Hybrid Economics Michael Love Toyota Motor Sales
Defining the Issue Lowest purchase price ? Lowest purchase price ? Lowest cost of ownership ? Lowest cost of ownership ? Lowest life cycle cost ? Lowest life cycle cost ? Lowest life cycle GHG ? Lowest life cycle GHG ? Lowest criteria pollutants ? Lowest criteria pollutants ? Lowest fossil fuel use ? Lowest fossil fuel use ? Other ? Other ?
Potential Hybrid Benefits Lower fuel use = lower fuel cost and CO2; Lower fuel use = lower fuel cost and CO2; Lower criteria pollutants; Lower criteria pollutants; Better performance Better performance In some combination
Toyota’s Position Hybridization of power trains offer benefits that can be realized today on many types of power plants – gas, diesel, alt fuel, even fuel cell – but no single technology offers a “silver bullet” solution to all the future challenges Hybridization of power trains offer benefits that can be realized today on many types of power plants – gas, diesel, alt fuel, even fuel cell – but no single technology offers a “silver bullet” solution to all the future challenges
Hybrid Economics Assuming issue is cost of ownership, analyze just like any other vehicle Assuming issue is cost of ownership, analyze just like any other vehicle – Initial purchase price – Resale value – Operational costs Fuel, insurance and maintenance
Intangibles Some companies (like some individuals) find value in certain “intangibles” Efficiency Efficiency Energy security Energy security Concern for environment Concern for environment Good corporate citizenship Good corporate citizenship Technology leadership Technology leadership
Issues Raised Within popular media, some have raised concern over hybrids: Maintenance – primarily battery life / cost Maintenance – primarily battery life / cost Battery designed for life of vehicle = >15 years / 15k mi. Battery warranty 8/80k is not “signal” of battery life, just like 3/36k vehicle warranty does not imply vehicle life! Resale value: Based on many issues but similar (or better) than conventional vehicles Resale value: Based on many issues but similar (or better) than conventional vehicles
Fuel Economy Actual vs. Label Fuel Economy has been hot topic, with much confusion … Fuel economy is non-linear versus all issues of interestFuel economy is non-linear versus all issues of interest –Cost of fuel –Gallons of fuel used –CO 2 emitted Fuel consumption is the better metricFuel consumption is the better metric Gallons saved has significant merit
Gallons Saved Every 100 gallons of gasoline saved has the following impacts: Every 100 gallons of gasoline saved has the following impacts: – ~$300 in the owner’s pocket (not spent) – ~ One ton CO 2 not emitted – ~4 barrels of crude not consumed Each additional 100 gallons saved has the same impact (i.e.: the metric is linear) Each additional 100 gallons saved has the same impact (i.e.: the metric is linear)
Gallons Saved Vehicle 2004 EPA Trends Class 2004 EPA Trends Old MPG Old Model MPG Gallons Saved per Year CivicHybrid Comp. Car Toyota Prius M/S Car Ford Escape Midsize SUV GM Silverado Large Pickup
Well, everybody knows the EPA test is no good! Consumers’ Union uses their own on-road tests Urban Legend
Old EPA vs. CU - MPG SourcePriusCorollaCamryMalibu Jetta TDI Old EPA Comb CUOverall % Diff 20%9%11%14%14% These data certainly suggest that Prius has a larger shortfall, right?
Old EPA vs CU – Gallons / Year SourcePriusCorollaCamryMalibu Jetta TDI Old EPA Comb CUOverall Gal Diff But, not on a gallons per year basis Remember MPG is non-linear
Economy vs Consumption X X X X -10% FE = -5 mpg, but +2.2 gal/1000mi -10% FE = -2 mpg, but +5.6 gal/1000mi
Old EPA vs CU – Prius Savings SourcePriusCorollaCamryMalibu Jetta TDI Old EPA Comb CUOverall On a gallons saved per year basis, the old EPA ratings were a good comparison
But, high efficiency vehicles suffer more in extreme operation! Another Urban Legend
EPA Test Results - MPG Vehicle Old EPA Label Cold 20 F HotSC03AggressiveUS06 Prius Corolla Camry Again, these data certainly suggest that Prius has a larger shortfall, right?
Old EPA Results – Gal/Yr Vehicle Old EPA Label Cold 20 F HotSC03AggressiveUS06 Avg incr Gallons Prius Corolla Camry Again, consumption tells a different story
EPA Tests – Prius Savings Vehicle Old EPA Label Cold 20 F HotSC03AggressiveUS06 Prius---- Corolla Camry On a gallons saved per year basis, the EPA ratings are a good comparison
EPA has changed the calculation of label MPG values in MY08 (but the tests are the same) What about Label changes? And they must keep the MPG metric by law
NEW EPA vs. CU - MPG SourcePriusCorollaCamryMalibu Jetta TDI New EPA Comb CUOverall % Diff 5%-4%0%4%0% The New EPA numbers are very close to the CU numbers! Based on MY04 vehicles as not all vehicles are available in MY08; EPA data –
NEW EPA vs CU – Prius Savings SourcePriusCorollaCamryMalibu Jetta TDI New EPA Comb CUOverall The New EPA ratings predict the same fuel savings as CU for the Prius!
What Next? EPA will change the calculation of LABEL FE once again in MY2011 Stay tuned!
Moral of the Story Be clear on the goal of the exercise Be clear on the goal of the exercise Forget about fuel economy, especially % differences, and focus on gallons saved in your analysis Forget about fuel economy, especially % differences, and focus on gallons saved in your analysis Consider intangibles as appropriate Consider intangibles as appropriate Toyota believes hybridization offers value and will continue to expand it’s offerings
Questions?