MARKET FORECAST

Despite Challenges, Hybrids Are A Bridge to FCVs

by Lindsay Brooke

A bridge to production fuel cell vehicles is in the early stages of construction, and it’s getting stronger each model year. The bridge is the hybrid-electric vehicle (HEV) segment, and it’s a key to proving electric-driveline technology in real-world use and validating its success in consumers’ minds. For fuel-cell vehicles (FCVs) to win the future, HEVs first must pave the way by proving themselves in the short-to-mid term.

The initial HEV battleground will be North America, where CSM forecasts at least 15 new HEVs will enter the market through 2007. More are expected in the years beyond. Their fuel efficiency rewards are real, particularly for “strong” or “full” hybrids (those capable of driving exclusively on battery power depending on load and conditions). This is one reason hybrids serve a strategic role in some automakers’ Corporate Average Fuel Economy (CAFE) fleet-mix plans for the U.S. market. Their higher fuel-economy ratings help boost fleet average fuel efficiency, which allows an OEM to sell greater quantities of popular larger, more powerful and less-fuel-efficient models.

In the case of Toyota, expanding its HEV offerings in the next three years will help offset sales of the big, V-8 powered, highly profitable large pickup trucks and SUVs soon to enter production at its new $1 billion plant in Texas. Similar rationale is driving HEV planning at General Motors, Honda, Ford and others. On the emissions side, hybrids qualify at ultra-clean SULEV or AT-PZEV (levels today’s diesels can only dream about) and offer benefits towards CO2 reduction.
But the cost of adding what is basically a separate powertrain to each vehicle will continue to challenge hybrid-market growth unless retail fuel prices are sustained above $3 per gallon. Without high fuel prices or a drastic increase in CAFE as market drivers in the U.S. – at least for now – the North American HEV landscape will remain uncertain for the short term. Diesels face the same situation.

That’s not to say that the industry cannot raise volumes significantly by spreading HEV applications across platforms, particularly across the light truck spectrum where hybrid powertrains can deliver the highest-value fuel efficiency and emissions benefits. Toyota plans to make four of its five major future light vehicle architectures “hybrid capable” and GM will certainly offer huge economies of scale by hybridizing even a fraction of its massive T900 truck platform beginning in 2007. Tax breaks for HEV purchases are a political no-brainer, as are driver’s benefits such as allowing hybrid operation in High-Occupancy Vehicle lanes.

Of course, automakers must balance the question of market demand –“if we build them, will buyers come?” – with the distinct possibility of facing stricter CAFE and emission mandates over time. Many OEMs believe they must have HEV technology on the shelf and ready to deploy, just in case tougher regulations arrive – or a competitor’s hybrid products win the public over. No one can afford to bet incorrectly. Witness BMW’s recent unveiling of a mild-hybrid prototype X5; not long ago the automaker was firmly in the diesel camp.

In lieu of Europe- or Japan-level fuel prices, automakers in the U.S. need flexibility in their product plans. Those who have thus far committed to HEVs – Ford, General Motors, Honda, Toyota, Nissan, Hyundai and (in small scale) DaimlerChrysler – have made the technology optional, rather than standard, on virtually all models except Prius and Honda Insight. To minimize investment risk, HEVs are being designed for assembly in the same plants and on the same lines as their conventional cousins and will be sold right alongside them as the ‘hybrid version.’ This way, market demand will determine volumes, giving automakers and suppliers a capacity hedge in case demand does not meet expectations. Of course, this would be unfeasible with FCVs, as there really is no such thing as a ‘fuel-cell version’ of a conventional vehicle.

The other broad hybrid category, called “mild hybrids,” includes Honda’s Insight, Civic and 2005 Accord, a variety of trucks from GM and DCX and, in Europe and Japan, a small but growing field of passenger cars. Unlike the strong HEVs, these systems cannot propel the vehicle by battery power alone. They replace the engine flywheel with an electric starter-generator motor or a belt-driven starter-alternator, allowing the engine to shut off and restart rather than idle and waste fuel. Some of the mild systems, particularly Honda’s, operate on high voltage and can provide a boost to the gasoline engine. Compared with strong hybrids the efficiency benefits are less, about 10-15% on average, but systems cost is also less. There is also less overlap between mild-HEV systems development and that of FCVs.

Cost remains the greatest challenge to both types of hybrid system penetration. Suppliers say cost-benefit decisions are even more prevalent in HEV development than in conventional vehicle programs. But the HEV era has just begun, and those who believe in a fuel-cell future see strong HEVs as much more than poker chips in the CAFE game, or a premium-priced option to save fuel with long-term payback to the owner.

Minus its internal combustion engine and fuel tank, today’s production hybrid driveline is increasingly suitable for FCV duty. E-motors and nickel-metal hydride batteries now propelling hybrids are virtually ready for FCVs, according to engineers. Power control systems are not as transferable due to the more sophisticated logarithms of FCV powertrains, but the knowledge is in place and growing.

The hybrid “bridge” already is connecting two of the auto industry’s most promising future propulsion systems. As more OEMs enter the HEV field, bringing greater volume and supplier involvement, and FCV development continues apace, the bridge’s importance will grow. And its span will shorten. Perhaps one day many of the components downstream of an HEV’s piston engine and an FCV’s stack will be interchangeable.

Of course, that interchange will happen faster if U.S. fuel prices make a sustained leap towards the $3 threshold. Until then, it’s a case of wait and see.

Lindsay Brooke is Senior Manager, Market Assessment
CSM Worldwide. CSM Worldwide is an auto industry forecasting and analysis firm based in Farmington Hills, MI. www.csmauto.com