January 11, 2006

Rivals Turn Up Heat to Challenge Toyota Hybrid Push

By Chang-Ran Kim, Asia auto correspondent

DETROIT -- Toyota Motor Corp. pushed the hybrid envelope further this week by unveiling two high-profile cars equipped with the powertrain at the annual Detroit auto show, but competitors responded by cranking up the volume to promote rival clean-engine technologies.

Japan's top auto maker has gained a reputation as a "green" company with its popular Prius and other gasoline-electric hybrids, and is keen to see the technology take off globally.

After selling about 250,000 hybrid vehicles globally last year, Toyota is targeting sales of 400,000 units in 2006 with the addition of versions of the Lexus LS and Toyota Camry hybrids -- the two brands' flagship sedans.

"It is clear today that hybrid technology has moved solidly into the mainstream especially among consumers who are environmentally aware, and want to make a difference for future generations," Don Esmond, senior vice president at Toyota Motor Sales U.S.A., said at the Camry hybrid's launch at the North American International Auto Show here this week.

But rivals sought to tone down the hype, citing high costs to manufacturers and consumers and claiming "inflated truths" about vastly improved mileage. Hybrids twin a conventional combustion engine and an electric motor to save fuel.

"I hate selling cars at a loss," Nissan Motor Co. and Renault SA Chief Executive Carlos Ghosn told reporters, saying hybrids were not a profitable proposition.

Nissan will bring out its first hybrid with the Altima sedan later this year, but says it was only because average fleet fuel economy regulations in California require it.

Ghosn repeated that Japan's second-biggest auto maker will bring a diesel passenger vehicles to the United States.

Even Honda Motor Co., which introduced the first hybrid car to the United States with the two-seater Insight in 1999, is not ready to endorse hybrids as the future mainstream for green cars just yet.

"We'll figure out over the next year whether hybrids are a cost-effective proposal for big-volume production," Chief Executive Takeo Fukui told Reuters recently. "By no means have we reached that conclusion yet."

Honda has said that zero-emission fuel-cell vehicles should be the ultimate goal for the industry since supply of its power source, hydrogen, is inexhaustible.

Fukui said in Detroit this week that Honda would aim to begin leasing a roomier, cheaper and more practical fuel-cell vehicle within the next three to four years.

Japan's third-ranked auto maker by volume also said it would offer diesel cars in the United States, following European brands such as Mercedes-Benz and Volkswagen AG into the nascent segment.


The most vocal challenge against gasoline-electric hybrids came from Germany's DaimlerChrysler AG, which zealously supported diesel engines. Diesels get 20 to 40 percent better fuel economy than gasoline vehicles and now power more than half of all cars sold in Europe.

Unveiling the Mercedes E320 BLUETEC diesel car to be launched this fall and which features what DaimlerChrysler touted as the "cleanest diesel in the world," CEO Dieter Zetsche said diesels offered an excellent solution to weaning the United States off of foreign oil.

"If we had a light duty vehicle population that was one-third diesels, that could save up to 1.4 million barrels of oil per day in the U.S. -- the amount the U.S. currently imports from Saudi Arabia," Zetsche said, citing a study by the Environmental Protection Agency.

DaimlerChrysler said sales of its current E-Class diesel had been booming since August as more Americans take to the torque, performance and fuel economy that diesels can offer.

Indeed, hybrids have increasingly faced sobering publicity about the "myth" of real-life fuel economy. Many drivers have reported to be disillusioned about underperforming the advertised mileage on their hybrids, which are most effective in stop-and-go city driving but help little on highways.

But hybrids are certainly on all major auto makers' radar.

General Motors Corp. unveiled two hybrid models, the Saturn Vue Green Line car and the Chevrolet Tahoe SUV, at the Detroit show, while crosstown rival Ford Motor Co. has pledged a 10-fold increase in hybrid output by 2010.

Research firm J.D. Power and Associates last week projected hybrid vehicles to make up 4.2 percent of the U.S. light vehicle market by 2012, up from around 1.3 percent last year. Its latest forecast for diesel penetration was a growth to 7.5 percent in 2012 from 3 percent in 2004.

(Additional reporting by Michael Shields)