Auto CEOs Talk Hybrid

Jose Michael

Reuters and Forbes report from the New York International Auto Show that hybrids and other alternatives are predominant keynote topics for the top executives of the auto companies.

Ford, licensing the Toyota hybrid technology, is making a big splash with its newly announced hybrid SUV.

People are concerned about where gasoline prices might be heading. At the same time they continue to want the convenience and function of sport utility vehicles. [Ford] is the first automaker to offer customers a remarkable value proposition: no compromise. – Bill Ford, Chairman

That’s absolutely right in terms of building solutions that can be widely adopted.

The consumer sector — and that includes corporate fleet buyers — have to maintain the focus on the need beyond this current gas price spike. Prices may wax and wane, but the fundamental need to shift rapidly is still there.

A few more Bill Ford quotes, these from 2003:

Hybrid technology is one that has great appeal because we don’t have to really invent anything; we know they work. If these vehicles don’t get customer acceptance, I really don’t know what we do next.

It’s important that we find ways to ensure that alternative-fuel vehicles gain wide customer acceptance. Breakthrough technology that sits unsold on dealer lots won’t do the environment any good.

Hybrids are a welcome step — but they are not a panacea.

BMW Chairman Helmut Panke seemingly grumpily reflected this reality in his speech: “On the way to the hydrogen economy, we will have different solutions, but right now ‘hybrid’ seems to be the right buzzword.”

Let’s do some back-of-the-envelope math. Toyota, the company that has definitely been in the hybrid lead both in terms of deployment and marketing, projects 300,000 hybrids in service by 2005.

According to the Federal Highway Administration, the average VMT (Vehicle Miles Travelled) in 2000 was 12,164; in 2001, 11,800. So let’s say 12,000 miles per car per year.

In 2001, new passenger cars averaged 28.6 miles per gallon. (CAFE standards required 27.5 mpg for the same vehicle type.) At 12,000 VMT, that’s 419.6 gallons of gas per car.

Also in 2001, the EPA pegged the Toyota Prius at 52mpg in the city (48mpg combined city and highway). We’ll take the higher number. 12,000 VMT for a Prius = 230.8 gallons of gas per car per year.

With these averages, a hybrid car would save 188.8 gallons of gas per year. The full 300,000-strong hybrid fleet would thus save 56,643,356.64 gallons of gas in a year.

A barrel of oil produces among many other products 19.5 gallons of gas. Applying that to above results in a hypothetical savings of 2,904,787.52 barrels of oil per year. Call it 3 million barrels a year saved.

The US currently uses almost 20 million barrels of oil per DAY.

Those 300,000 hybrids represent a very rapid uptake, every gallon of gas saved by the drivers of those cars is a boon – but it doesn’t substitute for a focused Apollo-type program to move to a new energy platform. There MUST be a strategic context for solving the basic problem.

Automakers take a lot of grief — some of it deserved — but these are the companies that have had to juggle a dozen different research agendas to try to strike a balance between consumer demand, government regulation, and their own analysis of the market. These companies – just like the energy companies — intend to be in business AFTER the oil party is over.

The danger is that hybrids become a fad. If gasoline prices drop again — and that’s not a foregone conclusion by any means — we could repeat our history from the 70s. Ensuring that doesn’t happen is as much a consumer’s task as it is a manufacturer’s.

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