Ghosn: Hybrids Are a “Terrible Business Prospect”

23 September 2005

Carlos Ghosn, joint chief executive of Nissan and Renault, continues to describe gasoline-electric hybrids as a “terrible business prospect.” He made his latest remarks during an update for the media on the status of Nissan’s business plan.

Although Nissan plans to introduce a hybrid version of its Altima based on Toyota’s Hybrid Synergy Drive next year, Ghosn is a skeptic and views the Altima hybrid as a niche solution for specific markets. (Earlier post.)

Hybrid sales account for less than one per cent of global sales. It is a niche technology. The question is how much the consumer is willing to pay for them, and if they are unsure at $70 a barrel [for oil] then I would be very worried. For now it is a terrible business prospect. We have to be careful that we don’t try to impose a technology on the market. (FT) Ghosn believes that Nissan can meet short-term demands for fuel-efficient cars with a variety of technologies that are less expensive: smaller gasoline cars, diesel and flex-fuel cars. He maintains his skeptical—and vocal—stance even while other automakers hurry to either increase their hybrids production (Toyota, Honda and Ford) or to announce upcoming introductions (GM, DaimlerChrysler, BMW, Volkswagen and Porsche). Comments Well, it still isn't clear that hybrids are the right answer for cost savings through fuel efficiency (as opposed to high MPG gas-only cars). I suspect that they are in the long run, but maybe I'm wrong... Could he be saying that because Nissan doesn't have any in-house hybrid tech that is ready and they have to license it from Toyota? Because Toyota certainly doesn't seem to think it's a bad business model if they are planning to sell 400,000 next year and make hybrid versions of all their models in the next few years... "Well, it still isn't clear that hybrids are the right answer for cost savings through fuel efficiency (as opposed to high MPG gas-only cars)." Yes, but then, nobody buys a car to save money. It's strange that people whip out the calculator as soon as you talk about hybrids, but would never try to rationalize a bigger engine, moonroof or bodykit. A high MPG car (smaller engine) or diesel engine saves significantly more gas than any hybrid. More and more, the hybrid powertrain is simply used to increase performance (Low-end torque, etc) rather than increase fuel economy. Ghosn is right...hybrids are a fad. Carmakers "need" hybrids to stay competitive in the current marketplace. But it isn't the answer to sustainable mobility. Toyota is marketing more hybrids, but at the same time they are beefing up production of the Tacoma pickup here in San Antonio. Posted these comments on SZ at: http://www.sustainabilityzone.com/comments.php?load_this=166 There's a number of points to be made about these comments. On the surface, they seem to fly in the face of the green ethic, but a detailed examination (and the passage of time) may show them to be more prudent (from business and environmental standpoints) than one might think. Oil Prices: To begin with, let's examine Ghosn's implicit assumption that oil prices will drop back down. In the medium term, he's probably right IMHO. Peak oil arguments aside, there's a lot of pressure on production, and the ability to increase output still exists (even if its bankrupting our energy future) - whether its via OPEC, or investment in oil sands in Alberta. That being said, is the current popularity of hybrids a marketing-fuelled temporary phenomenon? Demonstrably, the oil shocks of the seventies failed to have a lasting impact on the consumer conciousness - it looks like Ghosn is banking on the same fickle consumer mentality to keep hybrids out of the profitable core of the automobile business. Alternative Technologies: The second part of Ghosn's comments suggests that existing technologies like low emissions diesel and flex fuel motors can meet the same goals as hybridization without the need to invest in new technologies and tool up for their manufacture. At present, this is a true statement: there's plenty of tricks that can be used to squeeze mileage out of an ICE that don't require the added layer of electric assist. The Smart car provides an example of this. Again, however, there's an implicit assumption on Ghosn's part that MPG goals won't change - which I think is a mistake. What would be even better than a Smart car, for instance? A super-high mileage hybrid Smart car, or an all electric version. Even if you need to look a decade ahead, the trend toward higher mileage vehicles is inevitable and eventually straight up ICE will need to supplemented or replaced. Summary? (IMHO) Ghosn probably thinks he's doing the right thing for his shareholders by deferring significant technology investment for a decade - and he's probably right. At the end of the decade, however, Nissan/Renault's peer manufacturers will enjoy significant brand and technology advantages, and Nissan/Renault will need to spend hard and fast if they want to catch up. Of course, Ghosn will be retired by then, so it will be someone else's mess to deal with. Now *that's* savvy management. A 4-cylinder car or turbodiesel with stop-start technology has much better math than any of the current crop of hybrids. "A 4-cylinder car or turbodiesel with stop-start technology has much better math than any of the current crop of hybrids." True, it's a good low-cost alternative and I can't wait to see it implemented in more non-hybrid models. BUT, from a "user friendliness", smoothness and technical transparency perspective, we have to remember that stop-start works better in a hybrid that has an electrical motor that can move the car at low speeds (like the Prius). Just imagine if you had a car with stop-start in the Rita evacuation traffic. The engine would have stopped and started a gazillion times during the trip, while in a Prius it would only have restarted a few times when the battery was getting low. Ghosn is a businessman through and through. His nickname "Le Cost Killer" is more than that. Its written allovwer his character. All he cares about is PROFITS. By pushing hybrids to the side, he prevents the huge investments. Toyota's large investments in hybrids is already eating into their profits. Personally I think he is right. I am not impressed with all the hoopla hybrids are generating yet delivering so little when a 1000cc toyota Aygo can achieve similar or better mileage in realworld without costing a fortune. Except that Nissan won't have much to sell in the USA when gasoline hits$4/gallon, while Toyota and Honda will be able to adjust the fuel economy of their hybrid models with tweaks to the compression ratio and camshaft or just the software.  Voila, instant response to customer demand.  The micro-models that Nissan would be able to offer for the same economy level wouldn't appeal to the USA.

That's a big part of the problem in the USA, isn't it?

Automakers there have spend billions and billions marketing to DEATH big cars, big engines, SUVs, etc (basically everything that has a large profit margin) and now it's very hard to get people to look at other things.

This looks like a short sighted statement. Granted that business has to remain profitable, to say that hybrids are a niche product glosses over this relatively new choice for consumers (at least here in the US). After all, people don't go out and buy a new car every year. Myself, I own two cars, one which is 5 years old and one which is 13 years old. My wife and I are planning the replacement of both cars and we will be replacing each with a hybrid for sure. But we're not buying two cars all at once, because like most of us we can't afford to. However, I track when to replace them, based on gas milage, repair cost, and insurance cost. It's just a matter of time.

Plus, hybrid empower individuals with a new option never before seen -- with a car that has an electrical motor consumers now have a practical way to make their own "gas" by supplimenting the electricity stored onboard with self generated power (PV panels at the house). My wife and my's long term plans are to add PV panels at the house which we will then use to both (hopefully) eliminate our on grid electrical needs as well as suppliment our "gas" needs for the cars. We have never even had that possibility before because there was no affordable car with an electrical component before. With PV development progressing rapidly and the availability of hybrids, new possibilities are presenting themselves.

Those who are not on the hybrid bandwagon will be left behind, choking on its dust. The hybrid will spur the development of many new industries which cannot be outsourced. The hybrid eventually becomes the car that does not have to be driven. The hybrid is the anti-car car, just as light rail is the anti-commute transit system. General Motors is producing phony hybrids and preposterous fuel cell prototypes, (drive-by-wire my foot), because any true hybrid is a conflict of interest to their profits, their transportation monopoly, and the monopoly of their bedfellows, the energy giants such as Enron.

Come on, lets face it, nothing is perfect until one invented a cheap craft that can let you fly around the universe with zero point energy.

How the hell does a hybrid car become a car that does not need to be driven?

I think Ghosn is talking more about Nissan than the industry at large. Remember Nissan was brought back from the brink of bankruptcy just a couple of years ago by Renault with Ghosn in charge. While the company is stable and profitable now it doesn't have the deep pockets of Honda or Toyota to invest in new technology. They simply can't make a business case for a small number of hybrids. It just means Nissan will be a few years behind while they get back on their feet. He also makes a good point about small more small cars.

"We have to be careful that we don’t try to impose a technology on the market."

However... the decision to not offer electric vehicles is imposing a technology monopoly (Internal Combustion Engines) on the market. I see hybrids as a transitional technology as we tool up to move into the era of EVs. Hybrid technology lends itself directly to the technology required for an EV, so even without an EV on the market, manufacturing hybrids supports the development of the EV drive components. Hybrids could never become a fully mainstream product because at some point the EV will be more economical than the ICE.

I can understand Mr.Ghosn somehow.. His Renault fleet belonges to the most economic one over decades. There is for example the Renault Clio 1.5 dCI. It has an average of 65.7 mpg and it would be my choice IF I could get it here. You can read about it at:
http://uk.cars.yahoo.com/car-reviews/car-and-driving/
renault.html
I have owned a Renault Master Turbodiesel Transporter myself for 3 Years. It came already in 2000 with a stock particle filter and I could never get it below 25 mpg.

If a Prius was the size and the weight of a small european car, you can bet that it would get pretty impressive fuel economy.

The thing is, a mid-sized car like the Prius has much more chances to appeal to americans until they change their buying habits and prejudices against smaller cars.

The thing is, until there is a paradigm shift toward efficiency and economy over size and power, neither hybrids nor biofuels are going to make much of a difference.

Odd how many people compare a 1000c non-hybrid toyota to the fuel economy achieved by a hybrid *5 PASSENGER SEDAN!!!*

Also, no conventionally fueled vehicle can achieve the same gas milage as an Insight while matching the performance.

Hybrids are a proven technology to improve efficiency without so great a performance loss. The most recent hybrud SUVs prove this. Same performance, better fuel economy.

Even more poinently, the Accord Hybrid... greater fuel economy AND greater performance.

Don't be confused by comparing apples to oranges. (Tiny Renault Clio vs Pris, or micro-car Toyota vs Prius)

You can't compare small cars to 5 seater sedans and call it evidence.

Add a decent hybrid component to any diesel or gasoline non-hybrid made and it will improve both peformance and economy. Bar none.

Was only an example with that Clio. It's not that tiny and it is a 5 seater with 101 HP and a lot of torque and 115 mph topspeed. And it is not expensive..
Add a decent Hybrid and it even would be better..
What I mean is that in Europe there is so much choice to get a gas saver, every model comes with several diesel engines to choose from. Here it all boils down to the Prius which is really a nice car and just the right size..
but not much of a choice..isn't it..? The insight is a bid to freaky..for the average car buyer..

I really think that hybrid tech needs to spread to a variety of model types to be successful here in America, especially Texas. Some people need powerful trucks for work, a 1 liter diesel isn't going to cut it where a hybrid V8 diesel would do the job. Americans require different things from their vehicles than Europeans (yes this is only a generalization). My dream car right now would be a hybrid 350Z Turbo. All the power when I want to play, reliable, and gets great gas mileage in traffic. Real country people around here would buy hybrid trucks, so long as they were built by an American name. I know it's all fantasy and will remain that way, maybe forever.

As I'm reading many of these comments, I notice many seem in favor of Carlos Ghosn's statement. Basically, hybrids are a niche (fad) market. I completely disagree. To assume that the price for a barrel of oil will be going down (and staying down) in the near future is being naive. It's been steadily going up, and will continue to go up if there weren't companies developing other forms of technology (ie. hybrids, hydrogen fuel cells). I applaud those companies (Honda and Toyota) who take the risk and blaze the trail for the "Johnny come lately" company.

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