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How Big is the Hybrid Market? It Depends on Whom You Ask

March 29, 2005

LOS ANGELES — Long-term customer demand for hybrids is difficult to predict, according to Automotive News on March 21.Estimates of annual U.S. hybrid sales in 2010 run from a conservative 535,000 by J.D. Power and Associates to 3.5 million in a Booz Allen Hamilton forecast. In 2004, the total U.S. market totaled 16.9 million vehicles.J.D. Power's forecast assumes a $4,000 premium for a hybrid vehicle. The Booz Allen Hamilton forecast assumes price parity when hybrids achieve high volumes and economies of scale.Another confusing factor: Both projections include so-called "mild" hybrids, which use a device that merely stops the engine when the vehicle stops. In true hybrids, electric motors provide propulsion.Toyota sees rising demand. Its internal research in late 2004 showed that 50 percent of consumers were familiar with the workings of hybrid vehicles, and 26 percent had intentions to buy a hybrid. That's double the figures of 18 months before.Toyota expects to sell 300,000 hybrids worldwide in 2006, climbing to 2 million annual units worldwide by 2010. So far only the Prius hybrid is a huge success. It sold 53,991 U.S. units in 2004, and there is a six-month wait in some areas. With production ramped up, Toyota estimates it can easily sell 100,000 U.S. units annually. It also wants to sell about 25,000 units each of the Lexus RX 400h and the Toyota Highlander hybrid, which go on sale this year. Both will have waiting lists.But other automakers have modest results with hybrids.Honda sold 25,571 Civic hybrids in 2004, right on its annual target. In addition to maintaining Civic sales, Honda also wants to sell 25,000 Accord hybrids this year. Honda has no incentives on its hybrids. Honda's two-passenger Insight can be obtained only by special order.Meanwhile, Ford Motor Co., which is constrained by limited quantities of hybrid batteries, says it expects to sell about 20,000 hybrids in 2005.Some contend the Prius has sold well because its futuristic design allows owners to broadcast the message: "Look at me, I'm concerned about the environment." But most hybrids will have little design differentiation. That could hurt sales, says Dan Bonawitz, American Honda vice president of corporate planning and logistics. Sales of hybrid versions of the Honda Accord and Civic also are slowed by price premiums, Bonawitz adds.The Honda Civic Hybrid carries a $2,390 premium over a gasoline-powered Civic EX, while the Accord hybrid carries a $3,290 premium over a gasoline-powered Accord V-6 EX. Bonawitz says high rebates on such competitors as the Ford Focus and Chevrolet Malibu magnify the price gap.
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