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Apr 1, 2005 (From the CalCars-News archive)
This posting originally appeared at CalCars-News, our newsletter of breaking CalCars and plug-in hybrid news. View the original posting here.
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KALW 91.7FM, It's Your Call with Laura Flanders­
10-11 AM, rebroadcast 1-2PM -- you can listen to it online or at RealAudio archive. I'll come on around 10:20

Subject is hybrids
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Feel free to call in with questions or comments about the market for PHEVs.
415-841-4134 (Bay Area)
866-798-TALK (Toll-Free)­wired/­archive/­13.04/­hybrid.html

Rise of the Green Machine
In a nation of gas-guzzlers, Toyota made hybrids cool. Now the world's number-two automaker wants to make the internal combustion engine obsolete.
By Brendan I. Koerner

Toyota promised me 60. The spec sheet on the 2005 Prius clearly states that the car gets five dozen miles per gallon of gas on city streets. But I'm test-driving a beige hatchback along Sepulveda Boulevard on the outskirts of Los Angeles, and according to the touchscreen on the dash, I'm topping out at 49.7.

Granted, 49.7 miles per gallon is at least twice what all the gas hogs around me are getting. But whenever I hit the accelerator, no matter how gradually, my mileage dips. I must be doing something wrong. I click the screen over to a real-time schematic of the hybrid gas-electric power train. Rolling out of a stop, the car is golf-cart silent while the display shows the 50-kilowatt electric motor providing all the power to the wheels. Once I hit 9 miles per hour, the gas engine takes over, transforming the electric motor into a performance booster that kicks in only when I need some extra juice. The secret to increasing my fuel economy, I realize, is to manipulate the relationship between the two halves of the engine. The more I can use the electric propulsion, the better mileage I'll get.

And that's when I have my eureka moment. There's a sweet spot on the accelerator. When the car hits 40 miles per hour, I coast for a few seconds, letting the gas engine go idle, then use the electricity to maintain my speed by depressing the pedal ever so slightly. My mileage starts to climb - 50.1, 50.4, 50.8.

My ad hoc videogame on the traffic-clogged streets of LA is nothing new to the 120,000 Prius owners in the US. Some fanatics even drive shoeless to be in better touch with the accelerator. For true masters, 50 miles per gallon is a piker's score; they shoot for a consistent 60. When it comes to gas mileage, Prius owners can make TiVo users and Mac addicts seem blasé. A typical newsgroup posting from one of hundreds of customers who frequent fansites like "This is the greatest car ever invented!"

Which is pretty much how Toyota feels. The company introduced an environmentally friendly, rather homely car to a niche of pocketbook activists five years ago. Having proved a market, Toyota remodeled the car's body, increased the engine's power, worked out the bugs, and turned a profit. Now it's rolling out phase two of its strategy: bringing hybrids to the masses. "We're at the edge of making the internal combustion engine similar to regular film for a camera," says Ernest Bastien, VP of Toyota's vehicle operations group. Bold words, considering that more than 99 percent of the cars Toyota sold last year had traditional internal combustion engines.

In phase two, Toyota is doubling production to sell 100,000 new Priuses in the US this year. This spring, the company will introduce the Lexus RX 400h, billed as the world's first luxury hybrid, followed by the Toyota Highlander Hybrid SUV. And it's considering opening a US manufacturing facility. Toyota has also begun advertising the Prius to the mass market. The company kicked off a TV ad campaign with a $5 million, 60-second spot during the Super Bowl that hit on a few important marketing messages: The Prius is good for Mother Earth, and it doesn't need to be plugged in - a major point of confusion in Middle America. The commercial also confirmed Toyota's role as Detroit antagonist by jabbing the industry for failing to advance the automobile engine in the last 120 years.

Of course, Toyota's not the only company with a hybrid on the market (see "Hybrids Hed2Hed," page 102). Honda has the Civic Hybrid, Accord Hybrid, and Insight. Nissan licensed Toyota's technology for the forthcoming Altima Hybrid. Ford introduced the Escape Hybrid SUV and Chevrolet has the Silverado Hybrid pickup. But Toyota has sold more hybrids than all other automakers combined, and it's the only manufacturer fully embracing the technology's long-term prospects. Other automakers fear that hybrids are too expensive or too complex to augur real change - not the digital camera that even-tually revolutionized that market, to use Bastien's analogy, but rather a niche product like the old-fashioned Polaroid - and that hybrid technology will be supplanted by hydrogen-powered fuel cells.

Which means that if there's going to be a hybrid in every garage come 2020, Toyota must lead the way. It may seem odd that the company poised to overtake General Motors in the next few years as the world's biggest automaker is out to render the traditional internal combustion engine obsolete. But the early success of the Prius is making believers out of Toyota suppliers. Toshiba, for example, recently committed $95 million to build a facility to manufacture hybrid control system microchips. Likewise, Sanyo announced that it will double output of its rechargeable hybrid batteries. For hybrids to become ubiquitous, however, Toyota needs to make a convincing case to drivers from Baltimore to Beijing - not to mention executives in Detroit - that hybrids are neither a stopgap nor a luxury, but affordable, cool, and here to stay.

Who but a tree hugger or a Hollywood politico would pay $20,000 for a four-door hatchback with a puny 1.5-liter engine? Toyota COO Jim Press has heard the question before, and he jumps on it. "How much premium are people paying today for their Hemi V-8?" he asks, referring to the 345-horsepower engine that's an option on the Dodge Ram pickup. The answer: about $1,000. "What do they get out of that? They can go faster from stoplight to stoplight. Why wouldn't they pay for a more fuel-efficient engine that gives you better performance but also saves the planet?"

"Saves the planet"? OK. The EPA classifies the Prius as a Super Ultra Low Emissions Vehicle. It uses less fuel than the most efficient diesel car and emits 95 percent fewer carcinogens into the atmosphere. So its green cred is irrefutable. But "better performance"?

Ever since General Electric first dabbled unsuccessfully in gas-electric technology in the early 1900s, the knock on hybrids has been that they don't have enough pep. (Engineers of the day couldn't get the cars much past the 35-mph barrier.) That was true of the first Prius, introduced in Japan eight years ago. Like today's version, it had a gas engine and an electric motor linked by a "power split device," a set of gears connecting two power systems to one axle. Each half of the power train can work independently or together, depending on the situation. The battery is recharged by the gas engine, as well as through a process called regenerative braking, in which the car's kinetic energy is converted into juice that's stored in the battery.

Despite the technologically impressive power train, the original Prius was suited to little more than the start-and-stop city driving that's common in Japan. Basic hybrid technology works well in vehicles that stop frequently and travel at low speed. (Which is why several package-delivery companies, including FedEx, are experimenting with hybrid fleets.) When Toyota brought the Prius to the US in 2000, it increased the electric motor's power to meet the typical American driver's hunger for acceleration. Still, the Prius went zero to 60 in a lethargic 14 seconds - making highway on-ramps an adventure - and drivers had to tolerate the annoyance of feeling the power train toggle between gas and electric.

Despite these drawbacks, and a sticker price about $3,000 higher than a similarly equipped Corolla, dealers could hardly keep the early Prius on their lots, in part because of Toyota's savvy rollout strategy. New cars are usually doled out evenly to 12 US sales regions. But the marketing department knew that only a special customer would pay $20,000 for a compact car. Specifically, someone with a master's degree, a six-figure income, and a fondness for composting.

So Toyota diverted a larger percentage of cars to the San Francisco Bay Area. "If we had used a conventional distribution system, we would have had consume`‹ŚWaiting in Northern California, and dealers with cars sitting on lots in Jacksonville," says Bastien. Bay Area early adopters were willing to sacrifice performance for psychological rewards.

But if the goal is to go big, there can be no sacrifices. The second-gen Prius accelerates 25 percent faster due to a new boost converter that turns the nickel metal hydride battery's 200 volts of DC output into 500 volts of AC to power the electric motor. Advances in battery chemistry also helped the battery shed nearly 29 pounds, making the car a bit quicker off the line and stingier with fuel.

The biggest development in the Prius 2.0 comes in the way the transmission manages both halves of the engine. As I discovered on my test-drive, the power train doesn't merely use electricity at low speeds, gas on the highway. Rather, the two sides of the engine work in tandem. The patented algorithm that manages that relationship is the real secret to the power train's success. It tells each part of the system when to whir to life or shut down, optimizing both fuel efficiency and performance. Toyota's engineers also sped up interaction between the onboard computer and the transmission, which now allows the power train to more quickly sense when the electric motor should provide extra oomph to merge onto the freeway or climb a steep incline.

The second-generation Prius handles like any other midsize sedan, and has impressive power on straightaways. Last August, Toyota's engineers set a hybrid speed record on the Bon-ne-ville Salt Flats: 134 miles per hour. Except for a few minor modifications - reduced weight, enhanced gear ratios
- the green and white speedster was a street-grade Prius; the Bonneville team even left the CD changer intact. The Highlander Hybrid and Lexus RX 400h perform even better. The all-wheel-drive Lexus boasts a 268-horsepower 3.3-liter V-6, two electric motors, and a more powerful boost converter, which transforms the battery's 200 volts into 650 volts. And though its estimated 30 miles per gallon can't match the Prius, the Lexus offers fuel efficiency that beats most four-cylinder sedans.

The question now is how to further improve the fuel efficiency and performance of hybrids without increasing the sticker price. Toyota's engineers have exhausted the most obvious tricks. The boost converter probably can't produce much more than 650 volts unless the entire electronics system is overhauled. It may be possible to capture more energy from the brakes and return it to the battery, but that will be an incremental improvement. One significant advance could come in battery development, as companies such as South Korea's LG Electronics develop lithium ion. Li-ion batteries pack the same wallop as NiMH units but cut 18 pounds off the weight of hybrid power trains - enough to add a few more miles per gallon.

Beyond that, automakers are going to have to get more creative to reach new levels of fuel economy. One option is to use carbon fiber parts to decrease weight, but that will significantly increase costs. "There is room for triple-digit fuel economy if you're willing to go to a very, very low-mass solution," says Dave Hermance, executive engineer for Toyota's environmental engineering group. "But I'm not sure the market is ready for an all-aluminum body."

The record of the Honda Insight suggests Hermance is right about how much change the market will accept in return for better mileage. The tiny two-seat Insight is even more fuel efficient than the Prius, averaging 66 miles per gallon on the highway, thanks to the car's aluminum chassis and funkier, more aerodynamic teardrop shape. But Honda sold only 583 Insights in the US last year; Toyota sold 55,390 Priuses.

Beyond looming engineering challenges, Toyota also faces a marketing dilemma as hybrid engines find their way into normal-looking vehicles. The Prius has been a hit in part because of its unique looks: Buy a hybrid and passersby will know that you're both hip and intelligent, not to mention part of a club that includes Leonardo DiCaprio, Cameron Diaz, and former CIA director James Woolsey. The look-at-me factor, however, is soon to fade. The Highlander Hybrid appears almost identical to its gas-burning cousin. Toyota is rumored to be introducing for 2006 a hybrid version of the Camry, the best-selling car in the US, which will probably look exactly like its vanilla namesake. Word is that the Lexus GS 450h, a hybrid version of the GS 430 sports sedan, will hit the market around the same time. Only then will Toyota know whether Prius owners are plunking down the extra $3,000 to help the environment or for the head-turning appeal.

The internal combustion engine under your car's hood isn't much different from the one that Gottlieb Daimler and Wilhelm Maybach patented in 1885. There have been occasional advances to limit emissions and increase fuel efficiency, most notably the introduction of electronic fuel injection in the 1980s. Otherwise, automotive innovation has focused on adding horsepower to ever smaller, ever cheaper internal combustion engines. Between 1981 and 2003, the average horsepower of cars sold in the US rose 93 percent.

Until recently, there seemed little need to worry about fuel economy. The thermo-dynamic properties of fossil fuels are hard to beat, and as long as oil remained cheap and plentiful, there was no reason to spend a fortune bringing a new type of car to market. Compared with tech-driven industries, automaking has been on a flat innovation curve. "You can't design a new car, bake it, and start using it when it comes out the other end," says Jim Press. "You've got billions of dollars of research and testing, and parts suppliers that have to be dealt with. On engines and power trains, you need 10- to 20-year life cycles to amortize the investments."

The long investment cycle makes some auto companies skittish about adopting new approaches. Selling 120,000 cars in Palo Alto and Hollywood is one thing - but what do middle-class families in Houston want? The average fuel economy of all 2004 vehicles was, in fact, 6 percent less than it was in 1987. Automakers say they're just giving the market what it demands - more of the same.

And so it came as no surprise that the word at this winter's auto show in Detroit was horsepower. Sure, the Ford Escape Hybrid was a promising newcomer, winning the trophy for 2005 North American Truck of the Year. And Ford vows to roll out four more hybrid models by the end of 2008. But for now, the company is making only 20,000 Escape Hybrids a year because it considers a $5,000 premium over the conventional Escape too steep for the mass market.

The same goes for Nissan. It will release a hybrid Altima in 2006 with Toyota's power train under the hood, but CEO Carlos Ghosn isn't sold on the technology. At the Detroit show, he warned that unless costs are reduced dramatically, "the hybrid is going to be like the electric cars" - a historical footnote, on par with the famously failed EV1 of the late 1990s. Honda, which put the first hybrid on the US market, still doesn't have real traction. Sales of its Civic hybrid have been disappointing; the company moved just 1,169 in January, a 45 percent drop from the previous month. Honda has no plans to put its hybrid system into the Element or Pilot SUVs.

One reason carmakers like to focus on horsepower is that it's damn hard to develop an algorithm that manages a hybrid power train. No company has been able to come up with a formula that beats Toyota's. Ford developed its own algorithm only to realize it was very similar to the Toyota approach; in order to avoid a lawsuit, it ended up purchasing a license rather than pursuing a patent. Mercedes was stunned to discover that its vaunted F 500 Mind concept car, a diesel-electric hybrid, actually got worse mileage on the highway than a gas-only version. Nissan just threw up its arms and licensed nearly all of Toyota's hybrid technology.

GM seems enthusiastic about hybrids, trumpeting a system it's developing with DaimlerChrysler that can beat Toyota on highway mileage. But GM doesn't exactly have a stellar track record in this arena. The company convinced King County, Washington, that its GM Allison New Flyer buses could increase fuel efficiency up to 40 percent over conventional diesels. The county purchased 235 buses at $645,000 each, a $200,000 premium per vehicle over their existing fleet, only to realize that the New Flyers don't get better mileage.

As a result of hybrid tech's complexities, many companies are looking in other directions. Audi, BMW, and Volkswagen are working on clean diesel. At the Detroit auto show, most manufacturers showed off hydrogen vehicles, which use fuel cells and emit only water vapor. Hydrogen cars are definitely the endgame, but making fuel for them requires copious energy. Building a network of filling stations will cost hundreds of billions of dollars. It'll take decades to solve such problems. In the meantime, many automakers seem content to point to their hydrogen prototypes as evidence that they're working on new solutions while actually embracing the status quo.

Not so at Toyota. Hybrid vehicles are showing up all over US roads because the Japanese carmaker has thrown its full weight behind the technology. The company has its own fuel cell prototype in the works, but executives are quick to note that the Prius is actually more efficient when you factor in how much energy it takes to produce the hydrogen fuel in the first place. And unlike hydrogen cars, hybrids work with the current energy infrastructure.

As far as the price premium that's so troubling to other automakers, Toyota just doesn't seem all that concerned. Even in a best-case scenario, hybrid power trains will always be more expensive due to the engine's increased sophistication. But the company is betting gas prices are going nowhere but up. If that's true, the hybrid tax begins to recede. It's a gamble, but a calculated one. Prius sales rise or fall from month to month in almost direct correlation to the fluctuating price of oil. And then there are the geopolitical factors to consider. "The cost of oil, the real cost of oil, is not just what you pay at the pump," says Press. "It's what we're paying in Iraq. That's the true cost." In short, Toyota has chosen the hybrid track for a simple reason: The world cannot afford to wait another 40 years.

Global warming. There. We said it. So declared a 2001 advertisement taken out by Ford in newspapers nationwide. It was an unusually frank admission from an industry better known for pooh-poohing all evidence of rising greenhouse gas emissions. But carmakers have begun to do the math. Right now, there are about 800 million cars in active use. By 2050, as cars become ubiquitous in China and India, it'll be 3.25 billion. That increase represents an enormous sales opportunity for automakers and an almost unimaginable threat to our environment. Quadruple the cars means quadruple the carbon dioxide emissions - unless cleaner, less gas-hungry vehicles become the norm.

Toyota knows China is the future. It will open a Prius manufacturing plant in Chang-chun by the end of the year, and Press believes driving conditions in China make hybrids an ideal fit - if not the Prius, then perhaps a more low-cost, low-power alternative perfect for puttering around megacities (see "China's Next Cultural Revolution," page 106). Or maybe the demand will be for so-called mild hybrids, like Honda's Civic Hybrid, which save fuel and limit emissions but can't run on electricity alone. Such vehicles improve fuel economy by 10 to 25 percent, chiefly by using an electric motor to start the engine. The technology is nowhere near as impressive as the Prius power train, but it's simpler and cheaper - which will be important to Chinese workers making $800 a month.

If Prius' early track record is any indication, the world will embrace hybrids. Prius waiting times have stretched six months or more, even with dealers selling above MSRP; the Lexus RX 400h had a preorder list of 18,000 names in January, three months before its release. And the masses are taking notice. A 2004 study by the Public Policy Institute of California found that 47 percent of those surveyed would consider buying a hybrid, higher prices and all.

Being pro-environment and actually slapping down an extra $3,000 are two different matters, of course. But several ominous forces could easily tip the market toward hybrids: worsening climate change, war in the Middle East, a tripling of gas prices due to regional turmoil, raised emission standards in China.

Jim Press says "the oil-drinking party" is nearing an end. When the lights come on, the US auto industry will see the energy equivalent of a Wall Street correction. And it will realize there's money to be made in slowing the depletion of our ozone and tapping into fears that we're leaving the planet worse than we found it. Toyota already understands this. Before long, Detroit will remember the last time a Japanese carmaker came up with a better way to build automobiles.

Contributing editor Brendan I. Koerner (brendan@...) wrote about high-end home theaters in issue 13.01.

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