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Honda hybrids may cut into Detroit's market share

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Honda hybrids may cut into Detroit's market share
May 21, 2008 4:49 PM ET
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DETROIT (AP) - Honda Motor Co. is coming out with hybrid cars starting early next year that will cost about $1,900 more than comparable gas-only models. The cost for the Detroit Three, according to industry analysts, could be lower market share as U.S. consumers continue their rapid shift to smaller, more fuel-efficient vehicles.

Analysts say the new hybrids, including a gas-electric hybrid-only model to fight the popular Toyota Prius and a hybrid version of the subcompact Fit, will hit the market at the right time with gasoline prices continuing to rise.

"It's a game-changer for the short term if they can get the products in the marketplace in the next couple of years before the domestics can come up with a significant volume of products that get high mileage," said Jesse Toprak, chief industry analyst for the auto information site Edmunds.com.

Honda, which already has the most fuel-efficient lineup in the U.S., announced Wednesday that it will sell the new hybrid-only car in the U.S., Japan and Europe starting in early 2009. It has not determined yet where the Fit will be sold.

The new models are a key part of Honda's strategy for the next three years that President Takeo Fukui outlined at Honda's Tokyo headquarters.

The plan also included production innovations and expansion in Japan to cut costs so Honda can stay competitive amid soaring material and energy costs, he said.

In addition to the new model and the Fit, Honda will introduce several other hybrids: a Civic and a new sporty model based on the CR-Z, Fukui said.

Fukui refused to give the price for the new hybrid-only vehicle.

But he said the difference between hybrids and their comparable standard models should be kept within 200,000 yen ($1,900), although such price gaps can now reach as much as 500,000 yen ($4,800).

"The 200,000 yen difference is a must," Fukui said.

Hybrids deliver a cleaner, more efficient ride by switching between a gas engine and an electric motor at different speeds, and by recycling the energy the car produces as it moves.

Honda's hybrids compound a problem that Ford Motor Co., General Motors Corp. and Chrysler LLC already are scrambling to overcome — the U.S. market shift to small cars when they're known for making trucks and sport utility vehicles.

"It does put them a little bit on their back foot in the sense that small cars have not been a core market for them," said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville.

GM and Ford, Robinet said, can rely on their European and Asian operations for small car expertise to quickly catch up. Chrysler has few small vehicles of its own but has signed a deal for Nissan Motor Co. to make small Chrysler cars in 2010.

Honda's hybrids come as all automakers are rushing to make their models more fuel-efficient. GM largely has focused on hybrids in its larger vehicles and on the Chevrolet Volt, a plug-in electric car it hopes to bring to market in 2010. Ford is banking on its Ecoboost direct-injection turbocharged engines and has midsize hybrids due out next year, while Chrysler is developing efficient smaller diesels and has hybrids in some large SUVs.

"They've done a lot of navel-gazing, saying, "What are we good at?" Robinet said. "They've all basically said we're all good at something different. GM and Toyota have the resources to invest in every technology, but others have to invest in some and do joint ventures for others."

No one really knows what technology will catch on with consumers, Robinet said.

"Everybody's nervous about missing the ship that leaves the dock quickest, whether it's ethanol, battery technology," Robinet said. "But it's difficult to say, "Are they missing it?" because everybody's going down a different route."

As recently as last year, people buying hybrids did so to make a statement about their concern for the environment, but that has changed and Honda is ready to capitalize on it, Toprak said.

"Now were after mass market, and mass market is more aware of the hybrids than ever due to high gas prices," he said.

Honda did not disclose the name for its new hybrid but said it will be a five-door sedan seating five passengers. It will feature new technology that reduces the size and weight of the hybrid system to increase fuel efficiency, according to Honda, Japan's second-biggest automaker.

Although Honda already has developed hybrids, it has fallen behind Japanese rival Toyota Motor Corp. in this segment.

Last year, Honda discontinued the gas-and-electric version of its Accord sedan — sold only in North America — which sold just 25,000 units since going on sale in 2004. In 2006, it pulled the plug on the slow-selling two-seat Insight hybrid.

Honda said it's also pushing its fuel-cell technology to ease environmental concerns.

A fuel cell vehicle has no emissions because it runs on the power created when hydrogen, stored as fuel in the vehicle, combines with oxygen in the air to emit water.

Honda said it expects to lease several dozen of its new fuel cell vehicle, the FCX Clarity, a year, mostly in California, reaching 200 vehicles in the first three years. The leasing is set to start in July 2008 in the U.S. and a few months later in Japan.

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May?

I've even been considering one.

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I am most excited about the CR-Z, especially if they offer it with a 6-speed manual transmission.

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hondas hybrids if the dealers don't gouge will indeed change the game I feel.

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Honda is planning on selling 500,000 hybrids per year globally from the 4 different hybrid models.

Toyota has sold approximately 1.25 million hybrids since the original Prius in 1997. So at Toyota's current rate Honda will eclipse them very quickly. However, Toyota is planning on increasing hybrid sales to 1 million per year by the early 10's. I don't think Toyota can significantly increase hybrid sales unless they come out with a very affordable option soon, like Honda is doing with the ~$19,000 hybrid. Is the next Prius going to be less expensive than the current? Is Toyota going to come out with a cheaper model?

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hondas hybrids if the dealers don't gouge will indeed change the game I feel.

As long as supply keeps up with demand, that shouldn't happen. Manufacturers, particularly cash-strapped ones like Ford, naturally limit production of vehicles, like the Escape Hybrid, that are less profitable. This lower-cost IMA system sounds promising.

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The Fit Hybrid is going to be very tempting, as some say gasoline may be $12 to $15/gallon within a few years.

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