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TOYOTA HYBRID PUSH
FORCES OTHERS TO PLAY
CATCH-UP

You could call it one of the biggest upsets in the global car industry's century-old competition.

Toyota Motor Corp, the world's third-biggest auto maker, began learning how to build cars 66 years ago by taking apart a Chevy sedan in an empty warehouse. But now it is forcing bigger rivals to play catch-up in the race to offer greener cars.

Next week, Japan's top auto maker will unveil a production version of the second-generation gasoline-electric hybrid car "Prius", distancing itself from competitors as it promises better fuel economy and a larger, more comfortable car than its predecessor at the unchanged sticker price of $20,000.

Since the first Prius debuted in 1997, Honda Motor Co Ltd has been the only other car maker to put mass-market gas-electric hybrids on the road.

The excuse offered by laggards, including Chevrolet maker General Motors Corp, was that developing hybrids was a waste of time and money since they were only a short-term solution until no-emission fuel-cell vehicles (FCVs) took over.

Hybrids use electric motors and battery packs to improve fuel efficiency, adding power during acceleration and reclaiming energy when braking and coasting, but still need gasoline to run.

"Others are going to have to step up plans to develop hybrids too," Hiroyuki Watanabe, Toyota's senior managing executive in charge of the hybrid business, told Reuters last week.

That, albeit belatedly, is the plan for many big auto makers.

Later this year, the world's top two, GM and Ford Motor Co will begin selling hybrids to fleet customers, and next year offer them to retail customers -- seven years behind Toyota.

FROM NICHE TO MAINSTREAM?

Gasoline-electric hybrids are the most fuel-efficient mass-market vehicles on the road now, with a four-seater offering between 45 to 52 miles per gallon -- about twice that of comparable gasoline-powered cars.

Toyota has sold about 150,000 units cumulatively since December 1997, and has promised to offer the power plant on most of its models in the near future. It hopes to sell 300,000 hybrids a year by 2005 -- an aim Watanabe admits is ambitious.

"It's a very tough goal," he said.

To help reach the target, Toyota is discussing supplying hybrids to other auto makers. It already has an agreement with Japan's Nissan Motor Co Ltd -- also one of the initial sceptics -- which plans to sell its first hybrid vehicle in 2006.

By raising volumes, Toyota hopes to slash the high production costs and make hybrids a de facto standard for alternative-fuel cars for now. Toyota says its hybrids are already profitable, but Honda says it still makes little, if any, money on them.

Toyota's initial bet looks likely to pay off.

Auto industry researcher J.D. Power recently forecast that in 10 years, one in every 20 cars sold in the United States would be a hybrid against one in 442 last year, as the power plant is offered in a wider range of vehicles.

In a few years, competition will be in full swing as Toyota's share of the U.S. hybrid market drops to 26 percent from half now, while GM takes a quarter and Ford grabs 16 percent, it said.

LONG ROAD AHEAD

While the road seems to be mapped out for hybrids in the United States, they are still far from catching on globally.

Despite the higher price of petrol elsewhere, hybrids only enjoy mild acceptance in Japan and virtually none in Europe.

Europeans are keener on diesel, which is cheaper and more fuel-efficient than gasoline, although they emit higher levels of harmful nitrogen oxide and particulate matter.

"The Europeans are working on a range of technologies but they still prefer working with diesels, first and foremost," said Morgan Stanley analyst Nicolas Hirth.

"And typically, the stronger they are in diesel, the less concerned they are in hybrids."

The divergence in regional tastes for fuel doesn't end there.

Brazil is trying to bring back cars that run on cane-based ethanol since sugar cane is abundant there. Iceland would prefer fuel-cell vehicles as it moves towards a hydrogen-based society.

But unlike Toyota, which sits on a $25 billion pile of cash, most makers can only afford to focus on a few due to high RandD costs.

Despite the highly publicised push by the likes of DaimlerChrysler and GM into the fuel-cell field, Toyota is beating them there too: last December it became the world's first car maker to put a saleable FCV on the road with its own fuel-cell stack.

And for the diesel-thirsty drivers in Europe, Toyota is working on diesel-electric hybrids. Watanabe said they will be a must when Europe lowers its limit on carbon dioxide emissions to 120 grams/km in 2012.

Written by: Planet Ark


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