gets 90 miles per gallon using a diesel engine and electric motor together.

    

    But while the two leading Japanese automakers already are selling hybrid cars, GM, Ford Motor Co. (F) and DaimlerChrysler (DCX) are all at least two to three years from putting a hybrid car in showrooms. And even the officials at work on the cars have only modest hopes for sales at that point -- mostly to consumers willing to pay more to pollute less.
    
Premium for 'green' wheels

    The premium cost of several thousand dollars to provide the hybrid engine is still too great to make it viable as a consumer product, according to officials.
    "With fuel prices stable at about $1.20 a gallon, people say that fuel economy is not a major concern in vehicle purchases," said Robert Purcell, executive director of GM advanced technology vehicles. "They are not willing to pay a premium for the technology."
    Honda is addressing that by not charging a premium for its new Insight, a two-passenger hybrid priced between $18,800 and $20,800. It will charge below cost as it tries to develop a market for hybrids and to find out about the performance of the vehicles in all segments of its global market. It plans to sell about 4,000 in the United States this year.
    "We think that hybrid technology has vast potential for the future," said spokesman Art Garner. "And everything we learned can be used improving future vehicles. We may never make a nickel on this car, but it'll be worth it for us."
    Interest and demand for the early Insights has been good, according to Ron Theis, a dealer from Corvallis, Ore., who has sold more than anyone with three sales.
    "We sold them in two days," he said. "I think part of it is we're in the right part of the world, very ecologically minded."
    
More than fuel efficiency

    Toyota isn't looking to give a break on its five-passenger Prius hybrid, which will go on sale in the United States in July for more than $20,000, or about $4,000 more than the comparably sized Corolla. That premium will outweigh any fuel savings in the United States, but Toyota officials insist there is a market for the car here.
    "We're not going to sell this car on fuel efficiency alone," said Mark Amstock, the U.S. marketing manager for the car. "With this engine it's very quiet, and (with batteries in rear) it has a more stable, firmer ride than a gas car."
    Honda's Insight has the best fuel efficiency rating in EPA history, 61 miles per gallon in the city and 70 on the highway. The Prius actually does better in the city because the electric motor does more of the work there, getting mileage in the low 50s in the city in the 40s on the highway. Even in Japan, where gas can hit $3 a gallon, Toyota has sold only 30,000 of the cars since 1997.
    

    
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Honda dealer Ron Theis with the two-passenger Insight, a hybrid gas-powered and electric car that gets 70 mpg on the highway. The car went on sale in the United States at end of December. Theis sold the three his Oregon dealership got within two days.

    

    Someone who drives 12,000 miles a year in a 30 mpg vehicle will use about 400 gallons of fuel in a year. Even doubling that fuel economy would only save $240 a year if gas is $1.20 a gallon, and the gains from a hybrid are most likely to top out at 50 percent improvement.
    Purcell said GM is concentrating its hybrid technology on applications where fuel use is a significant part of operating costs, such as city buses or delivery vans, where several thousand dollars of increased cost for the hybrid is well worth it to the owner for a one-third savings in fuel.
    "Ultimately, it's got to make sense as a business," he said.
    
Research and incentives

    Purcell and officials with the other U.S. automakers say the research on hybrid cars is useful for making new technological breakthroughs and for finding technological design elements that can be used on traditional gas-powered vehicles. But while they believe some hybrid cars will be in showrooms in a few years, they say there needs to be some tax credits or other incentives if consumers are going to turn to the cars.
    The U.S automakers say that with the gas prices less significant less here than in Japan and Europe, consumers have shown no inclination to cut back on fuel consumption, even with progress on vehicle mileage over the last 25 years.
    "History has told us as you have made the vehicles more and more fuel efficient, people get bigger vehicles," said John Wallace, executive director of Ford's Th!nk Group, a new all-electric brand.
    On Monday Ford introduced its hybrid vehicle, the Prodigy, which can get 80 miles per gallon and like the Precept can carry five. But it also is just an interim stage between early concepts and a production model now planned for 2003.
    DaimlerChrysler showed off its hybrid concept two years ago, and put a hybrid system in its Durango model as a concept last year. That might be the most economical use of the hybrid because sports utility vehicle buyers are already paying more for their vehicle and they would like better fuel economy, said Stephen Zimmerman, director of DaimlerChrysler's new vehicle generation program.
    "We think if it got a $3,000 tax incentive, it could be a consumer viable product," he said.
    
Taking an environmental profile

    Despite the doubts about the commercial viability of the high-efficiency cars, all the automakers want to position themselves as environmentally conscious.
    "We would like to take cars out of the environmental debate," Harry Pearce, vice chairman of GM, said at Tuesday's kick-off of the environmental concept cars.
    That's part of the reason GM showed off a concept version of the Precept that is powered by a fuel cell, a technology used by spacecraft that emits no exhaust but water and heat. But the cost of the fuel cell and difficulty of finding the right fuel for it means no one is giving even an estimated date when it could be viable.
    Ford this week announced a Web site for consumers to check the environmental profile of any car or truck, and a line of Th!nk vehicles, from an electric scooter to the "neighbor," an open cart that carries four and is authorized to use local roads at up to 25 miles per hour, to a light-weight, two-passenger car called the "Th!nk city" capable of reaching 55 mph. The neighbor will be available this November for about $6,000, but it is more golf cart than car, with no doors or windows other than the windshield.
    

    
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John Wallace, director of Ford's all-electric Th!nk Group with the Th!nk city car that should be available to U.S. consumers in late 2001.

    

    The city is selling for about $25,000 in Norway, but Ford expects to reduce that cost when it comes to the U.S. market in late 2001. But even Wallace admits the city is probably not commercially viable without thousands in tax incentives, although he thinks the neighbor could see use in closed communities, resorts and industrial sites. Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.