JANUARY 19, 2007
Autos
By Ian Rowley
In Green Push, GM Still Lags Japan
The Detroit automaker's Chevy Volt is getting a lot of attention, but Toyota and Honda won't relent in their drive to lead the hybrid market
Of the dozens of vehicles on display at this year's North American International Auto Show in Detroit, GM's (GM) Chevy Volt concept car probably commanded the most attention. The innovative car uses electric power exclusively for up to 40 miles of a trip. Then the range-extending power source—which creates electricity from either gasoline, E85, or biodiesel—kicks in to recharge the lithium ion battery pack (see BusinessWeek.com, 1/7/07, "Chevy's Volt has the Juice").
What's more, as a plug-in hybrid (one that can recharge its batteries either using a car engine or connecting to the electricity grid), the Volt has won praise for being a step up from current offerings, which rely solely on the engine for recharging.
Just as important for Detroit, the Volt is going some way to persuade cynics that U.S. automakers are finally getting serious about environmental technologies. "It is a rare occurrence when Toyota (TM) gets "out-greened" at a major auto show, or anywhere, for that matter. But GM has done just that with its Volt," notes blog AutoExtremist.com. (see BusinessWeek.com, 1/17/07, "A Hot Reception For GM's Volt").
GM accepts that battery technology will have to improve markedly for the Volt to become a reality. But it reckons that could happen as early as 2010.
Yet for all the hoopla, many industry watchers, especially those in Japan, remain skeptical that the Volt will do much to narrow the gap between GM and hybrid leaders Toyota and Honda (HM). While details are scant, Toyota is also working on plug-in hybrids of its own. "GM is attempting to catch up [in hybrids], but Toyota will maintain the same speed or go even faster," says Hirofumi Yokoi, an auto analyst at CSM Worldwide in Tokyo.
No Rest for the WearyToyota has already achieved what many in Detroit thought was impossible: making hybrids profitable. Although the company doesn't break out figures by model, Merrill Lynch (MER) analyst Koichi Sugimoto estimates that profit margins on the Prius hybrid are between 3% and 5%. For more expensive models, like the Lexus RX 400h, margins are even higher.
Moreover, while GM looks to the future with plug-ins, Toyota has big plans to improve its current gas-electric offerings. In late 2008 or early 2009, it is expected to launch a third-generation hybrid system that should raise the bar for the entire segment.
The new system, which will use Li-ion batteries instead of the current nickel metal hydride cells, is expected to be half the size of current hybrid systems and, more important, half the price. Fuel efficiency, reckons Merrill's Sugimoto, will be improved by 20% to 30%.
Toyota is also expected to widen its range of hybrids. In the future, the company could offer a hybrid version of any model that sells more than 100,000 units a year (see BusinessWeek.com, 4/3/06, "Toyota Winning the Hybrid Race"). Speaking at the Detroit show, Toyota North America chief Jim Press told reporters the company is looking to boost hybrid sales by 50% in 2007, to between 250,000 and 300,000.
Unrelenting EffortsHonda also is making headway on environmentally friendly technology. Last fall it revealed it is developing a "green" diesel car for the U.S. market (see BusinessWeek.com, 10/30/06, "Honda's (Green) Diesel Machines"). In addition, the company has plans to begin leasing out a fuel cell car, a version of the FCX Concept, in 2008.
In gas-electric hybrids, Honda is working on a new subcompact model that will likely debut in 2009, and plug-in hybrids of its own. "Hybrid technology is very strong and proven technology for improving fuel economy," Motoatsu Shiraishi, president of Honda research and development, told reporters at the Detroit Show. "And we won't relent in our efforts. We are studying what kind of conditions would enable a plug-in."
But perhaps the biggest indicator that Japanese carmakers are poised to stay in the lead is that a breakthrough in Li-ion battery technology—vital if the Volt is to get off the ground—is expected to happen in Japan. Sanyo Electric (SANYY), which supplies hybrid batteries to Honda and Ford (F), and Panasonic EV Energy, in which Toyota has a 60% stake, are the leading makers of nickel hydride hybrid batteries and are investing heavily in Li-ions (see BusinessWeek.com, 9/20/06, "Battery Woes Spark Few Concerns Among Asian Carmakers").
To catch up with the Japanese, the Big Three U.S. automakers are asking Washington to subsidize advanced battery research to the tune of $500 million, spread over five years. GM, meanwhile, has asked Johnson Controls-Saft Advanced Power Solutions, a joint venture between automotive-systems manufacturer Johnson Controls (JCI) and Paris-based Saft, and Cobasys, a joint venture between Chevron (CVX) and Energy Conversion Devices (ENER) to develop Li-ions.
"No question, the Japanese will commercialize lithium ion first, but I do think the U.S. can be fast followers," says Per Onnerud, chief technical officer of Boston-Power, a lithium ion battery company based in Westborough, Mass.
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