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Nissan Unsure of Demand for Hybrid Vehicles

January 18, 2005

GARDENA, CA — Nissan will be able to build up to 50,000 hybrid gasoline-electric cars a year for sale in the U.S. once production starts next year, the company said on Jan. 11, according to the Financial Times newspaper. Carlos Ghosn, chief executive, said Nissan would build its hybrid Altima sedan at a factory in the U.S., using electric components bought from Toyota. But he said he had little idea how much demand there would be for the car, and it would be loss-making. If Nissan uses its full production capacity it will be making far more hybrids than envisaged when it licensed the technology from Toyota. In 2002 the two companies said they expected sales of 100,000 over five years. The production numbers came as Ford, Toyota, and Honda all showed off new hybrid vehicles at the Detroit motor show. Manufacturers have been racing to speed development of new models powered by both batteries and gas engines since the Toyota Prius raised the profile of the technology 18 months ago. Toyota has sold far more Prius hatchbacks than it expected and was picked as last year's U.S. car of the year. Ford's Escape hybrid – which uses Toyota technology – was voted U.S. truck of the year at the Detroit motor show earlier this week. However, Ghosn said the Altima would lose money and he remained concerned about the cost of the technology. "If the value (to the customer) remains below the cost, I think the hybrid is going to be like the electric cars," he said. Both Ford and GM launched expensive electric car products a decade ago but failed to persuade customers to pay for the vehicles. His worries were echoed by Tom Elliott, executive vice president of American Honda. He said Honda would sell more than 50,000 hybrids in the U.S. this year. But the vehicles would earn only "barely" above break-even. Both Honda and Nissan said they would have to look at expanding conventional vehicle production in north America after a strong year of sales. Ghosn said new production capacity would "probably" be needed in the U.S. as Nissan's two factories were full, although he did not say when expansion would be needed. His declared strategy is to minimize currency risks by producing near the market. Elliott said Honda would "have to discuss" building a new North American factory after filling its capacity of 1.4 million in the region. He expects sales to reach 1.45 million this year.
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