Toyota Concerned About Market Viability of Plug-ins, Sees Clear Path to Commercialization of Fuel Cell Technology in 2015
Based on its 15 years of experience with advanced battery technology and the now-mainstream Prius, Toyota has key unanswered questions regarding market acceptance of plug-in hybrid and electric vehicles and who the target buyers—in numbers sufficient to meet California ZEV mandates—might be, according to Michael O’Brien, Toyota’s US corporate manager for advanced technology vehicle planning. O’Brien was speaking at the California Air Resources Board’s ZEV Technology Symposium in Sacramento, California.
As Toyota learned with the introduction of the Prius and its efforts on the 2002 RAV4 EV, O’Brien said, it is difficult to force technology adoption by consumers. The current state of market readiness of plug-in hybrid and electric vehicles presents serious challenges, particularly in mass production, given issues including range; cost; a charging time still longer than a conventional gasoline refueling; a broad variation in battery pack life, and the lack of infrastructure. “Creating consumer demand for mandated advanced technology vehicles will require substantial government engagement at all levels.”
California first adopted its Zero Emission Vehicle (ZEV) regulation in 1990 as part of the Low Emission Vehicle Program. Modified several times since, it establishes required sales levels for a range of very low and zero-emissions vehicles. The California ARB is in the process of redesigning its Zero Emission Vehicle (ZEV) program to affect the 2015+ model years, with a focus on reducing greenhouse gases as well as criteria pollutants, and with an emphasis on plug-in hybrid, electric and fuel cell vehicles. (Earlier post.)
We are convinced that to reduce greenhouse gas emissions from passenger vehicles anywhere near the overall target of 80%...we are going to need extremely low carbon emitting vehicles...the answer to when we are going to need these vehicles s probably sooner and quicker, so its going to be within the next decade, and that’s going to create a substantial challenge...we need to have multiple technologies in the future and not be tied to one like we are to gasoline now...Some of them may not be successful in the commercial marketplace, but it is unlikely that we will just have one.—Tom Cackette, ARB Chief Deputy Executive Officer, at the ZEV Symposium
O’Brien and Toyota sounded a more cautious note than Brian Verprauskus from Nissan, who discussed Nissan’s LEAF vehicle and program; David Patterson from Mitsubishi on the i-MiEV; and JB Straubel from Tesla Motors. Tesla has its EVs in the market, Nissan and Mitsubishi are poised to enter their EVs in the US soon.
Prius best embodies Toyota’s philosophy on advanced vehicle technology—for vehicles to become true solutions to our climate change and environmental challenges, they must be mass market solutions. It is not enough to build niche vehicles that only a few can afford to buy or fulfill only a small subset of customer needs. We believe at Toyota that hybrids have successfully passed the threshold into the early mass market, perhaps the first advanced [vehicle] technology to achieve that goal. It is this experience and the lessons we have learned from it that shapes and grounds everything we do in the advanced technology vehicle areas.—Michael O’Brien
Toyota has collected extensive data using hybrids, plug-in hybrids and electric vehicles in real-world testing, matching conditions seen in day-to-day use, O’Brien said. This experience has convinced Toyota of three things, he said:
NiMH batteries appear to be the best choice for conventional hybrid vehicles for some time to come.
The higher energy density of lithium batteries will be required for EVs and plug-in hybrids. Cost will remain an issue for years to come, and will not be offset by large scale mass production volumes.
In addition, compared to conventional hybrid vehicles, batteries for EVs and PHEVs will be exposed to very severe usage conditions and wide swings in state of charge. As a result, packs for plug-in hybrids and EVs will have a relatively broader life variation range than packs in conventional hybrids. For this reason, Toyota believes that customers may need to consider replacement of the original battery during the vehicles life, adding in an additional cost factor.
While Toyota is making its best effort with Li-ion to meet broader expectations and societal goals with EVs and PHEVs, there is a need for a battery beyond Li-ion capable of higher energy density, lower cost, and more stable lifetime performance.
Within the context of technical issues, let’s consider the market. In the end, our success of failure will be decided by the customer. All of us at Toyota are committed to technological development to realize sustainable mobility, but we believe it is important to take not just one path, but to base our approach on the concept of the right car at the right place at the right time, in accordance with customer needs and emerging and available energy resources.
The ARB 2015 [ZEV] vision has a trajectory of advanced technology vehicle deployment that is steep early on. However, we believe that front-loading large scale mass production will be very challenging. We can draw on our Prius experience to understand how on consumers adopt new technology, products and the length of time required to achieve mass market acceptance.—Michael O’Brien
Toyota launched the Prius in June 2000, and for the first four years, the buyers were a small segment of innovators and early adopters. It took 8 years for Prius to achieve the same level of purchase intention as Camry and Civic, O’Brien said, and it wasn’t until the introduction of the Gen 2 Prius, with improvements in size, comfort, and fuel economy that Prius grew beyond niche volumes.
Even with Prius, Toyota sees wide variation in natural demand from state to state. Prius volumes in California are nearly twice the level of the next highest state. Fewer than half of the current states which have also adopted California ZEV rules are currently in the top 10 list for Prius sales.
We believe the variation [in natural demand] exists because there are regional differences in importance in buying an environmentally friendly vehicle or fuel efficiency...it is likely to be a serious challenge to meet [ZEV] mandate targets outside California. In Florida, nearly half of our hybrid sales would have to be plug-ins to meet the objective. Issues related to plug-in suitability across the US will compound the problems.—Michael O’Brien
O’Brien also referenced a recent Synovate study that found the average additional amount consumers would pay for 15-20 miles of electric range is $1,700—far below the cost of batteries that deliver that kind of range. The large study of Li-ion plug-in hybrids that Toyota is launching in January is part of Toyota’s efforts to determine the ideal balance between all-electric range and selling price, while taking into consideration vehicle lifetime greenhouse gas reduction and consumer usage patters.
Battery electric vehicles, said O’Brien, with their even large battery packs, amplify the market challenges: larger price premiums, more severe limitations in range, durability, usage, climate restrictions and inconvenience. “The appeal of electric vehicles is likely limited to shorter urban use,” he said.
O’Brien noted that Toyota’s work on fuel cell technology has advanced rapidly over the past few years. A recent test with a Highlander Fuel Cell Vehicle achieved a range of 431 miles on a single fill of compressed hydrogen, representing fuel consumption of 68.2 miles/kg. This is twice the fuel economy of a current gasoline Highlander hybrid, O’Brien said, adding that “Toyota sees a clear path to the commercial introduction of fuel cell vehicles by 2015. We believe that hydrogen and fuel cells have a potential to significantly reduce the environmental impact of the automobile.”
The company’s primary concerns with this technology are the fueling infrastructure and further lowering the cost.
From our RAV4 EV and Prius experience, we learned that consumers will not adopt a new technology unless it is better in every way than what is available, and that anecdotal evidence of robust markets is not a substitute for true market acceptance.
Toyota made a huge marketing and sales effort of nearly nine thousand [dollars] per unit for the 2002 RAV4 EV to sell, including an attractive lease payment equivalent to that of a Prius at that time. But, RAV4 EV sales did not exceed several hundred units in total. We also learned that if consumers are disappointed because technology is unsuitable, it could hamper introduction of new technologies in the future.
Major challenges still face plug-ins in terms of product readiness for market and the state of technology. Longer term shifts in consumers values, new frugality, may delay technology adoption by many consumers. These suggest that there is a limited natural market for plug-in vehicles, and that strong incentives will be needed to push demand to the higher levels, and to address challenges regarding battery technology, cost and suitability.—Michael O’Brien
In addition to government incentives to reduce the cost differential, O’Brien also suggested other measures such as providing a safety net for battery pack replacement, a focus on ensuring an adequate refueling/recharging infrastructure before mandating large volumes, state funding for fleet purchases, and further individual incentives such as single-occupant HOV access.