Hybrid production costs may drop two-thirds within 10 years

prius.jpgBloomberg reports:

Toyota Motor Corp., Honda Motor Co. and other carmakers may cut production costs for hybrid systems by 67 percent over the next decade as shipments rise and companies gain experience, according to JPMorgan Chase & Co.

Gasoline-electric systems on average will cost $1,919 each in 2018, compared with an estimated $5,869 this year as the global market grows 16-fold to 9.6 million units over the same period, the bank said in a report released yesterday.

This is remarkable news, especially when you consider that gasoline prices are all but certain to rise to $5 a gallon and higher over the next decade (see “Will we see $3 gasoline before $5?“).

If hybrids drop in price and gasoline resumes its peak-oil driven upward trend, then by, say 2015, it would simply not make sense to bother producing a non-hybrid version of any vehicle. At the same time, this drop in the price of key hybrid components will mean a drop in the price of key plug-in hybrid components, further accelerating the time at which that core climate solution becomes cost-effective.

Hybrid vehicle sales will grow to 10.2 percent of the overall market, with North America being the biggest and strong growth expected in Europe and China after 2013, JPMorgan auto analyst Takaki Nakanishi said. Higher gasoline prices and tightening emission standards are boosting demand for fuel- efficient and alternate-energy cars worldwide.

Hybrid systems consist of a vehicle’s battery, electric motor, control unit and other electronic components.

Toyota aims to more than double sales of hybrid vehicles to a million a year by early next decade. Japan’s largest carmaker will introduce plug-in hybrids by the end of 2009, and will start to mass-produce electric cars in the early 2010s.

Honda plans to raise sales of hybrid vehicles by ninefold by 2010 to 500,000 units. The company re-introduced its Insight hybrid at the Paris Motor Show on Oct. 2. The Tokyo-based company aims to sell the model for about 2 million yen ($19,685). That would undercut Toyota’s Prius, currently the world’s most popular hybrid, selling at 2.33 million yen.

The Insight is the first of four new or revamped hybrids Honda plans to introduce by the early part of the next decade to reduce Toyota’s lead in the segment.

Let’s hope that Honda gives serious chase to Toyota’s leadership in hybrids — and that other automakers follow suit.

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11 Responses to Hybrid production costs may drop two-thirds within 10 years

  1. caerbannog says:

    This wouldn’t be a bad time to invest in Toyota and Honda. Their stock prices swooned with the rest of the market, and when the economy eventually recovers, Toyota and Honda will be the hybrid leaders, and they’ll be doing business in an environment where there’s less competition than there is now. (Ford, GM, etc may be out of business or bought out).

    If you can tough out short-term negative investment returns, now would be a good time to start dollar-cost (or euro-cost or whatever) averaging into these companies.

  2. Rick says:

    cheap hybrids sound good if they come with a plug and a whole bunch of clean power from somewhere

  3. john says:

    Which begs a question: why is US legislation on fuel efficiency standards (worse yet, CAFE) lagging behind projected technological performance, rather than leading it?

    We passed the SOx standard with no idea of how — or whether — car manufacturers could meet it. The irony here, of course is that GM — a company that fought the standards the hardest, came up with the catalytic converter and licensing it became a major source of revenue for them.

    There’s no reason we shouldn’t have a 60 mpg standard by 2020; a 75 by 2025; and a 100 mpg by 2030. None.

  4. John Mashey says:

    Without wanting to argue between PHEV and BEV, it was nice to see the BMW Mini-E test plans for BEV Mini E

  5. Bob Wallace says:

    Barn door left open.

    Horse has left the building….

    Increasing fuel efficiency standards would have driven car manufacturers to produce more efficient vehicles. Would have done wonders for GM, Ford and Chrysler. Had they been forced to do so, they would now have good, efficient cars and trucks coming off the lines and helping their bottom lines.

    But we might not need increased fuel efficiency standards in the future. The market seems to have taken over. Oil is not going to return to “cheap” and electricity is quite likely to become less expensive.

    As electrics become more “usable”, as their ranges increase and recharge times decrease, people are going to impose efficiency standards with their purchasing decisions.

  6. John Mashey says:

    In support of this point, there is a very strong analogy with the 1980s/1990s change in the mid-range part of the computer business, i.e., mincomputers/superminis.

    1) At the beginning, any vendor (like Digital Equipment Corporation) build a product line that sometimes shared peripherals, but used complex CPUs built of multiple boards of logic, with different ones in low-end, mid-range, and high-end products. There were dozens of minicomputer companies.

    Microprocessors were denigrated as useless for real computers.

    2) Later on, micros got good enough to totally displace custom-designed minis, almost all minicomputer compnaies went out of business or radically changed. High volumes lowered prices. Custom designs gave way to use of 1, 2, 4, 8 … standard micros, standard DRAMs, standard chipsets in different chassis … and high volumes drove costs down.

    3) As all-electric drive-trains (eventually) replace mechanicals, it is easy to think of auto families that:

    a) Have 2-wheel or 4-wheel drive (2 choices)
    b) Allow several different sized battery packs. (3? sizes)
    c) Are easily either BEV or PHEV (2 choices)

    That allows 2x2x3 = 12 possible choices, with more commonality of components, i.e., higher volume, lower cost.

    Hence, this is hardly wishful thinking, but a good analogy with a well-understood inflection point in computing technology.

  7. shopa says:

    When they make a hybrid Japanese Kei car, the mpg will be amazing.
    See my website for my plan to import Kei cars to America.

  8. Ronald says:

    I saw this article in our state’s largest paper.

    The title is ‘Turning the Corner on Auto Efficiency,’ and it discusses the missed opportunities that American auto makers had.

  9. Cyril R. says:

    Well, electricity cost will probably go down in most of the US, but not just yet; it will take some time for the cheap and clean generation technologies to take over the current market (afterthought: no pun intended).

    Not that it matters much, considering fuel cost per mile of electric traction versus oil based transport. Even expensive electricity still beats oil down to very unrealistic (low) price levels. OPEC is lowering production, they quite like high oil prices and so quite dislike the recent price drops. To some level, this seems justified; many investments in expensive oil have been made, and higher oil prices push conservation, efficiency, and alternatives better than most subsidies can. It’d be a pity if relatively low oil prices slow the adoption of electric traction tech, and cause people to drive more rather than less, and buy more vehicles that are to big by any rational standard for their purpose.

  10. msn nickleri says:

    The title is ‘Turning the Corner on Auto Efficiency,’ and it discusses the missed opportunities that American auto makers had.