Who Are These Hybrid Buyers?

Luxury consumers don’t typically purchase a non-luxury vehicle. That seemingly self-evident fact is a truism in the auto industry. Put another way, people with money generally show it with their vehicle purchases. The well-to-do are just not likely to buy a Ford, Chevrolet, Toyota or Honda. But now a new study from Acxiom Corporation demonstrates that one type of vehicle -- the hybrid -- is standing that time-tested adage on its head. Well-heeled customers are purchasing Toyota Priuses, Honda Civics, Ford Escapes and other non-luxury hybrid vehicles in significant numbers, and it could have a profound effect on the entire vehicle market.

As a matter of fact, hybrid models are scrambling the traditional marketing efforts in several ways. Not only are wealthy individuals buying non-luxury brand hybrids, but hybrid models are driving a significant degree of brand-switching as consumers seek hybrid models from brands that they would not otherwise have bought. Well-educated, affluent, tech-savvy buyers who previously gravitated to luxury brands now are showing a willingness, or even eagerness, to shop for non-luxury brands if they offer hybrid technology that interests them.

So who are all these hybrid buyers, anyway? The study looked at the typical characteristics of a hybrid buyer and found that they shared several lifestyle traits. When comparing buyers of mid-market conventional models to hybrid buyers of those same models, the study found that hybrid buyers are not only more interested in environmental issues, which is largely a no-brainer, but are also more interested in science and space, science fiction, music collection and even camping than their non-hybrid counterparts.

They are also centered in two well-defined geographic areas. The research found that more than 50 percent of consumers with a high propensity for the hybrid Ford Escape, for example, are located along the East and West Coasts, while traditional Ford Escape prospects are more evenly dispersed throughout the middle of the U.S. With import brands, this effect was less pronounced, since import brands are traditionally strong on both coasts anyway.

Just because hybrid buyers are taking a "step-down" from their normal luxury category to a non-luxury brand doesn't mean they expect anything less in terms of technological features and advanced amenities such as navigation systems, premium entertainment-sound systems, onboard diagnostics, Bluetooth compatibility and other technologies. They want a luxury-like experience.

"Clearly, these hybrid buyers are the trendsetters that are helping to shape the modern automotive landscape," said Tim Longnecker, automotive industry executive for Acxiom. "They're tech-savvy and demand the performance and amenities of luxury brand vehicles and are willing to pay for it. This presents an opportunity to position hybrid vehicles to a very different consumer set.

"Another fascinating aspect of the hybrid phenomenon is the brand-switching it has fostered. The study found quite clearly that hybrid vehicles drive brand- switching, referred to in the industry as "conquesting" because buyers often choose a different-than-current brand when purchasing hybrids at a greater rate than non-hybrid buyers. For example, 77 percent of Toyota Highlander hybrid buyers come from other manufacturers as opposed to 67 percent of Toyota Highlander non-hybrid buyers.

"There is great opportunity for manufacturers of hybrids to tune into consumers' preferences and grow their customer base at the expense of the competition," said Longnecker. "For many manufacturers, hybrids are reaching prospects that their traditional models could only dream of."

Will Consumers Accept Diesels?

Volkswagen, Audi, BMW, Mercedes-Benz and Honda are all poised to introduce diesel-powered passenger cars to the United States. With higher Corporate Average Fuel Economy targets from the U.S. Federal Government looming in coming years, all of these companies want to bring to bear the diesel engine’s inherent efficiency -- efficiency that could mark a significant decrease in our use of fossil fuel and a significant increase in the car companies’ ability to hit the mandated fuel economy targets. But a looming question out there is: will American consumers buy in to diesel technology? Frankly, the answer to that question is anything but crystal clear.

A recent study conducted by a well-respected market research firm took a long look at how new-vehicle buyers feel about hybrids, diesels and found a large majority of U.S. consumers do not see diesel as a likely mainstream fuel source in the future. The survey of new-vehicle buyers revealed that only six percent of shoppers think diesel is most likely to succeed in becoming a mainstream vehicle powertrain type. In comparison, 40 percent of new-vehicle buyers thought hybrids would become a mainstream powertrain, 20 percent said the same about hydrogen fuel cells and 17 percent cited flexible-fuel systems as a probable mainstream powertrain of the future. 

That was a major blow to the proponents of diesel vehicles. Several of them have been thumping the tub for diesel for years now, and frankly they were surprised by the findings. More specific consumer perceptions of diesel engines were equally troubling to the diesel advocates. For instance, nearly half of consumers say diesels are “dirty” and “noisy.” In addition, the study showed that shoppers believe that diesel-powered vehicles get poorer fuel mileage than conventional gasoline engines, and fewer consumers see diesels as being “fuel-efficient.”  Finally, the study found that consumers’ perceptions of diesel technology was actually trending downward, not exactly what you’d like to see if you are about to gamble millions, if not billions, on introducing the technology to the American marketplace.

Those companies that are about to bring “clean diesel” to America might well point out that virtually all of these consumer perceptions fly in the face of the reality about the technology. Those of us who have driven a wide variety of clean-diesel-powered vehicles in Europe understand that the best of them are smoke-free, quiet and, most of all, extremely fuel efficient. The important lesson from the survey results is that American consumers don’t know that yet. Further, American consumers have solidly held pre-conceived notions about diesels that are decidedly negative.

To us, this means that the manufacturers who seek to sell diesels in the U.S. must convince a larger portion of the American public that clean diesels are worthy of consideration. And that is not an easy task, since the largely negative consumer perceptions of diesels are strong.

Saving the Environment, One Body at a Time

The twin efforts to limit the consumption of fossil fuel and the production of so-called "greenhouse gases" like carbon dioxide have taken auto makers in many directions, most of them involving more efficient powertrains. Hybrids, diesels and direct-injection gasoline engines are all front-burner projects with most car companies these days. But in the quest for more environmentally friendly automobiles, another effort might also yield positive results. Global steel companies have aims to reinvent the steel automobile body to make it lighter and more efficient, which in turn will help reduce fuel use and emissions.

The International Iron and Steel Institute's automotive group, WorldAutoSteel, has created the Future Steel Vehicle project and made the announcement of its formation at the United Nations Framework Convention on Climate Change conference in Bali. The initiative will develop steel auto body concepts that take advantage of alternative powertrains, such as advanced hybrid, electric, and fuel cell systems. The goal of the research is the development of safe, lightweight steel bodies for future vehicles that reduce greenhouse gas (GHG) emissions over the entire life cycle. It will address not only the vehicle itself, but also the processes and transportation costs that go into the manufacture and eventual recycling of vehicles.

"From a total vehicle cradle-to-grave life cycle perspective, steel is the most effective material for reduced greenhouse gas emissions," said Ian Christmas, International Iron and Steel Institute's secretary general. "With this project, we will develop concepts that should help automakers reduce GHG emissions over the entire vehicle life."

WorldAutoSteel has commissioned the world's largest independent automotive engineering partner, EDAG Engineering + Design AG, headquartered in Fulda, Germany, to complete the first-phase Engineering Study that is a key part of the program. Development work will be based at EDAG's Auburn Hills, Mich., facility, and will examine the changes implied and enabled by new powertrain systems that may radically alter the structure of automobiles. The spadework will also provide input for selection of Phase II design concepts. Phase I results are expected in 2008.

Future Steel Vehicle is the fifth in a series of auto steel research projects. The previous four were undertaken over the last decade to demonstrate the application of new steel grades, design techniques and manufacturing technologies for light vehicle structures. Each illustrated how advanced high-strength steel in high-volume steel applications could significantly reduce vehicle weight while improving safety and performance and maintaining manufacturing affordability.

"These previous research projects revolutionized the kinds of steels normally applied to auto bodies, as well as demonstrated innovative steel vehicle designs," said Edward Opbroek, WorldAutoSteel director. "The application of these research findings is seen globally in many vehicles on the road today. We expect the Future Steel Vehicle project to stimulate the same development in upcoming alternative vehicles."

Driving Today Contributing Editor Tom Ripley writes about the auto industry and the human condition from his home in Villeperce, France. He has a special interest in lightweight bodies.

Are Biofuels a Cure or Disease?

The Energy Policy Act of 2005 included a biofuels mandate. Everyone, from the environmental community to President George W. Bush, has touted renewable biofuels as one of the answers to America's reliance on foreign oil sources. But now, some are asking if biofuels are really a cure or if they actually represent a new problem.

One of the organizations, the National Petrochemical and Refiners Association (NPRA), has suggested that biofuels might not be the panacea some claim they are. Its Executive Vice President, Charles T. Drevna, has pointed to three new reports from the international Organisation for Economic Co-operation and Development (OECD), FarmEcon and the Chesapeake Bay Commission that cast doubt upon whether increasing the biofuel mandate established by the Energy Policy Act of 2005 is necessary, or even wise, given its potential impact on food prices and the reported negligible environmental benefits resulting from ethanol's production, distribution and use.

"[Experts] have cautioned policymakers against relying heavily on biofuels to achieve the two goals of enhancing energy security and improving our environmental quality," Drevna said. "The new reports from the OECD, FarmEcon and the Chesapeake Bay Commission really tell the rest of the story when it comes to the biofuel mandate and its negative consequences."

The OECD report asks the basic question, "is the cure worse than the disease," and discusses the potential "food-versus-fuel" debate. FarmEcon says that the cost increases associated with ethanol subsidies are already showing up "in the prices of meat, poultry, dairy, bread, cereals and many other products made from grains and soybeans." Finally, the Chesapeake Bay Commission warns that "biofuels could lead to shifts in crop patterns and acreages that create an uncertain future for farmers and foresters and seriously worsen the overload of nutrients to our rivers and the Bay" if handled incorrectly.

In its recent report, the Organisation for Economic Co-operation and Development (OECD) noted: "In theory, there might be enough land available around the globe to feed an ever-increasing world population and produce sufficient biomass feedstock simultaneously, but it is more likely that land-use constraints will limit the amount of new land that can be brought into production leading to a 'food-versus-fuel' debate."

In an article by Dr. Thomas Elam, FarmEcon reported, "Nearly all of the world's current grain supply would be needed to fuel the U.S. gasoline-powered vehicle fleet, leaving almost nothing for world food needs. Put another way, each one percent of the U.S. gasoline supply that is replaced by ethanol uses almost one percent of our current global grain production. Clearly, the global demand for food places a severe limit on the feasibility of using grain supplies for producing a large percentage of U.S. motor fuels."

"We strongly urge policymakers to consider these consequences as they debate increasing the federal biofuels mandate in pending or future energy legislation," Drevna concluded.

Driving Today Contributing Editor Tom Ripley writes about the auto industry and la condition humaine from his home in Villeperce, France. He eats virtually every day.

Closer to the Electric Car

At first, hybrid vehicles touted their freedom from electric cords. Now the electric cord might be the salvation of hybrids, a vehicle type that might need a new wrinkle to continue its upward climb. When the Toyota Prius and Honda Insight hybrid gasoline-electric vehicles were first introduced to the American market, their manufacturers were quick to point out that they never had to be plugged in.  Since the plug-in General Motors EV-1 was a dismal failure in the marketplace, the fact that the Prius and Insight never had to be connected to a receptacle was seen as a major plus. And now large-format lithium-ion rechargeable batteries could make feasible the "plug-in" hybrid electric vehicle, which has become the new darling of the environmental set, although none are on the road in volume production. But several manufacturers, including Toyota, Ford and General Motors, say they want to change that.

The battery in a plug-in hybrid vehicle offers much more energy than batteries traditionally used in hybrid vehicles. That means it allows significant amounts of zero-emission driving. This answers one of the unasked questions about current hybrids, which still use fossil fuel and still emit quantities of internal combustion engine exhaust and so-called "greenhouse gases." In contrast, plug-in hybrids offer much longer periods of no-emission driving. Plus, in short trips, they might not burn any gas at all. The use of the more efficient, high storage capacity battery also results in phenomenal fuel economy. Fuel efficiency that can reach up to 180 miles per gallon for an average commute of 50-60 miles per day, which is about triple the claims for a conventional Prius.

Because of the fuel economy, the plug-in hybrid also offers incredible range, which means fewer trips to the gas station. Using the plug-in system, the plug-in hybrid electric vehicle (PHEV) offers a zero-emission electric mode in city and suburban traffic (up to speeds of 33 mph) and an efficient gasoline engine for long, higher speed trips. It allows renewable energy to displace gasoline, reducing our reliance on fossil fuels, which is increasingly important given today's environment and economic concerns. Of course, a significant percentage of electricity that could be used to recharge the vehicle is currently being generated using fossil fuels, but some argue that it will be easier to convert generating plants to renewable fuels than the automobile fleet.

So why don't we see them on the road today? The answer, ironically, is the high-tech battery design. Today, lithium-ion batteries have substantially higher energy density than competing batteries for hybrid electric vehicles, but they are also very expensive. The battery packs can add several thousand dollars to the price of a typical hybrid vehicle, which already is premium-priced. Ford, GM and Toyota say they hope to overcome the price concerns for hybrids, and Toyota's most recent announcement on its upcoming plug-in says it won't use the higher-cost lithium ion batteries. As the situation continues to develop, we will continue to cover it here.

Driving Today Contributing Editor Luigi Fraschini, who is based in Cleveland, has long been a fan of alternative-fuel technology.