At Witz' End: Detroit Auto Show: Reality Check - Part I
Posted Feb 3rd 2009 12:02PM by Gary Witzenburg
This year's Detroit North American International Auto Show (aka NAIAS) was easily the greenest ever, greener even than the evergreen Los Angeles show two months earlier. Several automakers (most notably Nissan) were missing due to the weak economy, while others (Honda, Hyundai, Mazda, Mercedes-Benz) were present but silent with no press conferences. That left room for the likes of Tesla, Fisker and a pair of Chinese makers to set up shop on the main floor and hype the media on their grand plans.While a number of high-powered gas- and diesel-burning machines (mostly from Europe) shared the NAIAS spotlight, nearly everyone there showed current and future EVs and gas-electric hybrids (HEVs). Among these, which will actually happen; which might sell in serious numbers; which (if any) will succeed to the point of being profitable for their makers?
Let us speculate (after the jump).
2010 Toyota Prius
Topping greenmobile headlines, Toyota – the planet's top selling automaker by 600K vehicles in 2008, but still trailing GM by more than 737K in U.S. sales – rolled out its 2010 Gen IV (counting the Japan-only Gen I) Prius. Though U.S. Prius sales were down 48 percent late last year and 12.3 percent for the full year as gas prices plummeted, Toyota predicted that this slightly larger, roomier and more powerful, yet lighter and more fuel efficient (50 mpg EPA combined) new model will sell to the tune of 180,000 units here in 2010.
For real? Early 2009 production
U.S. annual sales? 150K-plus, depending on gas prices
Profitable? Toyota won't admit it, but the dedicated-platform/high-tech powertrain Pruis' cost is still well above its $23-30K selling prices
Toyota FT-EV concept
Two-door Li-ion battery EV conversion of teeny Japan-market iQ may reach very limited production by 2012. With a projected 50-mile range and two-hour recharge time on 220V power, U.S. consumer acceptance in serious numbers is not likely.
For real? Maybe for Asia and Europe; unlikely here unless gas gets really expensive
U.S. annual sales? Slim to none
Profitable? Little chance
2010 Lexus HS250h
More than a re-bodied Prius, it is longer and wider, and its gas engine (Lexus' first 4-cylinder) is larger and more powerful at 2.4 liters and 187 hp. As Lexus' first hybrid not sharing its body with any other model, its most affordable hybrid and its most fuel-efficient vehicle, it will slot just above the (Camry-based) entry-level ES. But with pricing likely around $40K, less-than-distinctive styling and fuel economy in the mid 30s, it won't generate large numbers.
For real? Early 2009 production
U.S. annual sales? 40-50K
Profitable? With dedicated body, not likely even at Lexus prices
2010 Honda Insight
Finally realizing its high-mileage hybrid has to look like one to effectively compete with Toyota's Prius, Honda debuted its 2010 dedicated-body Insight hybrid sedan, but with no fanfare. It was just there, looking much like Honda's earlier FCX fuel cell car (and not unlike the 2010 Prius), for media to see and pick up a press kit. Using Honda's latest-generation Integrated Motor Assist (IMA) technology - still not a full hybrid that can operate for any distance on battery alone - but priced below both Prius and Civic Hybrid, it will be the U.S. market's most affordable hybrid but, at about 42 EPA-rated mpg, will fall short of the Prius' 50 number.
For real? Early 2009 production
U.S. annual sales? 100K
Profitable? No; dedicated body, but simpler, less expensive system than Toyota's
Cadillac Converj concept
A stunningly-styled Cadillac luxury coupe with Chevy Volt's "Voltec" range-extender EV powertrain on GM's next-gen compact architecture, it could have modest profit potential if enough buyers would pay a price for it that is greater than the cost to build. Will financially-struggling GM find enough budget to develop it?
For real? Could happen if/when the U.S. economy, and car sales, sufficiently recover
U.S. annual sales? 10-20K depending on price and gas prices
Profitable? Long-shot for production but better per-unit potential than lower-priced Volt
Ford future EVs
Thanks to its new second-generation parallel hybrid system (similar to Toyota's but unrelated), Ford already builds the industry's most fuel-efficient mid-size sedans (Ford Fusion and Mercury Milan Hybrids) and compact crossovers (Ford Escape and Mercury Mariner Hybrids) but readily admits that each one sold loses money. Like Toyota's, this complex system's cost far exceeds its customers' ability and/or willingness to pay for it.
Ford told the media at NAIAS that it was working aggressively to develop battery electrics (BEVs) and new HEVs and would begin rolling some out next year. Specifically announced were a BEV commercial van (most likely a conversion of the already coming-to-the-U.S. compact European Transit Connect) in 2010, a small (Focus-size) BEV car in 2011 and next-gen HEVs, "including a plug-in version" in 2012.
For real? Count on new hybrids and some BEVs, though they could be delayed
U.S. annual sales? HEVs: 40K; BEVs: given high prices/low ranges, fewer than 10K
Profitable? Not until volumes and selling prices increase
Chrysler future EVs
Desperate to prove both relevance and seriousness, Chrysler rolled out updated versions of three concept EVs it showed last fall - a Lotus-based Dodge Circuit BEV sports car and converted Jeep Wrangler and Chrysler Town and Country range-extender EVs - and two new potential entries, a Dodge Patriot BEV and a rear-drive "200C" range-extender EV that probably previews the handsome styling of Chrysler's future mid-size sedan. The Patriot is driven by a 150 kW (200-hp) motor, the Wrangler by individual wheel motors, the other three by powerful 200 kW (268-hp) motors, and all five carry Li-ion batteries.
Chrysler says it will bring at least one of these out by the end of next year, and three more by 2013, but may be underestimating the substantial cost and development effort required, especially for (GM E-Flex-like) range extender systems. If any do see production in 2010, we'd bet on the simple Patriot conversion. But even with a li-ion pack, as an electrified conventional compact truck not designed from the tires up for ultra-efficiency, it would be pricey yet lucky to surpass 100 miles of range. Next best bet would be the quick and sexy Circuit, essentially a lower-priced (though not at all inexpensive) Dodge "Tesla" two-seater.
For real? To survive, Chrysler must focus precious development time and dollars on potentially profitable conventional vehicles; maybe two EVs could reach limited production
U.S. annual sales? BEVs: high price + limited range = low sales; range extenders: ???
Profitable? High cost + low sales = negative profit
Next time we'll take a reality check look at BMW's coming X6 and 7 Series 2-Mode hybrids, Mercedes' versatile Blue Zero concept EV, Smart's Tesla battery-powered EV, Tesla's latest Roadster, Fisker's Karma and a range of EVs and HEVs alleged to be coming from Chinese automaker/batterymaker BYD. How many are for real? We'll speculate.
Reader Comments (Page 1 of 1)
Stan-O 12:35PM (2/03/2009)
Gary,
great article, thanks! Would you say US & Japanese manufacturers would have been better off offering highly efficient diesel vehicles if perception of oil burners was different in the US?
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Dave 12:51PM (2/03/2009)
Toyota is crazy if they are really planning on selling 180k 2010 Prius at a substantial loss.
Honda is also crazy if they are planning on selling 100k 2010 Insights at a loss.
While claims like these frequently come up (hybrids are a loss-leader), I highly doubt that either manufacturer would consider selling a very large number of vehicles at a substantial per-unit loss. I have to believe that they are planning on making a profit from the start or at least breaking even, then relying on future model years to amortize the initial R&D and production costs down.
People make the same claim about the 2004-2009 Prius being sold at a loss, too, but then why is Toyota be planning on continuing to sell that Prius at a significantly reduced price in certain markets along side the new Prius?
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Nixon 1:08PM (2/03/2009)
How about we DON'T speculate, Witz?
The last thing we need is yet another unsubstantiated set of claims, by yet another talking head.
Do us a favor. IF you are in possession of facts that the rest of us don't, post your facts instead of speculating and giving us your opinion.
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paulwesterberg 1:23PM (2/03/2009)
The battery pack in the 2010 Prius remains small NiMH which keeps costs low this including toyota's production management make it profitable.
With more room, great mpg, and lower price it will easily outsell the Ford Fusion Hybrid($27270) & Toyota Camry Hybrid. The Honda Insight will do well in the market for lower end hybrids. Economy car with ok mpg like the Yaris, Fit, etc sales will hold steady.
All other 2010 car sales numbers will be dismal as people pinch pennies and wait for real automotive breakthroughs ala Volt(over hyped & too expensive), PHEV Prius, electric mini, model s. First next-gen vehicle to reach mass production with a reasonable price tag will do well.
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jeffzekas 2:03PM (2/03/2009)
Mr. Witzenburg: let me get this straight-- every one of the cars you mentioned either sells at a loss, or cannot be sold for profit. So, should we stop trying? Should we just give up, and go back to building gas-guzzling behemoths? Americans built the first heavier-than-air craft, and the first moon ship... Are you suggesting that we can't build a fuel-efficient vehicle? Nonsense! Every new technology is expensive and complex at first, then, as it develops, becomes more efficient, simpler, and cheaper to buy (my mom's first hand calculator cost $250, and the same device sold for $5, two years later!). We cannot return to "business as usual": the ice caps are melting, huge numbers of species are going extinct, and oil WILL be depleted-- if not today, then tomorrow. Instead of doom and gloom, "we can't do it" platitudes, we need positive, forward-looking, can-do attitudes! The country that built the stealth fighter CAN build a vehicle which is fuel efficient, non-polluting, and recyclable.
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jharlan 2:44PM (2/03/2009)
Paul Westerburg, I think you have something there. People are waiting for breakthrough technology to appear at the showroom reasonably priced. We are not likely to get what we want just yet, and may have to settle for this new generation of increasingly fuel efficient petrol and diesel offerings for a few years. Competition is driving innovation. Which would make more sense, a Fusion that EPAs 29 & 20 MPG @ $16K (carsdirect.com) or a Fusion Hybrid that EPAs 41 MPG @ 28K @ $27, 270? It just depends on a lot of different factors. How many years would you have to drive the car before the hybrid pays for itself? You can buy a lot of gas for 11K. How about a Jetta TDI? You have to do the math. This really gets interesting! It boils down to the future prices of fuel.
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ug 2:41PM (2/03/2009)
"Should we just give up, and go back to building gas-guzzling behemoths? "
That appears to be the intent of his spin.
Why Autobloggreen gives this guy a forum to spout off his endless pessimism about alternative cars is anybody's guess.
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stevejust 9:25PM (2/03/2009)
I agree. Witzless is an idiot. And he never took me up on the bet I wagered here in the comments section re: the Mini E. And I would've won that bet, I should add.
Witzless, I also notice you left out the Fisker Karma, which, with the use of the GM engine, I would've thought you might want to mention. I guess because it might actually be a desirable, profitable car that will sell all 15,000 produced each year, you had to skip it, right?
SteveCT 2:48PM (2/03/2009)
"Toyota won't admit it, but the dedicated-platform/high-tech powertrain Pruis' cost is still well above its $23-30K selling prices"
Unless I'm very much mistaken, you are accusing Toyota of fraud, given that they've said numerous times that they make a profit on every Prius. I'm not a lawyer, but given that you've made your comments to the public, it seems to me that Toyota could sue you for libel. Shall I notify their legal department?
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Rei 4:15PM (2/03/2009)
Witz is, of course, wrong about the profit margins on hybrids. The Prius, for example, which Witz says the Insight compares favorably to, has over a 6% profit margin:
http://www.nd.edu/~mmfe/projects/Group_3.pdf
The company expects the next-gen Prius to have a margin similar to that of a Corolla:
http://www.reuters.com/article/marketsNews/idUSN0518895920080905?pageNumber=1&virtualBrandChannel=10216
But hey -- who cares about accuracy? If you're Witz, you could assert that CO2 heals the sick and polar bears will bail out GM (who never, ever made any mistakes -- at least not in the past 10-15 years), but you'd still get a column here.
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Spence 4:39PM (2/03/2009)
It's so refreshing to see Detroit's self-serving conventional wisdom re-masticated here. Wait, not refreshing. What's the word?
Oh yeah, annoying. That's the word.
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GoodCheer 4:57PM (2/03/2009)
Dude, that actually made me laugh out loud. Very nice.
No, but seriously, where else would you go for witzdom as profound as
"it could have modest profit potential if enough buyers would pay a price for it that is greater than the cost to build".
Chris M 5:08PM (2/03/2009)
Well, it looks like Witz' assertions that hybrids are money loosers has been discredited yet again. Apparently he thinks that if GM can't produce a profitable hybrid at a reasonable price, then no one else can, either.
But Toyota and Honda have engineers that developed hybrids that are simpler and cheaper to build than the GM "dual mode" yet considerably more efficient than the GM BAS almost-a-hybrid, and they've been perfecting their designs for much longer than GM, and have a more efficient production process, and fewer overpaid executives. Result, Toyota and Honda have been doing what GM can't do - make a profit.
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Spence 5:29PM (2/03/2009)
It's just baffling that this dude wants us to believe that Toyota's been selling a money-losing car for over a decade. Hundreds of thousands of little acts of hari-kari, and for what? If Witz ever left Detroit, he'd get a nosebleed from the unaccustomed pressure change.
fnc 8:11PM (2/03/2009)
I appreciate dissenting views to the popular, groupthink is a dangerous thing. So it's good to me to see someone come in here and stir the pot and challenge common viewpoints.
But if you think Toyota et al are pouring money into a hole with hybrid sales, I really want to see an essay on why you say that with some verifiable numbers. It's obvious big expensive batteries are keeping pure EV's well above mainstream price points, but the hybrids use older well established battery technology and need small packs at that. Has Toyota really sold this car at a drain on profits for going on a decade? It that's true, but it gives the company enough of a green tinged halo to overcome that loss with increased overall sales, why would they do anything differently? Oh wait, that would involve being able to the bigger picture, a skill Detroit wandered away from some time ago.
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davido 10:42AM (2/04/2009)
So the Prius can't be profitable selling for 23-30k. And the Lexus can' t be profitable selling for 40-50k. So, Witz, how much does it cost Toyota to build these things? Do you actually know? Of course you don't. Otherwise you would have said so. But one thing should be obvious even to you. If the only difference in the drive train between the Prius and the Lexus is the IC engine, then it simply isn't possible for the Lexus to lose money selling for 10-20 above the price of the Prius unless Toyota's per unit cost for both cars is above 50k.
The dedicated body can't account for the price difference if the underlying platform is shared. Looking at the lines of the Lexus, it appears to be based on the ES 350 which is itself based on the Camry. The panels are different, the platform isn't and the panels can't cost that much more as you should obviously know.
And I noticed you mentioned Fisker and Tesla but didn't claim they can't money, presumably because you can't credibly claim that two independents have a business plan that will make them lose money on every unit they sell.
Bottom line Witz, either explain (as in make a logical argument) why hybrid technology costs so much that even a car selling for 40-50k can't be profitable or shut the f*** up!
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davido 12:19PM (2/04/2009)
I should also note that one of the unspoken assumptions of your Toyota sells hybrids at a loss thesis is that in ten years of manufacturing these things, Toyota hasn't been able to bring the costs down.
How is it possible in a world where the cell phone you carry and may have gotten free from your carrier has more computing power than NASA used to send men to the moon that Toyota hasn't figured out how to cut costs on this technology? As you never support your assertions, I guess we shouldn't expect you to explain this one, but come on guy, give it a shot!
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GWitz 8:40PM (2/05/2009)
Davido,
Of course Toyota has lowered its Hybrid Synergy Drive component costs over many years and hundreds of thousands of units. But, based on my own EV and HEV knowledge and experience, I believe they are still way too high for Prius or any other Toyota Hybrid to turn a profit. I can't prove it -- for competitive reasons, Toyota is not about to share its cost numbers with you, me or anyone else -- but that is my opinion, and my columns are "opinion" columns. Yours may differ, and yours may be right, but I'll bet no one outside of the top ranks of Toyota knows for sure.
What most folks outside of the industry don't see or comprehend are the enormous costs of designing, testing, developing and validating every single one of the thousands of parts and pieces that go into every modern vehicle. Beyond the mostly expensive and relatively low-volume hybrid system components themselves are all the specific Prius body, chassis, electrical, comfort and convenience, etc. parts and pieces, few of which are shared with other vehicles. Addition of the new Lexus HS 250h on the Prius architecture will help by raising the volumes of those parts that are shared components (but not most body, interior and accessory parts), but I don't believe even that will turn a profit at its higher prices but much lower volumes.
Is Toyota fibbing by claiming that Prius is profitable even if I am correct? Maybe, maybe not...depending how they calculate their cost. If they add up the costs of all those parts and pieces -- including the still very expensive battery, EVT transmission, control systems and more -- and toss in the relatively minor cost of assembly, the total may be less than the average selling price. But they would have to be ignoring all those years and huge costs of design, testing, development and validation, which must be spread out ("amortized") over hundreds of thousands, even millions, of units.
What I don't understand is why Prius' profitability seems so important to some ABG readers. If the current car does actually make a buck, good for them. If not, it's still a hugely profitable investment as one of the best-ever image-building programs any automaker has ever carried out. Whatever they have spent on it through the years is worth far more than any amount of paid advertising into which they could have invested that money. What should be important to potential owners is whether its selling price (whatever its cost to Toyota) is worth the long-term gas savings it offers.
I'll speculate on (unfortunately still very expensive) EV and HEV costs and potential profitability, including tiny start-up makers Tesla and Fisker, in my next OPINION column. Anyoned who has facts and figures to challenge my opinions, please do.