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Hybrids Heat Up at the Car Show


Top News January 9, 2009, 12:01AM EST

Hybrids Heat Up at the Car Show

Despite lower gas prices and few car buyers in sight, automakers are still seeing green with a raft of new electric and hybrid vehicles

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Ford says the Fusion Hybrid will get better mileage than Toyota's Camry Hybrid. David McNew/Getty Images

The Detroit Auto Show, which kicks off on Jan. 11, will be a decidedly dour affair. With carmakers fighting for survival and consumers worried about keeping their jobs, generating interest in the latest models won't be easy. That goes double for the raft of green-tech cars that will be unwrapped; fuel savings are less of a concern now that gasoline costs less than $2 a gallon.

But the industry's big players are undaunted, and nearly all of them are coming out with high-tech fuel sippers. Most are conventional gas-electric hybrid vehicles. Others are plug-in cars that can run solely on electric drive for a longer time, pushing efficiency beyond even the best hybrids. There will even be some pure electric cars onstage.

The industry is gambling—with pretty favorable odds—that gas will once again rise above $2 a gallon. And they will need these cars to meet tougher fuel economy rules that are coming in the U.S. The automakers intend to be ready, and they will flaunt their latest technology prowess at the show.

Electric Drives General Motors (GM) may have the biggest surprise. Even though GM is reeling from billions in losses and the need for government loans to stay afloat, the 100-year-old carmaker will show a brash Cadillac two-door coupe that would run on the same electric drive system as the ballyhooed Chevrolet Volt, which is scheduled to hit the market in 2010. The Volt's system runs exclusively on an electric motor and can go 40 miles before a small gasoline engine kicks in to recharge the battery.

Several sources inside GM say the Cadillac is just a demonstration, or "concept," car. But it shows that the company plans to go well beyond a small, four-passenger Chevrolet with its electric-drive technology. The new Cadillac is smaller than the Caddy CTS sedan but wears a bolder look even than the highly stylized CTS two-door coupe. One GM executive says the Caddy's drop-dead dramatic styling will make "people want it regardless of the energy source."

The challenge, of course, is that even after last summer's oil shock—and the near extinction of full-size SUVs—most Americans still need some convincing before they'll pay extra to buy a hybrid. "The bottom line is that people don't really want to buy them unless they feel they really need a hybrid," says IHS Global Insight analyst John Wolkonowicz. "People want large, fun vehicles."

Slugging It Out Several of the carmakers will try to give them that reason—and knock Toyota (TM), maker of the Prius, off its hybrid perch.

Ford Motor (F) is one example of a carmaker that is going toe-to-toe with Toyota in the hybrid game. Ford developed its new Fusion sedan with innovation consultant IDEO, boasting that the car's 38 miles per gallon will beat the Toyota Camry's 36 mpg.

Here are some of the other hybrid and alternative-fuel vehicles that will be on display in Detroit:

• Toyota says it will fend off interlopers with an all-new Prius (it promises more than today's 46 mpg) and the Lexus HS250h—the first hybrid-only luxury car to hit the market.

• Honda (HMC) will show a new five-passenger Insight with fuel economy that jumps well above the 40 mpg range, but for a price of around $19,000. That's $2,500 less than a Prius.

• Mercedes (DAI) is aiming to demonstrate its tech chops with a trio of concept cars—one that's powered by a hydrogen fuel cell, a pure electric car, and another electric that has a small gasoline engine to recharge the battery.

• BYD Auto of China will show its F3DM and F6DM plug-in hybrids. They will sell only in China at first, but the company is making a statement that it can compete in the technology race.

• Chrysler will showcase electric-drive technology developed by its ENVI technology unit.

All of these ideas would have been great to have last summer, of course, when gas sold for more than $4 a gallon in the U.S. and even higher overseas. Even Toyota admits that hybrids will be a tough sell in the near term. Sales of all hybrids in the U.S. fell 42% in the past three months, vs. an overall drop of 18% for all vehicles. And Toyota isn't yet ready to rekindle plans for a new Prius plant in Mississippi, says James Lentz, president of Toyota Motor Sales USA. But Lentz says that in the long run, green concerns and gas prices will bring sales back.

"Consumer behavior was driven by the cost of gas," Lentz says, adding, "I think we've seen the bottom of fuel prices."

He and his rivals have a lot of money riding on that.

Welch is BusinessWeek's Detroit bureau chief.


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