Catch 22 for Hybrid Cars - Price Vs Volume
Date: 28-Mar-07
Country: UK
Author: Anna Stablum
A hybrid vehicle, which combines an internal combustion engine and an electric motor powered by batteries that can recapture energy normally lost, costs US$4,500 to $6,000 more to build than a conventional vehicle, a recent report by the Sanford C. Bernstein investment management firm said.
The upfront cost and load capacity are the main challenges for hybrids due to the expensive electrical motor and battery.
"It is a chicken-and-egg problem -- the car makers say to us we want an aggressive price from the beginning and we say to them we can give them an aggressive price when we have the volume," Franck Cecchi, chief operation officer of battery maker Johnson Controls-Saft, said.
Demand for hybrids was booming and the world's top producer of hybrids, Toyota Motor Corp. forecast global sales of hybrids reaching 1 million in 2010, equalling the number of all new cars and small trucks purchased between 1997 and 2006.
The second largest hybrid car manufacturer in the world Honda Motor said: "We are in heavy competition with Toyota and more and more players are moving into the hybrid market," Head of Corporate Affairs in Europe Chris Rogers said.
"The problems at the moment that we have is actually meeting demand," Rogers said, adding Honda forecast its European sales of hybrid cars to nearly triple to 10,000 from last year.
The world's second largest manufacturer of heavy goods vehicles, Volvo Group , believed it could change a quarter of its yearly global sales of 1 million buses and trucks into hybrids in the future.
"Everyone is hunting for better energy efficiency so this will be a large market," Volvo's spokesman Marten Wikforss said.
Volvo also planned to introduce hybrid engines in earth moving equipment saving some 50 percent of the total fuel costs.
HIGH COST
But the new technology posed large costs and hybrids contain more metals than conventional cars. With metal prices on the London Metal Exchange trading at record high levels the volumes produced must increase to reduce the cost for consumers.
"In the American market there are plenty of hybrid buses sold to public authorities...but they are so expensive so they depend on large subsidies," Volvo's spokesman said.
And truck firms would not be subsidized - limiting demand.
"The battery is the most expensive component, more expensive than the engine and its electronics," Anders Kroon, head of Volvo hybrid technology said.[nL07235065]
But also the larger amount of copper in the electrical motor adds to the high cost of hybrid vehicles.
"There is a correlation between the price of copper and the price of the electronic devices and the larger the electronic machine is -- there is a linear correlation to the amount of copper used," Volvo's Kroon said.
Hybrid cars and the evolution of functionality will boost demand for copper as it is the best electricity transmitter.
"Hybrid cars need more copper than usual cars because of the wirings -- it is an extra 12 kg of copper," Christian de Barrin, at the Copper Institute said.
A conventional car needs some 20-25 kg of copper and transport accounts for some 5 percent of global copper usage.
Also nickel, tripling in price in 2006 is used more.
"They use high nickel alloys in the turbine housing 35 percent and in the rotor it could be 65 percent nickel," an analyst at the Nickel Institute said.
But as more inner-city traffic like buses and post or packaage delivery firms choose hybrids, this would allow automakers to ramp up production and gain economies of scale that will in turn make hybrids less expensive and more attractive to the average drivers, Sanford C. Bernstein said.
"All these products will come down in price...when we see mass production then the price of the electronics and the various devices will fall," Volvo's Kroon said.
Honda's Rogers said they would introduce a more affordable model in 2009 with