Ford vs Toyota: Who Will Win the Hybrid War? – Forbes

Posted: Wednesday, August 27, 2014

Hybrid excitement just isn’t what it used to be. Once upon a time the concept of getting 40-plus mpg from an advanced drivetrain, one that combined internal combustion with electric motor-vation, was enough to get any red-blooded, green-minded American to drop several thousand dollars over the cost of an equivalent non-hybrid vehicle. It didn’t matter that most of these hybrids took between 5 and 25 years to pay back their additional cost through fuel savings. Hybrid fans were quick to note, “It’s not about the money, it’s about doing the right thing for the environment.”

Of course that was back when plenty of Americans had plenty of spare cash to spend on cars that didn’t make economic sense. Many of these same folks were coming out of three-row, three-ton, 12-mile-per-gallon SUVs that also didn’t make economic sense because they rarely carried more than four people. Then Hurricane Katrina hit in August of 2005, damaging much of the Gulf of Mexico’s oil infrastructure and sending fuel prices to never-before-seen levels. Suddenly vehicles like the Ford Excursion, Hummer H2 and Jeep Commander didn’t seem like a hip expressions of rugged individualism. Instead they represented the auto industry’s most egregious examples of conspicuous (and highly inefficient) consumption.

Ford Fiesta versus Toyota Prius

After Hurricane Katrina the U.S. experienced several years of increasingly unstable, and generally rising, fuel prices. Throw in a global economic meltdown in 2008, and by 2010 all three of those monster SUVs were dead, along with large truck and SUV sales in general. Over that same period sales of small cars and hybrids grew, with a little extra shove from the government’s Cash for Clunkers program in the summer of 2009.

No single model better represented this shift in shopper behavior than Toyota’s Prius. U.S. sales of the Prius doubled the year Katrina hit, from 54,000 to 108,000, before hitting their highest number ever in 2006 at 181,000. Since then sales have hovered around 140,000, though they are down 11 percent so far this year. In fact overall hybrid sales have dropped, and while Toyota gets credit for consistently selling over 100,000 Prii a year (a number that dwarfs every other hybrid offered in the U.S.) the automaker’s own, similarly sized Corolla stomps the Prius, averaging approximately double that hybrid’s sales at around 280,000 units a year.

There’s no indication hybrid sales, either on a volume or market share basis, are going up any time soon. We’ve actually seen hybrid research activity faltering at, behavior reflected in a hybrid market share drop from 3.37 percent to 3.14 percent so far in 2014. Meanwhile, sales volume and market share for large, three-row SUVs is rising. Yet Ford says it’s not giving up on hybrids, despite issues that forced it to downgrade C-Max and Fusion Hybrid mileage ratings. Twice. And Toyota has a redesigned Prius in the works, appearing confident it will continue to sell well.

So what, if anything, will move hybrids from their niche position into the mainstream? Will they ever make a serious dent in traditional car sales?

It’s possible, but I’m convinced Ford’s upcoming, dedicated hybrid, as well as the next Toyota Prius, will have to make a substantial leap in fuel economy ratings, plus up their driving dynamics and value equation, to garner serious interest from today’s car shoppers. Here’s why:

Toyota Prius

2010 Toyota Prius

The Prius’ once-impressive 50 mpg simply doesn’t move the needle today. In 2005 the number of cars getting over 30 mpg was small, and limited to economy cars. For 2015 there’s a wide range of small and midsize sedans and SUVs that can achieve 30-plus mpg without requiring the added cost and weight that goes along with a hybrid drivetrain. And while 50 mpg might sound like a big jump from 30, the truth is that most consumers find 30-plus mpg to be more than adequate for their needs. They see a hybrid that costs more while looking and driving like a hybrid and offering 40-50 mpg. Then they see a compact SUV that costs the same or less and offers SUV styling and flexibility while still getting 30-35 mpg. For most buyers in this situation their reaction is, “I’m good with 30 mpg. Gimmee the SUV.”

This is because fuel prices have been relatively stable over the past few years, which is more important than the actual price of fuel in terms of consumer confidence. A stable $4-a-gallon price is far less less disconcerting to the average car shopper than a price that’s bouncing wildly between $3 and $4. They can plan for $4-a-gallon, and at that price (or less) gas in the U.S. remains relatively cheap. Ask your European friends if you don’t believe me.

Honda Insight

2000 Honda Insight

So what kind of mpg numbers do the next-generaion Prius and/or dedicated Ford hybrid need to offer? I’d say anything that doesn’t start with a “6″ is a non-starter in terms of shifting consumer interest. I remember when the third generation Prius was introduced at the Detroit auto show in 2009. I went to that press conference somewhat excited, expecting to see a 60-plug mpg figure. What I got was a mixed rating of 50 mpg, essentially the same as the outgoing model. I distinctly remember being quite disappointed, especially when I considered Honda’s first Insight got a 70 mpg rating a decade earlier. Yeah, that car was smaller, slower and only seated two. But it was a decade earlier. In that same decade internal combustion engines had become far more fuel efficient. Why did the Prius (and hybrids in general) seem stuck at the same mileage ratings they’d been offering for 10 years?

Beyond fuel efficiency, the next generation of hybrids needs to be fun-to-drive while having a minimal price premium over non-hybrids. Again, internal combustion engines keep getting more fuel efficient while being both cheaper and lighter. Look at the 2015 Ford Fiesta with the 1.0-liter engine. It gets 43 mpg and is a blast to drive. A (theoretical) 2017 Prius offering, say, 56 mpg, while costing substantially more than the 43 mpg Fiesta and driving like the current model, will not see sales increase over the current model. In fact I could easily imagine it struggling to just maintain the current car’s volume.

Ford Fiesta Hatchback

Ford Fiesta

Which brings me to the most important question: Between Ford and Toyota, two automakers that appear committed to hybrid technology, who will win the hybrid war? So far Toyota has it all over Ford, both in terms of mileage numbers and sales numbers. But here’s where it gets interesting. Ford’s struggles with hybrid technology have occurred while the automaker is making massive leaps in small-displacement, turbocharged technology. That 1.0-liter Fiesta engine is an engineering marvel in terms of both performance and fuel efficiency, as is the upcoming 2.7-liter V6 that, according to Ford, will offer V8-like performance.


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