Hybrids Growing, Diesels Too?

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More and more test vehicles around Detroit are equipped with hybrid technology and diesel engines, just as a new study predicts the vehicles will become more common on the nation’s highways in the next decade.

A new study by JD Power and Associates predicts the number of hybrids on the road will triple to nearly 500,000 units annually by the end of 2008. But the future success of both hybrids and diesels is by no means assured, according to David Cole, the director of the Center for Automotive Research at Altarum in Ann Arbor, Michigan. “No one really knows which technologies are going to be successful,” noted Cole.

The uncertainty is creating a lot of uncertainty in the auto industry, particularly when it comes to diesels. James Padilla, president of Ford’s North American Operations, told reporters last week that Ford was working on a diesel-powered version of the Focus. But Padilla didn’t offer any specifics about the timetable for rolling out the diesel-powered Focus to the public.
The Chrysler Group, meanwhile, insists it is going ahead with plans to offer a diesel-powered version of the Jeep Liberty. The diesel Liberty is still a go project despite the Chrysler group’s need to cut $1 billion in costs this year, according to Jan Zverina, a Chrysler spokesman. The diesel Jeep Liberty will appear early next year.

Other Chrysler execs last week candidly labeled the diesel-powered Liberty as an “experiment” designed to test the public appetite for new technology. Chrysler, however, has no plans on the books to offer the diesel-powered version of the PT Cruiser that they slipped into the company’s 2004 full-line preview in Chelsea, Mich. The diesel PT got a heavy workout during the tests but Chrysler has no plans to sell it in the U.S. nor in Canada, a Chrysler spokeswoman said last week.

Growing hybrid numbers

Walter McManus, an analyst with J.D. Power & Associates who prepared the firms’ new study, says hybrid sales will increase as the hybrids are offered in different segments.
Honda sells about 2000 Civics with the hybrid layout but the sales numbers are still somewhat below Honda’s expectations that had targeted sales of more than 40,000 units annually. With gasoline prices still well below $2 per gallon, hybrids in the small-car segment don’t generate enough fuel-cost savings to overcome the higher price tag in what is a price-sensitive segment. Buyers simply opt for the less-expensive standard versions of the Civic.

Meanwhile, the Japanese automakers, like their American counterparts, are facing new pressures that raise some questions about whether they can continue to subsidize hybrid sales indefinitely. Honda’s sales have dropped by double digits in Japan under pressure from new competition and Toyota’s earnings dropped 18 percent in the fourth quarter.

Meanwhile, environmentalists remain on guard against any changes in air quality rules that tilt government regulations.

The U.S. Environmental Protection Agency remains “neutral” on which engines should go in which vehicles. But EPA officials have cautioned engine and auto manufacturers that the Bush administration isn’t about to adopt regulations that could help expedite the introduction of diesel engines. Diesel engines will have to meet tough new air-quality regulations.

In fact, the Bush administration, which has loosened some environmental rules, has found it convenient politically to sacrifice diesels to the environmentalists. New rules prepared by the Clinton administration have been allowed to take effect with little or no change by the current administration.

The other challenge facing the diesel engines is that the oil companies have been slow to introduce the kind of low-sulfur fuel required by the modern and very expensive catalysts needed for diesels to comply with the new regulations.

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