As hybrids go mainstream, Toyota, Honda rush to produce smaller models

Posted by: Ian Rowley on May 27, 2009

In Japan, it’s getting difficult to make the case that hybrids are a niche for drivers keen to demonstrate their environmental credentials. In April, Honda’s new Insight, which want on sale in February, was the country’s best selling car (excluding 660cc minicars). Toyota, meanwhile, received a record 80,000 orders for the third generation Prius, which was launched last week. The previous record, held by a Toyota compact, was 47,000. Those numbers suggest, at least in Japan, hybrids are heading for the mainstream.

Just as telling: Honda and Toyota are revving up plans a new generation of smaller gas electric models. According to a local media report today, Honda will bring forward a hybrid version of its Fit compact by 18 months to the fall of 2010. The Nikkei newspaper, without citing its sources, says the Fit hybrid will sell for $15,800, compared to the Insight’s $19,900. Like the Insight, it will use a 1.3 liter engine plus the company’s IMA hybrid system. The reports add that Honda expects Fit hybrid sales of around 50,000 a year in its home market—roughly a third of the number regular Fits it sold in 2008. Toyota is working a Yaris-sized hybrid which could hit the market by 2011 and will likely be sold for a similar price.

That both are in the pipeline shows how quickly Toyota and Honda are bringing down the cost of making hybrids. Until recently, the notion that either could sell smaller hybrids without incurring losses seemed fanciful. After all, hybrid systems add cost and weight to any size car. For smaller vehicles, which are lighter and tend to be the least profitable in automaker lineups, the problems are obvious.

Yet, if the report is correct, it sounds like Honda is confident of eking out further savings on its system. For the new Insight, it got the “hybrid premium”—the cost of adding the system compared to a similar size car—down to below $2,000. That enables Honda to make as much profit from each Insight sale as it would from selling a regular Fit.

Toyota, too, insists it can compete in smaller hybrids. Speaking after the launch of new Prius last week, its chief engineer Akihiko Otsuka told me that critics had been wrong to suggest that its “parallel” hybrid system, which is more complex than Honda’s “mild” version, is too expensive for smaller cars. Otsuka said that while Toyota’s system uses two motors to Honda’s one, its hybrids don’t need a continuously variable transmission. That, he said, means that Toyota, despite using larger batteries, can make its hybrid system cheaply enough to use even in smaller cars.

Reader Comments

lms

May 27, 2009 12:20 PM

What's up with nobody mentioning the price of electrical battery charging? I assume when the car is being charged while not running, i.e., at home, the utility company will bill for the electricity used. Have I missed something?

HondaGal

May 27, 2009 1:39 PM

A hybrid Fit? Bring it on! Guess I'll just have to repair my 1989 Civic for a little longer - just got over 38 mpg this last weekend (not quite sure how) and don't really want to settle for worse mileage...

Internet User

May 27, 2009 4:17 PM

Lms,

Yes you have missed something: these aren't plug-in electric cars, but gas-electric hybrids. They run the gasoline engine at a more uniform level, giving better mileage, and any excess power is used to charge the battery. In addition, they also use the friction of braking to further charge the battery.

eugene

May 27, 2009 6:06 PM

Lms, you have. This is hybrid that burns gas. No plug in.

Paul

May 28, 2009 12:19 AM

Hmmm.... they will leave no room for Civic Hybrid... and they might need to spec-up the Insight.

nyonga

May 28, 2009 6:39 AM

As usual, rather than throwing a tantrum, the japanese are getting out in front of the curve. Watch as 2016 rolls by and the D3 start asking the principle for an extension, while the Japanese studiuosly iron out kinks in their technoligies, gain accelerating economies of scale, and.....MARKET SHARE!!!

The more things change..the more they stay the same.

Al

May 28, 2009 9:44 AM

Give credit to the Japanese. They improve their cars bit by bit, never relying on a single product (think GM Volt) to save the company. Remember the first Japanese cars? They were junk, but look at them now.

We Americans can learn from them. Less talk, more disciplined action. Less short term thinking, more decades long planning. Less pride, more humility. At this point, the D3 should just copy what Honda and Toyota are doing. The government handlers should be able to do that, at least.

Steve

May 28, 2009 3:01 PM

The new Insight is a "mild hybrid" (IMA)which means that it never runs on electricity only. It uses a 13 HP electric motor to assist the 93 HP Gas engine. It is not a hybrid like the Fusion Hybrid or Camry Hybrid. It is very slow and built with cheap materials inside, and looks and feels cheap.

If that's what you like I've got a 1996 Aspire that you would like, and it might even get you up to highway speeds a little faster.

Michael

May 28, 2009 4:12 PM

Nyonga,

Please try to keep in mind that only two of the D3 have taken a loan. Ford is making it on it's own.And as for hybrid technoligies, You should give the Hybrid Escape/ Mariner, or Fusion/ Milan a try. You might be very pleasantly surprised.

IH

May 28, 2009 4:21 PM

Ford is right there with the next generation of hybrid cars, so not all the D3 are lacking. Check out http://www.thefordstory.com/ and the 2010 Fusion Hybrid

ih

May 28, 2009 4:33 PM

Not all the D3 are lacking -Ford is right there with the next generation of hybrid cars. Check out http://www.thefordstory.com/ and the 2010 Fusion Hybrid

James

May 29, 2009 10:41 AM

Somebody needs to do some fact-checking: I've been driving an original Insight with 5 spd for 6 years now, so I'm pretty sure the Honda IMA system doesn't require a CVT transmission. In fact, one of its strong points is that (unlike Toyota's system) it can be used with a standard transmission.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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