By Vijayendra Rao and Dr. Julia Saini, Frost & Sullivan
Hybrid electric vehicles (HEVs) have been a very niche market in Europe over the last few years, and 2006 was no different. Their penetration rate was less than 0.5%, with diesel vehicles still dominating the market. European vehicle manufacturers (VMs) are still not confident about introducing hybrid vehicles, with most VMs like Ford, Opel, and VW delaying their plans to launch HEVs in 2006.
Toyota with its full HEVs, PSA Group with its micro HEVs, and Honda with its mild HEVs were the only players in the European HEV market in 2006. The extra cost of full hybridization, which amounts to around €2,000 to €3,000, is deterring other VMs from introducing full HEVs in Europe.
Toyota Drives the Growth of Full-Hybrid Vehicles in Europe
|Figure 1. Research Methodology for Frost & Sullivan End-User Study (Europe), 2006. Click to enlarge.|
The European market for HEVs saw growth of 91% in 2006, mainly dominated by full HEVs. These accounted for around 78% of total HEV sales in Europe in 2006, while mild (13%) and micro (10%) HEV sales were negligible.
Toyota is the only VM to sell full HEVs in Europe and thus accounted for all sales of full HEVs in 2006. According to a Senior Engineer at Toyota, “Due to Toyota’s limited diesel vehicle offering in Europe, hybrid vehicles have been marketed aggressively, especially performance-oriented vehicles such as the Lexus RX400h and the Lexus GS450h.’
|Figure 2. End-User Perceptions about Likely Purchase of Gasoline and Diesel Hybrids (Europe), 2006. Click to enlarge.|
The Lexus RX 400h and the Lexus GS 450h accounted for more than 28% of total sales of Toyota HEVs in Europe. Germany has been at the forefront in adopting performance-oriented Lexus HEVs, with more than 50% of these being sold in that country. However, the Toyota Prius continued its dream run in Europe, with sales volumes of around 30,000 units in 2006, compared to around 20,000 units in 2005.
The UK has been leading the charge for the HEV market in Europe, as these are exempt from the London Congestion Charge, can park for free in Central London, and get a tax break of £1,000 when purchased. HEVs are driving UK customers to adopt full HEVs in a big way.
|Figure 3. Cost Comparison: Gasoline Hybrids, Diesel Hybrids, and Conventional Diesels (Europe), 2007. Click to enlarge.|
Frost & Sullivan recently conducted a study on “Customer Attitudes and Perception towards Powertrain and Hybrid Vehicle Technologies and Features,” interviewing more than 1,800 end-users, as shown in Figure 1.
Based on the study’s findings, customers are more willing to buy diesel HEVs than gasoline HEVs in Europe, as shown in Figure 2.
|Figure 4. Customer Willingness to Pay Extra for Different Types of Hybrid Vehicles (Europe), 2006. Click to enlarge.|
However, diesel HEVs are far more expensive than gasoline HEVs. Figure 3 compares the costs of conventional diesels, gasoline hybrids, and diesel HEVs.
Regarding the likely purchase by type of HEV, customers are willing to pay more for full HEVs than they are for micro and mild HEVs. More than 21% of end-users are willing to pay an additional €1,500 for full HEVs, as shown in Figure 4.
|Figure 5. Sales of Hybrid Vehicles (Europe), 2006. Click to enlarge.|
Full hybridization is targeted at SUV/MPV-segment vehicles, since these are better suited to achieving better performance, fuel savings and reduced emissions than small and medium-segment vehicles. Frost & Sullivan projects sales volumes of around 150,000 full HEVs in Europe by 2012. Figure 5 provides data for 2006.
Sales of Micro-Hybrid Vehicles Have Been Disappointing
PSA Group was the only VM to sell micro HEVs in Europe in 2006, with volume running around 5,000 units. PSA Group launched the Citroen C2 start/stop hybrid in 2006, with sales estimated at around 2,000 units in that year. Ford also had plans to launch the Ford Fiesta micro HEV in 2006. However, due to the extra cost of micro hybridisation (€500-700) compared to conventional gasoline vehicles, Ford has postponed its launch date and is likely to launch its micro HEV in 2008. According to a Research Engineer at Ford’s Forschungszentrum, “The main reason for us not launching micro hybrids is the cost. It is not as cheap as it is claimed to be. So, we are delaying the project.”
General Motors has very concrete plans to launch HEVs in North America, whereas its HEV strategy in Europe is not at all clear. “We are looking at micro hybrids and we see it as a potential market. But the business cases for projected volumes are not positive, and hence we have stalled the project for the time being. We are likely to introduce micro-hybrid vehicles by 2008/2009,” commented a Research Manager for Alternative Propulsion Vehicles at Opel.
Until late 2004, BMW had no plans to enter the HEV market, but has sprung a big surprise on the market by announcing micro-hybridization of the BMW 1, 3 and 5 Series by 2015. According to the Head of Alternative Propulsion, “We are likely to standardize the entire 1, 3 and 5 Series line-up with micro-hybrid vehicles in the coming years,” which is likely to help BMW reduce fleet average emissions of carbon dioxide (CO2) in the years ahead.
The Mild-Hybrid Segment Was a Niche in 2006
Honda, Mercedes, and Volkswagen are the only VMs in Europe that are working on mild HEVs (no pure-electric driving mode). Due to high costs (€1,500-2,000), a lack of pure electric driving (no direct mechanical link between electric motor and wheels), and smaller advantages in terms of emissions and fuel savings than offered by full HEVs, the uptake rates of mild HEVs will be lower than those of full HEVs. Honda managed to sell around 4,500 to 5,000 Honda Civic and Honda Insight mild HEVs in Europe in 2006.
European sales of HEVs in 2006 were disappointing compared to sales in other regions, such as North America and Japan. The main reasons for this were a higher penetration of diesel vehicles, customers not being willing to pay extra for HEVs, a lack of HEV models in Europe, and European VMs not pushing HEVs.
However, European VMs are facing an uphill struggle to meet the voluntary ACEA agreement to reduce CO2 emissions to 140 grams per kilometer (g/km) by 2008 and 120 grams by 2012. At present, most European VMs are in the 150 to 160 g/km range. VMs feel that HEVs provide a solution that will enable them to reduce emissions considerably, compared to alternative solutions such as gasoline direct injection (GDI), automated manual transmissions (AMTs), and low-rolling-resistance tires.
HEVs will reduce CO2 fleet averages by 10 to 50 g/km, depending on the type of HEV. Europe will see considerable growth in the number of HEVs with introduction of models such as Audi Q7, Porsche Cayenne, Volkswagen Touran, BMW X3, Mercedes M Class, S Class in the years ahead, with volumes projected to be over 1.3 million vehicles in 2012. HEVs will definitely be a force to be reckoned with in Europe in the years ahead.
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