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It seems as if the whole country has gone green.
Pick up a newspaper on any given day and at least one headline will tout an auto maker’s latest push for environmentally friendly vehicles.
Kermit the Frog pitchesMotor Co.’s Escape Hybrid cross/utility vehicle on TV and in magazines.
Motor Corp. asks, “What if the air were clean again?” in a commercial for its hybrid-electric vehicles.
Corp. and both are asking consumers to “Unleash the Power of Corn,” by embracing E85, corn-derived ethanol mixed with gasoline, which they say will help reduce U.S. dependence on foreign oil.
GM, an innovator in electric vehicle technology and the development of hydrogen fuel cells, also has formed a partnership withAG and DaimlerChrysler AG to produce HEVs.
Meanwhile,, DaimlerChrysler and other European auto makers are trumpeting clean diesel technology, and Motor Co. Ltd. CEO Takeo Fukui says the auto maker is hard at work to bring a 50-state diesel to the U.S.
CEO Dieter Zetsche says DC’s new Bluetec clean diesel technology will enable compression-ignition engines to meet the toughest U.S. emission standards while allowing even its big Mercedes S-Class sedan to achieve more than 36 mpg (6.5L/100 km) and have a range of 860 miles (1,383 km) with one tank of fuel.
Even suppliers have mobilized.Corp. plugs its “Green Ways” at a press conference at the recent North American International Auto Show.
Not since the early 1990s, when recycling was the craze, has the industry prioritized protecting the environment.
Is it hype, or has the industry truly moved the needle? And are some auto makers reaping benefits – or garnering criticism – disproportionate to their efforts?
offers the best-selling HEV in the U.S., the Prius, but it also just unveiled its biggest passenger vehicle yet, the all-new ’07 Tundra pickup, with nary a word in the official release about fuel efficiency or emissions from a new 5.7L V-8.
Ford CEO Bill Ford has made public his mission to helping protect the environment. It has made the company a target for critics quick to point out Ford’s corporate average fuel economy number is the lowest of all U.S. auto makers.
Ford also just introduced two new fullsize SUVs: ultra-sized versions of its huge Expedition and Lincoln Navigator.
Meanwhile, auto makers that have quietly showed leadership, such as, seemingly have been overlooked.
Others, such as European OEMs waiting to get in the game, are being given a pass by fringe groups more interested in lambasting Ford.
Consumers further muddy the water, parking large SUVs beside HEVs in the garage.
“The whole country is schizophrenic,” GM Product Chief Bob Lutz says of the U.S. appetite for more fuel-efficient vehicles as well as more horsepower.
While the ’05 model year saw a shift toward more fuel-efficient engines, according to Ward's data, 28% of light vehicles purchased had a V-8, more than the 10-year average of 26.7% and surpassing the 25.2% of ’05 models sold with a 4-cyl. engine.
Although America appears to crave hybrids and fuel economy,Group cannot build its storied Hemi V-8 fast enough to satisfy consumer demand.
If lean and green vehicles are to coexist peacefully with those that are big and mean, what do auto makers get out of marketing themselves as pro-environment, if anything?
Toyota basks in a green glow and views technology such as hybrid powertrains as just another option that should be available on all vehicles.
Clearly Toyota has set the pace, and the rest of the field is scrambling to catch up. But it may be too late.
Incentives Give Japanese a Head Start
High fuel prices and traffic congestion prompted the Japanese government in the mid 1990s to grant tax breaks to auto makers for more fuel-efficient and less polluting cars. These incentives drove development of hybrids at Honda and Toyota.
The movement came ashore in the U.S. in late 1999, as Honda began selling its 2-seat Insight gas-electric car.
Six months later, Toyota, which had been first to market in Japan with a mass-produced HEV in 1997, the original Prius, began U.S. sales of the vehicle.
Meanwhile, U.S. auto makers were enjoying record SUV sales, and the price of a gallon of regular unleaded was just over $1. Ford and GM’s largest SUVs were pulling in some of the highest gross profit margins in the industry, and competitors were trying to follow, including Toyota.
Soaring sales and profits led many to conclude the American auto industry need not worry about matching Honda and Toyota’s fuel-efficient offerings anytime soon.
Cheap gas, however, is not a constant. Terrorist attacks, a weak U.S. dollar, Middle East conflict and crushing hurricanes in the refinery-heavy southeastern U.S. saw the price of regular unleaded climb to more than $3 a gallon nationwide in 2005.
But is the price of gas driving sales of hybrids and other fuel-sipping vehicles, or is it the need to respect the environment?
Ron Cogan, editor of the quarterly Green Car Journal, says while early adopters favored the Insight and Prius for environmental reasons, buyers now are thinking mostly about the bottom line.
“It’s morphed over the years, primarily because of really high fuel prices, into a market that I think is primarily interested in higher fuel economy with the environmental benefit being important but second to that,” Cogan says.
“When you start looking at personal budgets, everybody’s concerned about where their money goes,” he says.
Toyota’s Marketing Juggernaut
Toyota’s Prius, whose sales were up 99.8% (to 107,897 units) in 2005, saw demand ebb and flow depending on fuel prices, says Jim Farley, vice president-Toyota Motor Sales U.S.A. Inc.
“Early summer was the sweet spot (when the waiting list for the vehicle was short),” Farley says. But demand “just took off” following Hurricane Katrina.
What makes Toyota a true juggernaut is not only its technology, but its powerful ability to sell it.
No other auto maker has invested as much in environmental marketing as Toyota.
From January through November 2005, in the U.S., alone, Toyota spent $12.6 million to promote the Lexus RX 400h and $4.8 million advertising the Highlander Hybrid CUVs, TNS Media Intelligence says.
Toyota says money spent on its Hybrid Synergy Drive ad campaign was equivalent to that of a typical model launch (estimated to be $30 million to $60 million), a tidy sum for what essentially is an engine option.
While it was second to the U.S. with a hybrid (behind the Insight) and had just one hybrid to Honda’s three as little as a year ago, Toyota has emerged as the undisputed leader. The second-generation Prius was embraced by celebrities and the common man alike.
Cogan commends Toyota for placing its marketing muscle behind hybrids. “In the end Toyota has pretty vast resources to put at this, and I think it’s admirable that they’ve made this a priority,” he says.
Last year Toyota launched the Hybrid Synergy Drive ad campaign, which includes the “What if the air were clean again?” tagline, to highlight the company’s HEV propulsion system.
Farley says it was important Toyota do such a campaign, insisting many buyers are not aware of Toyota’s hybrids.
“You’d be shocked at how many people, when you go to a motor show, don’t know that Prius is a Toyota, or that a hybrid doesn’t have to get plugged in, or hybrid is a real solution for mainstream consumers.”
The challenge now is convincing mainstream buyers hybrids are worthwhile. For this, Toyota needs a large-scale TV-centric campaign, Farley says.
“If you don’t go with that kind of campaign that touches a lot of people on TV, you’ll never get to them,” he says.
Toyota’s environmental self-promotion has its detractors, many of whom say buyers will never recoup the premium paid for an HEV through fuel savings.
They also question Toyota’s simultaneous push of hybrids and its ever-growing light truck lineup in the U.S. (12 with the new FJ Cruiser SUV this year).
In a mocking editorial in the Nov. 30 edition of the Wall Street Journal, writer Holman W. Jenkins Jr. took the auto maker to task, pretending to be one of its own employees, rejoicing in the fact Toyota got away with duping buyers into purchasing vehicles that do “not yield any substantial benefits for society if (they don’t) save the owner money.
“Toyota applauds your willingness to spend $9,500 over the price of any comparable vehicle for the privilege of saving, at current gasoline prices, approximately $580 a year,” Jenkins writes.
Toyota Motor Sales U.S.A. Inc. President and Chief Operating Officer Jim Press replied to the article seven days later in a letter.
“We understand that Mr. Jenkins and other naysayers will continue to target Toyota as the leader in hybrid technology because innovation and technological progress can be intimidating for some people,” Press wrote. “Ultimately, consumers know what's best for them, and they will make the choice with their pocketbooks.”
When asked at last November’s Specialty Equipment Manufacturers Assn. show in Las Vegas why Toyota also sells gas guzzlers, Press pointed to the auto maker’s upcoming Yaris subcompact and said, “Because everyone doesn’t want to drive this.”
Having a lineup that includes the Prius and Tundra does not mar Toyota’s environmental credentials, Cogan says. “They clearly are an environmental leader when you put them in context with the rest of the market as we know it now,” Cogan says.
Honda: No Respect
Honda placed slightly behind Toyota last year in a study conducted by TechnoMetrica Market Intelligence on which auto maker Americans see as committed to making HEVs widely available.
But it appears Toyota’s lead over Honda and other auto makers gets bigger every day in the court of public opinion.
“Honda is an engineering company; Toyota is a marketing company,” a Honda dealer says of why the No.2 Japanese auto maker seems to have lost valuable ground to Toyota in the minds of consumers.
Honda’s notorious humility could be a factor. “It really is just the Honda way,” Cogan says of the company’s long-standing aversion to self-promotion.
Honda does have an ad running currently on U.S. TV boasting of its industry leading fleet fuel economy, 29.1 mpg (8 L/100 km) in the ’04 model year, but the effort pales in comparison to Toyota’s Hybrid Synergy Drive campaign.
John Mendel, American Honda senior vice president-automobile operations, says Honda’s “quiet leadership” is one of its best attributes, but he acknowledges the need to be more “upfront” in publicizing some of its products and technologies.
“Even though you try to take a position of quiet leadership, there are those times when you need to come out and help that along a little bit,” he says.
Mendel admits to being annoyed by the attention GM gets for being a leader in hydrogen fuel cells.
“We're still the only manufacturer that's actually delivered a hydrogen vehicle (an FCX) to a customer,” Mendel says. Honda plans mass production for the next-generation FCX within four years.
GM Climbs on Hybrid Train
After spending years and hundreds of millions developing fuel cells, and denying the viability of hybrids, GM finally is getting its HEV house in order, coming out with 12 full-scale hybrids in the next several years.
The first arrivals due in 2007 – the Chevy Tahoe Hybrid and GMC Yukon Hybrid – spring from the technology partnership with DC and BMW.
“We might not be first to the hybrid game, but we’re in it now,” Mark LaNeve, GM North America vice president-vehicle sales, service and marketing, said at the recent Detroit auto show. “We will cover every major vehicle segment with hybrid models.”
GM also began a full-scale advertising campaign promoting the benefits of corn-derived E85 ethyl alcohol (ethanol) called “Live Green Go Yellow,” with the bulk of ads airing during the Winter Olympics on NBC.
“We are trying to start a movement that will heighten the focus on the need to diversify our energy needs with ethanol,” Brent Dewar, former executive vice president-marketing and advertising, says of the campaign, the online version of which includes the “GM Cornulator” that calculates the amount of petroleum saved with E85.
GM offers nine flex-fuel vehicles – those capable of running on either gas or E85 – and will add 400,000 flex-fuel vehicles to its U.S. fleet of 1.5 million.
In his recent State of the Union address, President Bush said Americans need to break away from dependence on imported oil.
“We will increase our research in better batteries for hybrid and electric cars, and in pollution-free cars that run on hydrogen,” Bush said. “We’ll also fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years.”
However, many critics rightly point out the ethanol infrastructure in the U.S. is miniscule, with just 600 of 180,000 service stations selling the fuel last year. More stations are on the way. Plus, it takes more energy to make E85 than to produce gasoline. E85 also generates fewer miles per gallon than gasoline.
“We always had over many years this chicken-and-the-egg problem with alternative fuels, and that’s why auto makers are hesitant to produce alternative-fuel vehicles unless there are fueling opportunities,” Cogan says. “Otherwise it’s difficult to sell people on the benefit of an alternative fuel.”
Conversely, fuel companies resist an alternative infrastructure if the number of flex-fuel vehicles is small.
GM also has been a long-time proponent of hydrogen-powered fuel cells and has invested heavily in the technology. Still, it has done little for GM’s green image.
“Some companies look at GM and are just as suspicious thinking that, ‘Well you don’t have hybrid product now, so you are diverting our attention to hydrogen,’” Cogan says, but he doesn’t agree.
“Their focus is long term on hydrogen. They’ve been slow to get into the game with hybrids, and they’ve admitted that,” he says. “But now they know that was a misstep, and by all appearances with the product lineup we’re hearing about for hybrids they’re going to correct that in a big way.”
Ford’s Green Ambitions
Ford arguably has garnered more than its share of criticism for its green ambitions.
Ford has been the most vocal of the U.S. Big Three about raising environmental awareness, thanks largely to Bill Ford’s own activism.
Its Rouge truck plant in Dearborn has been turned into a showplace for 21st century environmentally friendly auto making, with a grass roof and surrounding wetlands home to a variety of plant species.
And Ford was the first of the Big Three to market with a hybrid, the Escape CUV.
Last fall it staged a 10-city hybrid driving school to teach Ford Escape and Mercury Mariner owners how to get the best fuel economy out of their HEVs.
In TV commercials, Bill Ford says the company will be able to produce 250,000 hybrids annually by 2010.
And now the auto maker wants to combine hybrids with ethanol.
Meanwhile, critics point out Ford, while preaching environmentalism, has the worst fuel-economy record in the U.S.
“Human rights and environmental activists, who have been challenging Ford’s claims that it is an ‘innovative’ and ‘environmental’ car company, view these latest initiatives as little more than a new round of public relations-driven promises that will result in virtually no meaningful improvement of the company’s bottom-of-the-barrel fleet-wide fuel efficiency,” reads part of a release from the website, jumpstartford.com, a consortium of environmental activist groups, including Global Exchange, the Rainforest Action Network and The Ruckus Society.
The criticism seems only to have emboldened Ford.
“We’re going to be more vocal (about our green efforts),” says Jim Padilla, Ford president and chief operating officer. “It’s not clear to us that we’ve gotten much credit for the good things that we have done, and we think we ought to start talking about that and get people to recognize it. If some people choose to sit on the sidelines and criticize, then we ought to ask them what they’re doing physically to make a difference rather than just talking.”
Cogan says not every product decision an OEM makes will be with the environment or better fuel economy in mind.
“I wish that were not so, and a lot of people wish that were not so,” he says. “However, the reality is auto companies are in transition, and the best we can hope for is they are going largely in the right direction. When product decisions are made that we feel aren’t going in the right direction, again, people (should) get vocal.”
Curt Haugtvedt, an associate professor of marketing at Ohio State University’s Fisher College of Business, says Ford’s advertising needs to better explain the company’s long-standing commitment to the environment, otherwise consumers may ask why the auto maker suddenly found religion.
“(Ford and GM) have all been thinking about electric vehicles and (fuel-saving, emissions-reducing technologies) for 20-25 years or so,” he says. “If it appears, ‘OK, we’re in financial trouble right now, it’s a desperate sort of move, we have to go green, we’re being forced to go green,’ then it loses its cachet,” Haugtvedt says of Ford’s latest ads.
Marketing Message Grows
For now, the cachet and the momentum belong to Toyota.
And Toyota has so successfully planted the idea technology, such as hybrids, are the future that even the reluctant, such asAG, are planning entries for the U.S. This despite VW CEO Bernd Pischetsrieder’s insistence that a vehicle with dual means of propulsion is “ridiculous.”
Toyota has altered the landscape for the foreseeable future. For the consumer, the marketing message will become more prevalent.
Farley, Cogan and Haugtvedt agree Americans will be expecting auto makers to continue to push automotive technologies that are more fuel-efficient and environmentally friendly, so any money spent on green marketing efforts is not wasted.
Haugtvedt, who specializes in consumer psychology, says most younger Americans are accustomed to protecting the environment, by way of recycling. He says it may be possible for one of the Big Three to position themselves as a green auto maker on par with Toyota.
“Sometimes people that have the leading advantage don’t maintain that,” he says, adding Toyota has been viewed as the greenest auto maker, but the technology is changing.
“If GM can come out with something that initially at least matches and continue to put the money into the research and come out with better products, I think there’s potential for GM to overcome a Toyota.”
He says consumers’ experience with hybrids and other green technologies will determine how well they are embraced by a larger percentage of the population.
“The research on (consumer) satisfaction shows matching or exceeding expectations leads to satisfaction,” Haugtvedt says. “So it’s very important for Ford, GM, Toyota, whoever, when they do make these claims of performance, whether it be power and/or fuel economy, that those vehicles match those expectations and ideally surpass those expectations.”