Honda Civic may go HYBRID ONLY

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Honda Will Cut Excess Price of Civic Hybrids to Bolster Sales

Dec. 22 (Bloomberg) -- Honda Motor Co., the world's second- largest maker of gas-electric cars, said it will cut the excess cost of so-called hybrid system on the Civic by a third within 5 years, as it phases out the gasoline-powered version in some markets including Japan.

The additional cost of using a hybrid system to run Honda's Civic compact car will fall by a third to 200,000 yen ($1,702) each, as development costs are halved, President Takeo Fukui said today. The Civic Hybrid, with a four-month waiting list in Japan, is priced at between 2.2 million and 2.4 million yen.

Honda is relying on hybrid versions of the Civic and Accord, its two best-selling models, to compete with Toyota Motor Corp.'s Prius as record gasoline prices spur demand for vehicles that burn less fuel. Tokyo-based Honda may put diesel engines in light trucks in North America, where it sells about 49 percent of its vehicles, Fukui said.

``Once we are able to cut costs and lower the premium price of the hybrids, there is a possibility that in some markets like Japan, we will only sell Civic Hybrids and no more gasoline- powered Civics,'' Fukui said in an interview today. ``We plan to install diesels in bigger models and hybrids in smaller models.''

Hybrid Power

A hybrid vehicle combines a gasoline engine with an electric motor. At low speeds, the motor powers the vehicle and the gasoline engine kicks in as the car gains speed. The battery pack for the motor is charged by the gasoline engine and by power regenerated whenever the brake is applied.

Honda's Civic Hybrid can go as far as 31 kilometers on a liter of gasoline, double the average mileage of a comparable model that runs on a conventional gasoline engine. Toyota's Prius, the world's best-selling hybrid car, is rated with 35.5 kilometers per liter in city driving while Honda's Insight Hybrid can travel 36 kilometers on a liter of gasoline.

Honda shares, which have gained 29 percent this year, rose almost 1 percent today to 6,870 yen in Tokyo.

Sales of the Civic compact cars in the U.S., the biggest market for the model, rose 18 percent to 23,695 units in November.

Honda may have to expand its factories in East Liberty, Ohio, and Alliston, Canada, to meet growing demand for its Civic and Fit compact cars, Fukui said. The Ohio factory is now running at full capacity and the carmaker sells Japan-made Civic compact cars in the U.S.

The automaker will start selling the Fit in the U.S. next year and expects monthly sales of 4,000 to 5,000 units in the first 12 months, he said.

``We can increase production at these factories by 10 percent through weekend shifts and overtime,'' Fukui said. ``That's a short term solution. We need to make vehicles where they are sold and increasing exports isn't the solution.''

U.S. retail gasoline prices surged this year, prompting automakers including Honda and General Motors Corp. to produce fewer trucks and sport-utility vehicles.

U.S. average retail gasoline prices surged to a record $3.06 a gallon in September and were at $2.2 on Dec. 21, 22 percent higher than a year ago, according to AAA's fuel-price Web site.

Honda will upgrade its production facilities to make newer and bigger engines including its VTec, hybrid systems and V10 engines, Fukui said.

``In Japan, we want to enhance the development and production of power-trains and this would be the most important challenge for automakers in the future,'' Fukui said. ``Once we start the production, we can expand it to other countries.''

Honda's diesel-powered vehicles in Europe comply with Euro IV emission standard, which are not as strict as those in the U.S. and Japan.

Nissan Motor Co. last month said it may put diesel engines in U.S. pickup trucks and sport-utility vehicles to cut emissions.

To contact the reporter on this story:
Kae Inoue in Tokyo at [email protected]

Last Updated: December 22, 2005 03:29 EST