Hybrid Vehicles to Face Competition from Diesel Powertrains

LONDON, September 20 --

- Greater Cost Efficiencies Essential to Fuel Uptake of Hybrid and Electric Vehicles

Research into hybrid and electric vehicles is reaching an all time high in Europe, with most companies in the automotive industry working towards developing their own versions of hybrid electric vehicles (HEVs) that reduce environmental pollution and increase fuel efficiencies.

A growing concern in the industry is offsetting the research and development (R&D) expenses and the high unit costs of components that compel automakers to charge high retail prices. However, automakers expect economies of scale and rapid public acceptance to generate profits for the electric vehicle divisions.

"In order to ensure profitability of the low-priced compact class cars, automobile designers are implementing cost-cutting measures such as modular production that drastically reduces assembly costs," says Technical Insights Research Analyst (www.technicalinsights.frost.com) Rajesh Kannan.

Since development costs for HEVs are very high, vehicle manufacturers are also largely dependent on governments to set up funds in the form of tax reduction/exemptions, grants and incentives that promote the growth of HEVs.

"While the introduction of city congestion charges apply to HEVs only in part while the possibility of government grants for first hybrid vehicle owners are regarded as crucial incentives," notes Mr. Kannan.

However, once pitted against the improved diesel engines, vehicle manufacturers need to decrease the price of hybrid vehicles further for closing the cost gap between hybrid and diesel powertrains.

In Europe, high-efficiency diesel vehicles have demonstrated fuel economies and CO2 emission figures similar to that provided by gasoline HEVs. Diesel engines account for about 45.0 per cent of all newly registered cars in Europe.

"Consumer acceptance and willingness to pay a little extra for a more fuel-efficient, high technology vehicle is therefore extremely important to drive uptake of HEVs," reiterates Mr. Kannan.

In order to succeed in the European market, manufacturers need to convince prospective buyers about the advantages of HEVs in terms of fuel efficiency, reduced pollution, functionality and driving performance.

Following the footsteps of Toyota Motor Corporation and Honda Motor Co., Ltd. General Motors Corporation and DaimlerChrysler AG are developing a gasoline-electric power system in hybrid vehicles that saves fuel and cuts tailpipe emission.

Application of renewable energy for recharging batteries is another priority among manufacturers of HEVs. For example, the use of photovoltaic solar energy and accumulation for night time recharging is important to the future of HEVs, particularly in the case of plug-in hybrids.

Introduction and development of more efficient batteries such as Nickel-Hydrogen, Lithium-ion and Lithium-Carbon is also essential to sustain demand for electric and hybrid vehicles in the long run. The challenge lies in creating batteries that have greater peak and pulse-specific power and a high charge acceptance to maximize the utilisation of regenerative braking.

While battery electric vehicles (BEVs) are expected to remain confined to niche applications, development of batteries with high energy density, lower manufacturing costs, short recharging times and prolonged life cycles is likely to enable BEVs to make a greater impact in the mainstream market.

"At the same time, it is necessary for both automobile manufacturers as well as governments to ensure that EVs are not marginalized or cannibalized in the market," says Mr. Kannan. "Defining a niche for different types of EVs such as intra-city shuttle transport may be key to enhancing their commercial appeal and ensuring their long-term survival."

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Media Contact: Magdalena Oberland, Corporate Communications - Europe, P: +44-(0)-20-7915-7876 F: +44-(0)-20-7730-3343 E: magdalena.oberland@frost.com Tolu Babalola, Corporate Communications - North America, P: +1-210-477-8427 F: +1-210-348-1003 E: tolu.babalola@frost.com Pramila Gurtoo, Corporate Communications - Asia Pacific, DID: +603-6204-5811 Gen: +603-6204-5800 Fax: +603-6201-7402 E: pgurtoo@frost.com