Wall St. Journal - Hybrids

June 18, 2004
AUTOS
Hybrids Gear Up

By JONATHAN WELSH
Staff Reporter of THE WALL STREET JOURNAL
June†18,†2004;†Page†W1

Jonathan Beldon has been intrigued by fuel-saving hybrid vehicles for a few years, but he could never quite see himself behind the wheel of a quirky compact with a poky engine. Lately, though, he's found something more his speed -- an SUV that promises more than 30 miles per gallon, with the pep of a sports car and enough room to haul his two kids and several hundred pounds of mulch.

"It's a win-win," says the 34-year-old lawyer in McLean, Va., who's signed up to buy a Lexus RX 400h when it comes out later this year. He's already anticipating the benefits, from saving money at the gas pump to driving solo in the carpool lane thanks to a Virginia hybrid-car rule.

Until now, hybrids -- cars powered partly by gas, partly by batteries -- have been oddball novelties for greens, early adopters or Hollywood types trying to be both. But starting this summer, a wave of new hybrids is about to hit Main Street -- including sedans, sport-utility vehicles, even a gas-electric pickup. Ford is coming out in a few months with a version of its Escape SUV that runs in part on batteries, while in August, Chevrolet will start offering consumers a gas-electric Silverado pickup truck. By the end of the year, six hybrid models will be available in the U.S., up from three currently -- with at least a dozen expected within the next two years.

Auto makers promise their new models have the same zip as raditional cars but with better fuel economy, in some cases 50 or more miles per gallon. Their timing could hardly be better, with gas prices recently climbing above $2 per gallon in many places. Makers also believe the technology will be a big enough selling point that buyers will pay a premium. The Honda Civic, for example, costs about $2,400 more than its gas-powered counterpart -- even with its smaller trunk and back seat that won't fold down.

So are Americans really ready to pay extra for battery-powered SUVs or trucks? To check out the options, we drove a range of hybrids that are on the market or coming soon. We found some surprisingly big differences between models -- from an SUV that gave snappy acceleration and 38 miles per gallon to a big rig that jerked in stop-and-go traffic and couldn't top 20 miles per gallon. Amid regular-car touches like heated leather seats and satellite navigation, we found a few surprises -- including batteries stowed beneath the back seat (240 of them in the Lexus) and an engine that sounded like a blender when we goosed the throttle. And this just in for tailgaters: Chevy's Silverado doubles as a generator, with enough standard A/C outlets for a deep-fat fryer, Foreman grill, coffee maker and margarita mixer.

Batteries have quickly made the jump from oddity to fashion accessory. Celebrities including Charlize Theron, Tim Robbins and Sting showed up at this year's Academy Awards ceremony in gas-electric cars, and Larry David's character drives one on HBO's "Curb Your Enthusiasm." Toyota has generated perhaps the biggest charge of all with its new sedan that promises 60 miles per gallon: The Prius has waiting lists of up to a year, new models are going for thousands over their $19,995 sticker price on online auctioneer eBay Motors, and dealers are tacking on premiums of as much as $5,000, according to Edmunds.com. Overall, the hybrid market is expected to double this year to 101,000 vehicles, from 48,000 last year, according to researcher J.D. Power & Associates.

Even so, hybrids remain a tiny niche, accounting for less than 1% of the roughly 16.5 million light vehicles expected to be sold in the U.S. this year. J.D. Power estimates the market will reach 440,000 in 2008, but that's still a drop in the bucket for big auto makers: Ford, by comparison, is expected to sell close to one million of its F-Series pickups this year alone.

It's little wonder, then, that some manufacturers are stepping cautiously. Ford is planning to sell about 20,000 of its hybrid Escapes annually, compared with more than 167,000 gas-powered versions it sold last year. General Motors introduced its Chevrolet Silverado hybrid to commercial fleets earlier this year, and says it will build 1,000 or so for consumers before deciding whether there's demand for more.
DaimlerChrysler won't bring out its first hybrid, a Dodge Ram truck, until the end of the year.

Risky Business? The risk for makers is that development costs may not pay off if the cars fail to go mainstream. It also may be a challenge to sell drivers on these cars' reliability: Their gas-engine/electric-motor
combinations, critics say, may make repairs complicated. (Reliability data are scarce for now, but so far Toyota's Prius has a lower complaint rate than most compacts, according to J.D. Power.) And most makers have failed in the past to make high-mileage cars into big moneymakers, from electric and diesel models to Honda's tiny, 52-mile-per-gallon CRX of the 1980s.

Analysts say Detroit's big manufacturers are hoping to get just far enough into the segment to exploit hybrids' upside: They make for good publicity, of course, and their better mileage figures help makers meet government standards for overall fleet fuel efficiency. Meanwhile, some makers offering hybrid vehicles as well as some who don't (including BMW), say the real future is hydrogen-fuel technology, which promises to be clean and economical but is considered years away from the market.

If hybrid pioneers such as Honda and Toyota begin demonstrating a mass market for these cars, the big U.S. makers won't have to begin programs from scratch. "I think the Big Three are being dragged along kicking and screaming," says David Healy, an analyst with Burnham Securities.

In coming years, expect to see more hybrids aimed at mass-market buyers. A battery-assisted version of the Honda Accord is due later this year, followed in 2005 by a Toyota Highlander SUV. Within the next two years, Ford plans to offer hybrid versions of a midsize sedan and its Mercury Mariner SUV. By 2008, forecasters expect, some 30 hybrid vehicles will be on the market.

Here's a look at the early pack of gas-electric hybrids -- and what we learned from driving in them:

Ford Escape, $26,380 - What's Cool: You can get 99 miles per gallon
What's Not: You'll have to be coasting downhill. Pulling out onto the streets of downtown Los Angeles in an early model of Ford's Escape hybrid SUV, we were determined to do better than the 20-odd miles per gallon many drivers get in the company's standard Escape. Like all of the hybrids in our test, this SUV made penny-pinching easy with a dashboard mileage monitor. We watched as our number ticked up -- 25... 30... 49 miles per gallon! Who cares if we were going 10 miles an hour? Keep honking, pal: We're saving gas.

On the road, the Escape's 94-horsepower electric motor offered quick acceleration, and then the 133-horsepower gas engine would kick in for smooth cruising. One thing that brought us back to earth: When we tried to pass a flatbed truck on a Southern California hill, the 3,500-pound rig slipped past easily enough but sounded, in one passenger's words, "like a blender set on 'crush.'†" Otherwise, the truck performed about the same as the six-cylinder Escapes we've driven, and it even comes in a four-wheel-drive version. The big difference: We averaged 38 miles per gallon. Bottom Line: It works, but we wondered: How many entry-level SUV buyers will spend $2,000 or more extra for hybrid power?

Chevrolet Silverado Hybrid, $32,695 - What's Cool: Tows 8,000 pounds, doubles as a generator. What's Not: Still gets less than 20 miles per gallon. We were less electrified by the drive. The Silverado is a "mild" hybrid, which in this case means the electric motor doesn't add power while the truck is on the move. It functions mainly as a big
starter and alternator -- charging the batteries and letting the big V-8 gas engine shut down completely at stops and then start back up again quickly.

Problem was, the engine took a split second to kick back in each time we tapped the accelerator. And when we tried getting going on hills, we rolled backward briefly before the engine started. It added up to a lot of jerky stop-and-go driving, and the fuel savings didn't seem worth it: Chevrolet is asking $2,500 for the hybrid option, but in our test we got only 18 miles per gallon -- only a couple better than a normal Silverado. (GM says that when it comes to heavy vehicles with low mileage numbers, even two or three extra miles per gallon represent a substantial improvement in total gallons consumed.) Bottom Line: We suspect GM is getting more mileage from the hybrid label than we did.

Toyota Prius, $19,995 - What's Cool: Promises up to 60 miles per gallon. What's Not: Big waiting lists. This is the name that's been on everyone's lips lately -- even if no one really seems sure how to pronounce it. (It's PREE-us, Toyota says, not PRY-us.) The buzz over an economy car is all the more surprising considering the original Prius, introduced in the U.S. in 2000, was a hard-to-love compact with plain looks and a cramped interior. But sales of the futuristic-looking
replacement model have doubled from last year at this time, and in an effort to deal with waiting lists, Toyota recently boosted monthly production to 4,000 cars from 3,000. On our drive, the Prius's electric motor started silently -- eerily, even -- and accelerated quickly. At 10 or 15 miles per hour, the gas engine kicked in with enough of a shudder to trigger our guilt for burning fossil fuel. We found ourselves playing a game to coax the number on our mileage monitor higher, and at the end of one 18-mile commute, we rolled down our street on batteries, coasted into our driveway -- and ran into the house to announce we'd hit the advertised 60 miles per gallon.

Not so fast, though. Some critics charge that the computer inflates mileage figures. "It ain't lying," counters Toyota spokesman Wade Hoyt. Could we solve the issue on our own, by dividing the number of miles traveled by the gallons burned? Not quite, says Toyota: The Prius has an aviation-style fuel bladder, and because some gas-station pumps don't have enough pressure to completely fill it, back-of-the-envelope calculations could be inaccurate. We used the fill-and-divide
method anyway -- and came up with an overall average of 51 miles per gallon, over 515 miles of mixed driving. Bottom Line: A decent car, if you can get it.

Honda Civic Hybrid, $19,650 - What's Cool: UV-treated window glass saves on air conditioning. What's Not: Big waiting lists. Even so, the Civic felt the most normal of the bunch -- no awkward silences or jerky starts. As with most hybrids, its electric motor exerts a lot of torque, which translates into quick acceleration, at least for the first several yards, and gives the engine a boost for passing. It was also fun to drive: Honda offers a version with manual transmission, the only car of the group that let us shift our own gears. In a couple-hundred miles of driving, we got about 45 miles per gallon without feeling like we were driving someone's science-fair project. Bottom Line: This car may be small and plain, but its technology bodes well for Honda's Accord hybrid, coming later this summer.

Lexus RX 400h, $42,000 - What's Cool: Promises 600 miles on a tank. What's Not: If you have this much money, you can afford the gas. It wasn't easy to get a look at this SUV, made by Toyota's luxury
division and set to hit the market later this year. Inside Lexus's development center, in an office park in Torrance, Calif., we saw a rig that looked like a Lexus RX 330, but with an extra air inlet in the bumper and about an inch less headroom in the back seat (the batteries are under there). The company isn't letting outsiders behind the wheel yet, but we hopped into the passenger seat for a drive through the parking lot. The car started moving under electric power, like the Prius, before the engine kicked in gently. By all accounts, it will be the most powerful hybrid -- with both power plants putting out the
equivalent of 270 horsepower, 40 more than Lexus's current SUV.

Even with that peek, we got a closer look than many potential buyers. Annie Walker, a registered nurse in Gig Harbor, Wash., is among hundreds who have placed deposits with dealers to reserve one of 24,000 of the hybrids Lexus hopes to sell next year. She says this is the first hybrid she's seen that's not weird-looking or "pedestrian," and it has room enough for her dog. "I don't want to be associated with SUVs," she says. "But the techy stuff is really cool." Bottom Line: This will be the litmus test for hybrids' higher-end appeal: Will anyone pay $42,000 for green credentials and leather seats?

Write to Jonathan Welsh at jonathan.welsh@w...
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Batteries and Beyond

In the next few years, auto makers are planning to release more
vehicles that pair gas and electric power -- as well as more diesels, and even a few diesel-electric hybrids. Here's a sampling of coming vehicles that promise to save fuel, in the approximate order they'll hit the market.

CAR/PRICE (Est.) RELEASE DATE WHAT IT IS COMMENTS

Honda Accord Hybrid - $30,000 November 2004 Family sedan -- batteries included. The hybrid race escalates: Honda's perennial top-seller -- 400,000 units a year in the U.S. -- arrives soon as a gas-electric version to challenge rival Toyota. (Toyota says it has no plans for a hybrid Camry.) Honda says it will be quicker than the current
Accord, yet get roughly 10 more miles per gallon -- up to 40 mpg
on the highway.

Dodge Ram - $40,000 Fourth quarter 2004 Diesel engine, electric motor While a diesel-electric hybrid seems like a niche within a niche,
DaimlerChrysler says diesels are popular for towing and heavy work. Initially, though, they'll be sold only for commercial fleets. Fuel economy should be about 15% better than for current diesel Rams, or roughly 23 mpg on the highway. Gearhead bonus: It'll have two 110-volt outlets -- and one 220.

Jeep Liberty diesel - $25,000 Late 2004 Four-wheeling goes diesel. Sales of the Jeep Liberty are up about 10% so far this year and parent
DaimlerChrysler hopes to build more consumer interest with this diesel that should improve fuel economy by about 25%. The Mercedes-Benz division recently began selling a diesel version of its E-Class luxury sedan.

Toyota Highlander - $35,000 Early 2005 Lexus hybrid SUV technology, for less Toyota has picked the Highlander for hybrid power in part because it's the company's most popular SUV. Just as the
conventional Highlander was based on the Lexus RX chassis, the hybrid version has many of the same underpinnings.

Saturn Vue - $23,000 2006 Small SUV from quirky GM division General Motors has used Saturn to introduce odd features like scratch-resistant plastic body panels and continuously variable transmissions, so it's no surprise to see this hybrid. It's expected to get about 30 mpg on the highway, compared with 26 for the current four-cylinder model.

Mercury Mariner - $30,000 2006 Like the Escape hybrid, but pricier In a continuing effort to shore up sales, Mercury plans to launch a Mariner SUV this summer -- basically, a smoother, quieter version of the Escape -- and add a hybrid version a couple of years later. Mercury could use the help, with total sales slipping 23% last year.

Ford midsize sedan - $25,000 2006 Mazda 6 chassis, green appeal. This version of Ford's still-to-be-named sedan is expected to use a 'strong hybrid' technology similar to that used on the Escape -- meaning it can travel on electric power alone.