Hybrid Hype

By Luigi Fraschini

In response to lower gasoline prices, the sales of many gasoline-electric hybrid vehicles have slowed. Across the country, dealers in many areas are advertising hybrids for immediate delivery at no premium over sticker price. Does that mean the bloom is off the hybrid rose?

Not according to a new study from the Freedonia Group, a Cleveland-based market research firm. That organization predicts worldwide demand for hybrid-electric vehicles (HEVs) will advance rapidly to 3.9 million units in 2015, and it will nearly double that number by 2020. Hybrids are expected to penetrate the world light vehicle market quickly in response to rising energy demand, which in turn has led to erratic fuel prices and increased emissions regulations worldwide.

One thing that has stood in the way of hybrid growth is the premium prices the cars command over similar vehicles in the marketplace, but the study projects those premiums will lessen. As the Freedonia Group said, "Cost disparities between HEVs and conventional light vehicles -- currently estimated at between $1,000 and $3,000 -- are expected to decline as production volumes increase."

Hybrids certainly got a boost at the recent Los Angeles Auto Show when Rick Wagoner, General Motors Chairman, said his company was going to make a strong push to develop and market what he called "electrically driven vehicles," a category that includes hybrids. That means the same corporation that was indicted by the film "Who Killed the Electric Car?" now is expected to become a leading light in moving electric vehicles forward. As proof in the pudding, Wagoner vowed GM would introduce a plug-in hybrid version of the Saturn VUE SUV, though he declined to give a date for the debut.

The Freedonia Group study predicted that the primary markets for hybrids will remain the Triad countries (i.e., the U.S., Western Europe and Japan), although the rapidly growing Chinese market is also expected to experience relatively strong demand for these fuel-efficient and environmentally friendly vehicles. Within the Triad, the U.S. market is expected to experience the highest levels of demand for HEVs, due to erratic fuel costs, the market's unique government-mandated Corporate Average Fuel Economy requirements and the lack of significant demand for diesel-powered light vehicles beyond the full-size truck and sport utility vehicle categories.

Despite being less cost-effective than conventional internal combustion engine (ICE) vehicles, the study said, HEVs have carved out a niche in the U.S. as a "carbon neutral" enabling technology. This niche in part appears to be animated by the extra cost associated with the vehicles, especially regarding HEVs that are both uniquely styled and focused on delivering superior fuel economy. On the other hand, recent attempts by some OEMs to position hybrids as high performance alternatives to conventional gasoline-powered vehicles stalled, due to unfavorable price/benefit levels.

Demand for HEVs in Europe, where overall diesel light vehicle demand has already reached 50 percent of the total market, is expected to be significantly lower than in the U.S. Japan will see increased demand for hybrids going forward, as government agencies and allied associations continue to put tax and other incentives in place to stimulate demand. Elsewhere in the Asia/Pacific region, both China and South Korea are expected to be strong HEV markets, due to government interest in dealing with mobile emissions (China), and because local production is planned (both China and South Korea). Other regions of the world will experience lower hybrid demand.

Based in Cleveland, Driving Today Contributing Editor Luigi Fraschini writes on a wide variety of auto-related issues, including safety and the environment.

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