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Electronics Manufacturing – M528

HYBRID VEHICLES (LOOKING INTO THE FUTURE)


IS IT REALLY WORTH IT?
Hybrid meachanics
INTRODUCTION
Hybrid technology seems to be one of the fastest growing technologies in the automobile industry today (although the technology itself has been around for a considerable amount of time, dating as back as 1665). It seems like it would continue to grow as consumers are beginning to shy away from high fuel prices, becoming more environmental aware or just plain obsessed with new technology.
However, there is a major factor to be considered in term of future value of a hybrid, according to an article on the CNNMoney website (Peter Valdes-Dapena, 2006, para.29); hybrids will not hold resale value, as most hybrids are still the same versions of normal conventional vehicles, with probably only the engine type as the only distinguishable feature between them.

There are a considerable amount of claims and expectations made about hybrid vehicles, especially from the manufacturers (which is expected) and the government. These ranges from fuel savings to environmental friendliness (keeping the environment green). However, the main question here is if it is really worth paying the extra amount of money for (in comparison to conventional vehicles), and how does the extra ‘benefits’ that comes from owning a hybrid pay off? or are the consumers being ‘bribed into believing that owning an hybrid is the way to go. Even the government seems to be introducing Car tax reduction and no congestion charges (in UK) for hybrid vehicle owners, and most insurance companies even offer discounts on hybrid vehicles, so is this really the way to go, and are consumers being ‘pushed’ to go that way?


IS IT REALLY WORTH THE PRICE?
Below is a graph taken from wikipedia (2007, Petroleum electric hybrid vehicle). It clearly shows a rise in the sales of hybrid cars (in the U.S) in the last three years, so surely they (manufacturers) must be doing something right (Although it is possible to see that this success is not exactly constant, but generalising the chart would mean there is a considerable amount of progress made)..
Hybrid

With reference to the graph, an easy observation is that the Toyota Prius occupies majority of the market of hybrid vehicles. The Toyota Prius was first introduced in 1997 when the main objective of the production of hybrid vehicles was to lower the emission of CO2 into the environment, and it has since been the ‘headmaster’ in the hybrid market. According to NRI site (Upcoming advances in the hybrid market, 2007) by 2010, Toyota is looking into increasing its worldwide sales of hybrid cars into a million units per year, while Ford is looking into selling about 250,000 units by 2010.

The majority of the hybrid market is more American based, and the second largest is Japan.
Hybrid

With the ever increasing price of fuel prices (2007, petrol prices); over the last five years, there have been a 25.6%increase the in the price of fuels; it only means that more people are opting for the option of owning a hybrid as it does not fully rely on the use of fuel.
Also, the hybrid market is increasing rapidly as there are more manufacturers introducing new and wider range of models into the market, which means consumers are given more option (and don’t we all love to have an option).
All the aforementioned factors could be the reason in the rise in purchase of hybrid vehicles, however there are few other factors that needs to be taken into consideration (in terms of the situation/position of hybrids now, and in the near future), and they will be addressed as the article goes on. These factors, include the cost (i.e. cost initially (if applicable), cost presently, and what the likely costs would be in the near future taking depreciation rate into account), durability and maintenance factors, introduction(or upgrade) of new technology which could be dependent on success/failure of present technology or dependent on consumer requirements.

BUYING AN HYBRID
Below is table comparing the purchase price of same type and model of a vehicle (both conventional and hybrid).
Hybrid
It is clearly easy to see that buying exactly the same mode of a vehicle in hybrid costs a more considerable amount of money, and this can be seen from the percentage difference shown.

Also from the table given above, the average percentage between an hybrid and conventional vehicle is slightly high, which means that for every consumer willing to switch to the ‘hybrid craze’, this percentage cost should be added to the present price of the conventional vehicle, an then a careful evaluation would need to be done to analyze whether it is truly worth purchasing an hybrid.

Below is another example table (Most hybrid vehicles not as cost effective as they seem, 2005), it also shows how much more a hybrid model would cost over its conventional model. However, the only cost effective option was when the Toyota Prius was compared to the Toyota Camry LE
Hybrid
Also, although fuel savings was part of the reasons as to why consumers should switch to hybrid, fuel prices would have to rise considerably high before consumers can even break even on the extra price they have paid for their hybrid (Most hybrid vehicles not as cost effective as they seem, 2005).
Hybrid
However, the cost is likely to decrease as hybrids become more mainstream and other factors like tax credits (in the U.S). The above calculations were calculated in terms with the Edmund’s True Market Value. The costs include interest on taxes, finances, maintenance, and fuel. The fuel was estimated to cost $2.28 per gallon for the first year with a 3% increase for each subsequent year.

In order to be able to carefully forecast the hybrid cast, I would be basing my predictions on a series of polls on hybrid vehicles (which are mostly based on what the consumers think).
According to a poll and analysis (Tanaka & Shigeta, p. 11, 2007) the forecast of the hybrid were based on the following:
• For each model, an estimate of initial and running costs of hybrids and conventional vehicles were created.
• An estimated ratio of consumers whose total costs of hybrid cars are less than that of fuel-powered cars.
• A multiplication of the number of new car sales by the ratio retrieved above for each model that exhibits cost advantage to forecast the sales of hybrid vehicles (this is only valid if consumers respond rationally to cost).
• A simulation of hybrid car sales, with assumptions that initial and running costs based on future advances technology-wise and fuel-wise.
Hybrid Hybrid
From these information, they were able to derive that by 2012, the Japanese market for hybrid cars will be at 460,000 units, while the American market will have 1.68 million units and 50,000 units respectively. Also, by the same year, hybrid cars should be accounted for 6% of the combined US, Japanese and European market.

Personally, I do not think the above could be said to be accurate, because, if car manufacturers like Toyota and Ford are looking to have increased their hybrid car sales in 2010 to one million and 250,000 units respectively, then surely for the 2012 figures provided by NRI (Upcoming advances in the hybrid vehicle market, 2007), it does not really add up. There is also the issue of value retention, e.g. the Toyota Prius has expereienced a 75.3% retention over the last five years (Omninerd, 2005).
Also, Toyota has revealed that in the future, we can expect to see all of Toyota’s vehicles being 100% percent hybrid (Bloomberg, 2005), which can only mean that there are plans in improving the present technology available now, but would this new development mean more money for consumers to pay (to make up for the amount of new components used, etc.).
There are also other factors apart from those mentioned above that could affect the forecast of hybrids. This factor is consumer-wise, based on their worries/concerns. Although they are being urged to base their purchase on fuel savings and environmental friendliness, it might be worth considering the fact that consumers also have a few worries of their own, ranging from driving performance to hybrid cars ‘weird’ designs, all these can contribute to how well the hybrid develop in the near future. Although, I believe that as technology advances, consumers would have no choice than to advance with it, thereby switching to hybrid, even if it looks like a really slow process right now, I believe in the long run, the hybrid market would finally break through (seeing how far we have come form horse driven carriages to what we have now), and who knows we might even be moving on to plug-in hybrid vehicles, where we just plug the hybrid vehicle in like every other household appliance we have, and just charge the motor (PHEV)., but I believe in taking one step at a time, even though the PHEV technology seems to be slightly available in today’s society.

References:

- Bloomberg – Toyota says it may make all its vehicles gas-electric. (2005). Retrieved April 27th 2007 from:
http://www. bloomberg.com/apps/news?pid=10000101&sid=aU1.fWe6ItuY&refer=japan
- Calcars – All about Plug-in-hybrids. (2007). Retrieved 27th April 2007 from:
http://www.calcars.org/vehicles.html
- Edmunds – Most Hybrid vehicles not as cost-effective as they seem. (2005). Retrieved April 27th 2007 from:
http://www.edmunds.com/help/about/press/105827/article.html
- Energy efficiency and renewable energy – hybrid electric vehicles: HEV cost calculator tool. (2007). Retrieved 24th April 2007, from U.S department of energy website:
http://www.eere.energy.gov/cleancities/hev/calculator/single.php
- Howstuffworks – Gasoline-electric hybrid structure. (n.d.). Retrieved April 24th 2007, from Howstuffworks website:
http://www.auto.howstuffworks.com/hybrid-car2.htm
- Hybrid Cars – History of hybrid cars. (2007). Retrieved April 22nd 2007, from Hybrid cars website:
http://www.hybridcars.com/history/history-of-hybrid-vehicles.html
- Hybrid Cars – Technology. (2007). Retrieved April 19th 2007, from Hybrid cars website:
http://www.hybridcars.com/technology.html
- Omninerd – Articles: Is a hybrid worth it? (2005). Retrieved April 24th 2007, from Omninerd website:
http://www.omninerd.com/2005/11/11/articles/41
- SpeedLimit – Petrol Prices. (2007). Retrieved April 25th 2007, from the speedLimit website;
http://www.speedlimit.org.uk/petrolprices.html
- Tanaka, Y., & Shigeta, Y. (2007, February). Upcoming advances in the hybrid Vehicle market. Normura Research institute Papers. Retrieved April 26th 2007, from:
http://www.nri.co.jp/english/opinion/papers/2007/pdf/np2007114.pdf
- Valdes-Dapena, P. (2006, September). Hybrids: Seven worries, seven answers. Retrieved April 27th 2007 from CNNMoney website:
http://www.money.cnn.com/2006/09/27/autos/tipsandadvice/hybrid_worries/index.htm