Hybrid Economics Michael Love Toyota Motor Sales.
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Transcript of Hybrid Economics Michael Love Toyota Motor Sales.
Hybrid EconomicsHybrid Economics
Michael LoveMichael Love
Toyota Motor SalesToyota Motor Sales
Defining the IssueDefining 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 BenefitsPotential 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 performanceBetter performance
In some combinationIn some combination
Toyota’s PositionToyota’s Position
• Hybridization of power trains offer benefits Hybridization of power trains offer benefits that can be realized today on many types that can be realized today on many types of power plants – gas, diesel, alt fuel, even of power plants – gas, diesel, alt fuel, even fuel cell – but no single technology offers a fuel cell – but no single technology offers a “silver bullet” solution to all the future “silver bullet” solution to all the future challengeschallenges
Hybrid EconomicsHybrid Economics
• Assuming issue is cost of ownership, Assuming issue is cost of ownership, analyze just like any other vehicleanalyze just like any other vehicle
– Initial purchase priceInitial purchase price
– Resale valueResale value
– Operational costsOperational costs Fuel, insurance and maintenanceFuel, insurance and maintenance
IntangiblesIntangibles
Some companies (like some individuals) find Some companies (like some individuals) find value in certain “intangibles”value in certain “intangibles”
• EfficiencyEfficiency
• Energy securityEnergy security
• Concern for environmentConcern for environment
• Good corporate citizenshipGood corporate citizenship
• Technology leadershipTechnology leadership
Issues RaisedIssues Raised
Within popular media, some have raised concern Within popular media, some have raised concern over hybrids:over hybrids:
• MaintenanceMaintenance – primarily battery life / cost – primarily battery life / costBattery designed for life of vehicle = >15 Battery designed for life of vehicle = >15
years / 15k mi.years / 15k mi.Battery warranty 8/80k is not “signal” of Battery warranty 8/80k is not “signal” of
battery life, just like 3/36k vehicle warranty battery life, just like 3/36k vehicle warranty does not imply vehicle life!does not imply vehicle life!
• Resale valueResale value: Based on many issues but : Based on many issues but similar (or better) than conventional vehiclessimilar (or better) than conventional vehicles
Fuel Economy Fuel Economy
Actual vs. Label Fuel Economy has been Actual vs. Label Fuel Economy has been hot topic, with much confusion …hot topic, with much confusion …
•Fuel economyFuel economy is non-linear versus all is non-linear versus all issues of interestissues of interest
–Cost of fuelCost of fuel–Gallons of fuel usedGallons of fuel used
–COCO22 emitted emitted
•Fuel consumptionFuel consumption is the better metric is the better metric Gallons saved has significant meritGallons saved has significant merit
Gallons SavedGallons Saved
• Every 100 gallons of gasoline saved has Every 100 gallons of gasoline saved has the following impacts:the following impacts:
– ~$300 in the owner’s pocket (not ~$300 in the owner’s pocket (not spent)spent)
– ~ One ton CO~ One ton CO22 not emitted not emitted
– ~4 barrels of crude not consumed~4 barrels of crude not consumed
• Each additional 100 gallons saved has the Each additional 100 gallons saved has the same impact (i.e.: the metric is linear)same impact (i.e.: the metric is linear)
Gallons SavedGallons Saved
VehicleVehicle2004 EPA 2004 EPA
Trends Trends ClassClass
2004 EPA 2004 EPA Trends Old Trends Old
MPGMPG
Old Model Old Model MPGMPG
Gallons Gallons Saved per Saved per
YearYear
CivicCivic
HybridHybridComp. CarComp. Car 27.127.1 47.647.6 238238
Toyota Toyota PriusPrius
M/S CarM/S Car 24.324.3 55.355.3 346346
Ford Ford EscapeEscape
Midsize Midsize SUVSUV 19.219.2 32.132.1 314314
GM GM SilveradoSilverado
Large Large PickupPickup 16.516.5 18.418.4 9494
Well, everybody knows the EPA test is no
good!Consumers’ Union uses their own on-
road tests
Urban LegendUrban Legend
Old EPA vs. CU - MPGOld EPA vs. CU - MPG
SourceSource PriusPrius CorollaCorolla CamryCamry MalibuMalibu Jetta TDIJetta TDI
Old EPAOld EPA
CombComb 5555 3232 2727 2828 3737
CUCU
OverallOverall 4444 2929 2424 2424 3232
% Diff% Diff 20%20% 9%9% 11%11% 14%14% 14%14%
These data certainly suggest that Prius has a larger
shortfall, right?
Old EPA vs CU – Gallons / Old EPA vs CU – Gallons / YearYear
SourceSource PriusPrius CorollaCorolla CamryCamry MalibuMalibu Jetta TDIJetta TDI
Old EPAOld EPA
CombComb 273273 469469 556556 536536 405405
CUCU
OverallOverall 341341 517517 625625 625625 469469
Gal DiffGal Diff 6868 4848 7171 8989 6464
But, not on a gallons per year basis Remember MPG is non-
linear
Economy vs Economy vs ConsumptionConsumption
0
10
20
30
40
50
60
70
10 20 30 40 50 60 70
Economy (MPG)
Ga
l/1
00
0m
i
X
XX
X-10% FE = -5 mpg, but +2.2 gal/1000mi
-10% FE = -2 mpg,but +5.6 gal/1000mi
Old EPA vs CU – Prius Old EPA vs CU – Prius SavingsSavings
SourceSource PriusPrius CorollaCorolla CamryCamry MalibuMalibu Jetta TDIJetta TDI
Old EPAOld EPA
CombComb -- 196196 283283 263263 133133
CUCU
OverallOverall -- 176176 284284 284284 128128
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 LegendAnother Urban Legend
EPA Test Results - MPG EPA Test Results - MPG
VehicleVehicle Old EPA Old EPA LabelLabel
ColdCold
2020FFHotHot
SC03SC03
AggressiveAggressive
US06US06
PriusPrius 5555 45.145.1 44.344.3 44.144.1
CorollaCorolla 3232 26.426.4 25.425.4 26.426.4
CamryCamry 2727 22.222.2 21.321.3 25.625.6
Again, these data certainly suggest that Prius has a larger
shortfall, right?
Old EPA Results – Gal/Yr Old EPA Results – Gal/Yr
VehicleVehicle Old EPA Old EPA LabelLabel
ColdCold
2020FFHotHot
SC03SC03
AggressiveAggressive
US06US06
Avg incr Avg incr GallonsGallons
PriusPrius 273273 333333 339339 340340 6464
CorollaCorolla 469469 568568 591591 568568 107107
CamryCamry 566566 676676 704704 586586 8989
Again, consumption tells a different story
EPA Tests – Prius EPA Tests – Prius Savings Savings
VehicleVehicle Old EPA Old EPA LabelLabel
ColdCold
2020FFHotHot
SC03SC03
AggressiveAggressive
US06US06
PriusPrius -- -- -- --
CorollaCorolla 196196 236236 252252 228228
CamryCamry 283283 343343 366366 246246
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 What about Label changes?changes?
And they must keep the MPG metric by law
NEW EPA vs. CU - MPGNEW EPA vs. CU - MPG
SourceSource PriusPrius CorollaCorolla CamryCamry MalibuMalibu Jetta TDIJetta TDI
New EPANew EPA
CombComb 4646 2828 2424 2525 3232
CUCU
OverallOverall 4444 2929 2424 2424 3232
% Diff% Diff 5%5% -4%-4% 0%0% 4%4% 0%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 – www.fueleconomy.gov
NEW EPA vs CU – Prius NEW EPA vs CU – Prius SavingsSavings
SourceSource PriusPrius CorollaCorolla CamryCamry MalibuMalibu Jetta TDIJetta TDI
New EPANew EPA
CombComb -- 196196 283283 263263 133133
CUCU
OverallOverall -- 176176 284284 284284 128128
The New EPA ratings predict the same fuel savings as CU
for the Prius!
What Next?What Next?
EPA will change the calculation of LABEL FE once again in MY2011
Stay tuned!
Moral of the StoryMoral of the Story
• Be clear on the goal of the exerciseBe clear on the goal of the exercise
• Forget about fuel economy, especially % Forget about fuel economy, especially % differences, and focus on gallons saved in differences, and focus on gallons saved in your analysisyour analysis
• Consider intangibles as appropriateConsider intangibles as appropriate
Toyota believes hybridization offers value Toyota believes hybridization offers value and will continue to expand it’s offeringsand will continue to expand it’s offerings
Questions?Questions?