Too Many Hybrids?

To understand General Motors Corp.'s hybrid-electric vehicle strategy, look no further than the '08 Saturn Vue.

GM will sell its venerable Saturn cross/utility vehicle with a traditional internal combustion engine.

But a customer seeking a Vue HEV soon will find that means choosing between three models of varying pricepoints, degrees of technology and levels of fuel-efficiency gains.

The simplest and least expensive is a Vue available with the Belt Alternator System — also known as a “mild” hybrid.

GM also plans a Vue with the Two-Mode HEV system, or what is referred to as a full hybrid.

And, in the future, a plug-in HEV based on the Two-Mode System will be available, possibly making GM the first volume auto maker to offer one.

Depending on whom you ask, GM's HEV play is either an ambitious attempt to make hybrids more accessible and affordable to Americans, or a misguided approach that could leave customers scratching their heads as to what exactly constitutes a hybrid.

Honda Motor Co. Ltd. and Toyota Motor Corp. were the first to market with their respective Insight and Prius HEVs. But the marketplace is changing with the proliferation of players and systems.

In the next five years, during which many forecasters expect U.S. HEV sales to peak, auto makers will bring at least 15 new HEV models to the field. Barring any cancellations, U.S. buyers could have 25 or more hybrids to choose from by the '09 model year.

Poised to be the largest contributor to this HEV fleet is GM. Between the '07 and '09 model years, GM will offer two cars and an SUV with a mild-hybrid system, which shuts off the engine when the vehicle is at a complete stop and restarts when the brake pedal is released. Comparatively, full hybrids such as the Toyota Prius are able to run on 100% electric power, and generally achieve better gas mileage than mild HEVs.

Another six GM vehicles — four SUVs and two fullsize pickup trucks planned for '08 — will use the Two-Mode System.

Developed jointly with DaimlerChrysler AG and BMW AG, Two-Mode incorporates electric motors in the basic structure of an automatic transmission to create what essentially is an electrically boosted continuously variable transmission. The auto makers say vehicles with Two-Mode will achieve a 25% improvement over internal combustion engine (ICE) counterparts.

Finally, GM has committed to building a plug-in HEV, possibly on the '09 Saturn Vue. PHEVs allow consumers to plug into a standard electrical outlet to recharge a vehicle's batteries. Toyota says it also is developing a PHEV, but has not designed a vehicle for it.

The new push on HEVs, along with the recent unveiling of the Chevrolet Volt, a series PHEV with a small ICE used to recharge the batteries but not propel the wheels, has earned compliments from some critics of GM's past hybrid failures.

“It appears (GM is) putting serious resources into the development of all these technologies, but it is confusing,” says Bradley Berman, editor of Hybridcars.com.

On a recent drive event, Ward's asked GM Vice Chairman Bob Lutz if GM is spreading itself too thin by offering so many HEVs instead of focusing in on a few.

Lutz, who sees just about everything on four wheels moving to electric-drive powertrains in the next few decades, does not believe the would-be hybrid buyer will be put off by more choice. He argues the opposite, noting vehicles such as the Saturn Vue and Aura Green Line mild HEVs get great mileage and are more affordable than their full-hybrid competitors.

“There will be a substantial price difference between the current hybrid system in the (Saturn Vue/Aura) Green Line and the plug-in hybrid system, which is going to be reasonably expensive because you've got the Two-Mode hybrid system, plus a very substantial battery pack,” says Lutz, who heads global product development.

“Unless we choose to be philanthropic about it, those are going to cost money,” he adds.

Pete Savagian, engineering director-hybrid powertrains, says GM is approaching the burgeoning hybrid market the same way it has engaged the traditional marketplace: with a vehicle for every type of buyer.

“What that means for hybrids is we need value-oriented systems as well as premium and performance systems because we've got customers with differing needs,” he says.

“We're going to understand more about the market once we get more market information under our feet,” he says, hinting at future products. “The Two-Mode can work on smaller vehicles and the question is, can we bring that to the right applications to serve the demand.”

That may be a careful way of saying GM soon could offer a more efficient and more expensive Two-Mode car.

Nevertheless, GM's evolving strategy has the undisputed hybrid leader, Toyota, ready to redefine its message on HEVs.

Jim Farley, vice president-marketing-Toyota Motor Sales U.S.A. Inc., notes nearly 60% of all new-car customers would consider a hybrid — a shift in consumer attitude that may help its Detroit rivals.

“We had a huge debate in the company that's now getting resolved,” Farley says. “We felt to sell the benefits of generic hybrids — Earth, miles per gallon, tailpipe emissions, quiet operation — the risk for us is we're generating demand for our competitors, because everyone has a hybrid now.” Going forward, marketing will focus on “how our hybrid's different, and that's the key.”

Farley sees room in the market for Two-Mode models and full hybrids, but he's glad to point out their differences.

“They're designed to do different things,” he says. “Two-Mode is really a very intelligent solution for people who want smaller (fuel efficiency) gains but (pay) a smaller premium. It uses existing packaging within the transmission. It's an intelligent solution for people who want a 20% or 10%-20% increase in mpg, better tailpipe emissions, some quieter operation. But our HSD (Hybrid Synergy Drive) system is pretty far beyond that. It's completely different.”

Other executives, such as John Mendel, American Honda Motor Co. Inc. senior vice president-automobile operations, say anything that might confuse customers is risky.

“I'm not sure the industry has defined what a hybrid is,” Mendel says. “That debate will go on long after — unless the government came out tomorrow and said in order to call it a hybrid it has to run 50% of the time on some alternative source.

“Then you start getting into regulated definitions that say, ‘OK, everybody's going to have to meet this standard.’ I don't know how you do that, plus you don't want the government more involved in your business.”

Thomas Lane, Nissan Motor Co. Ltd. corporate vice president-product planning and strategy, says customers want savings, regardless of packaging.

“The thing that counts is the actual fuel economy you get and the performance you get,” Lane says. “If an application of a mild hybrid produces good results, great. If it's just window dressing and a sticker on the back of the car and nothing really happens, it's not fair to the customer, I don't think you're treating them right.”

Nissan is launching its first HEV in the '07 Altima and is mindful of over-promising the benefits.

“It doesn't take a whole long time for the image and reality to get connected,” Lane says. “That's why I said, over time, forget the hype and forget the names and think about what you're trying to deliver to the customer. That's what's important.”

Ford Motor Co., the first of the domestic Big Three to offer an HEV on its Escape/Mercury Mariner cross/utility vehicles, also is moving to bring three new HEVs to market by '08, including the Ford Fusion and Mercury Milan midsize cars and the Mazda Tribute, cousin of the Escape.

Ford's “full” hybrids automatically switch between pure electric power (at speeds up to 25 mph [40 km/h]); gasoline engine power only; or a combination of the two for maximum efficiency and performance.

Mark Fields, Ford president-the Americas, says consumers are becoming educated on the virtues of mild vs. full HEVs.

“Customers are so good at doing their homework now and researching their products on the Internet that they should be educated about what the differences are, and they're big differences,” Fields says.

“They'll see it just in the premium they pay for mild vs. full. We've stated what our near-term plans are for hybrids, and full hybrids are the most compelling for customers in giving them the benefit of greater gas mileage and the other benefits that come with them.”

Paul Lacy, Global Insight manager-technical research North America, says auto makers and dealers will need to step up to avoid consumer misunderstanding.

“The buyer will get confused if they're not educated further by the manufacturers,” he says. “Eventually, I think the manufacturers will be forced to narrow down what they will offer.”

By 2012, Global Insight anticipates HEV sales to peak and then level off at 5%-6% of total light-vehicle market share, or roughly double what it is today. Lacy sees 2010 as a turning-point year, when a surge of clean-diesel vehicles enters the U.S. market.

“They'll all have their benefits according to each manufacturer, but it's not realistic from a manufacturing/cost perspective for each (OEM) to produce different (HEV) versions,” he says.

According to Ward's data, HEV sales in the U.S. grew 22.4% in 2006. GM is the only seller of HEV models in the U.S. that does not break out sales for hybrids in its monthly figures.

Berman, of hybridcars.com, says with so many HEV technologies being bandied about, there is bound to be some confused customers. But he isn't too worried.

“The average consumer might not have a deep knowledge of that hybrid technology, but that's OK,” he says. “Hybrid is becoming synonymous with alternatives, and people want alternatives.”

Still, he notes the example of the Honda Accord HEV, which never caught on in the U.S. and is rumored to be on Honda's chopping block. Ward's data shows Accord HEV deliveries fell 66.7% to 5,598 units in 2006 vs. prior-year, well below the 20,000-unit annual goal Honda set for the car at its 2004 launch.

“In the end, consumers are going to look at fuel economy,” he says. “The Accord just didn't resonate and the chief reason was (relatively poor) Environmental Protection Agency fuel economy.”

Whether the same fate awaits GM's line of hybridized models remains to be seen.

Taking the long view, Lutz says HEVs simply are steps toward complete electric-drive vehicles. “We're talking about a transition that's going to last decades,” he says.

But ultimately, he says, just about all cars will be powered electrically, regardless of their primary fuel source.

“All of that mechanical junk will disappear,” Lutz says.
— with Christie Schweinsberg and Byron Pope

HEVs Available in '07 and Expected in '08 and '09 Model Years

New EPA Ratings Hit Fuel Sippers Hardest

Makers of the thriftiest cars and trucks on the road have less to brag about under new vehicle fuel-economy ratings the government says better reflect Americans' real-world driving.

The U.S. Environmental Protection Agency recently released new vehicle fuel-economy estimates that, for the first time, account for current interstate highway speeds, heavier use of air conditioning and other modern-day driving habits.

The agency had not changed the way it evaluates cars and trucks for fuel economy since 1984.

Under the EPA's new ratings system, city mileage for all '07 U.S. light vehicles, on average, falls 12%, while average highway estimates drop 8%. Combined fuel economy for the current fleet is about 10% lower.

For some vehicles, particularly fuel-sipping powertrains, the new ratings system can mean as much as a 30% reduction in city fuel economy and a 25% cut in highway driving averages.

“The most efficient vehicles on the market are gas-electric hybrids,” an EPA spokesman says. “They're more affected downward as a percentage than other vehicles. Smaller engines pay a higher penalty for accessory usage, such as air conditioning.”

For example, Toyota Motor Corp.'s Prius hybrid-electric vehicle saw its combined city/highway numbers fall from 55 mpg (4.2 L/100 km) to 46 mpg (5.1 L/100 km), or a 16% drop, according to the new measurements.

The impact is far less on trucks and SUVs. The '07 Chevrolet Tahoe, for instance, when equipped with a 5.3L V-8, slipped from a combined rating of 18 mpg (13 L/100 km) to 16 mpg (14.7 L/100).

The federal corporate average fuel economy numbers automakers must adhere to, will take into account the across-the-board EPA standards.