January 16, 2008
Ford Expects Hybrids To Start Turning Profit

Manufacturing costs for hybrids are dropping.

By the end of this year, Ford Motor Co.'s hybrid vehicle program is expected to be profitable for the first time.

Nancy Gioia, Ford's director of sustainable mobility technologies and hybrid vehicle programs, said that since production started in 2004, Ford has chopped about 30 percent of the cost out of making the Escape, Mercury Mariner and Mazda Tribute hybrid SUVs.

Yes, hybrids have been loss leaders. That they are becoming profitable is good news. The longer we go before world oil production starts declining the easier it'll be to handle it. Advances in hybrid and battery technologies as well as in wind turbines, photovoltaics, and nuclear technologies will all make the migration away from fossil fuels easier.

Toyota President Katsuaki Watanabe says Toyota is already making money on hybrids.

To the amazement of many in the industry, Watanabe also declared that Toyota is making money on hybrids -- and could soon expect to make more. "As of today, there is no problem with the profitability of hybrids. Of course there is room for improvement. The next generation will be one-half the size and one-half the cost."

GM isn't just trying to produce a pluggable Volt hybrid by 2010. Turns out GM will also release a shorter range pluggable Saturn Vue by 2010 as well.

Meanwhile, GM executives announced this week that they hope to introduce the plug-in version of the Saturn Vue hybrid in 2010. The plug-in hybrid SUV would be capable of going 10 miles when fully charged before the gasoline engine kicks in, according to GM, and it would get roughly double the gas mileage of a typical SUV on the road today.

This Saturn Vue might beat the more radical Volt design to market just because the Vue is a smaller step. So ths PHEV Saturn Vue might turn out to be the first mass production pluggable hybrid car. How many people will want to put up with the hassle of recharging just about every day to maximize the use of cheaper electric power? I think it depends on where you live and where you park your car. If you park it in a garage then plugging it in every night would be a lot easier.

You might have heard that Toyota is trying to beat GM to market with a pluggable hybrid. Well, Toyota's 2010 release date for a pluggable hybrid is for a very low volume vehicle that would be sold to a small number of fleet customers (i.e. not in dealerships).

However, in another sign of the steep technological hurdles carmakers face to make the cars commercially viable, a Toyota spokesman said initial sales would be in "the hundreds", and the company did not say when it planned to mass-produce plug-ins for retail customers.

The 2010 Toyota pluggables sound like experimental vehicles.

Watanabe announced that Toyota will market a test fleet of rechargeable hybrid vehicles to companies or government agencies by the end of 2010.

Even though people in the auto industry do not know exactly when the lithium battery problem will be solved many in the auto industry expect to see high volume lithium batteries for cars in a few years.

"I think within three to five years you'll see lithium-ion hybrid electric vehicles out there in some volume," Ford's chief hybrid engineer, Sherif Marakby, said on Tuesday.

Share |      Randall Parker, 2008 January 16 10:58 PM  Energy Electric Cars


Comments
odograph said at January 17, 2008 7:14 AM:

I think that by the time Toyota "went big" with the Prius II they were making profit.

The fallback post-2004 from critics was that they still needed to pay back front-end costs Well shoot, when did any manufactured good not need to pay back up-front costs? By that measure the first iPhones were loss leaders, even at their first price.

In my opinion a (GM led) disinformation campaign about the costs of hybrids morphed into a more banal discussion of front-end costs and payback.

Now for and their "models" are curious, because essentially they have one hybrid with three badges. And it is sold to a segment that may not be that hybrid friendly. Basically they positioned their hybrid with some retail premium over the non-hybrid, and from that it followed the payback term for front-end costs. It is a spreadsheet exercise. Plug in different premiums and different sales rates and you get different payback periods.

I think the interesting question for Ford, and Ford-watchers, is whether the SUV should have been their only hybrid, and whether they could have competed end the compact/midsize arena.

Personally I think a Focus Wagon Hybrid would have been a killer, if they could hit 40+ mpg.

odograph said at January 17, 2008 7:28 AM:

It's kind of interesting that the Prius outsells the Ford Explorer now. I don't think the Escape Hybrid outsells the Explorer.

And that says something about hybrid placement, and changing consumer preferences.

Rob Sperry said at January 17, 2008 12:48 PM:

I understand there was initial concern at Toyota about the marketing of a plug in hybrid.

But what is the engineering problem that it should take 2-3 years? It seems like such a basic extension.

odograph said at January 17, 2008 1:15 PM:

You could do a plug-in with this battery size, but that would buy you relatively little. It would be a small lift on total MPG. To get real benefit you need bigger batteries, and that is still very expensive. Actually I don't know the 2008 price, but in 2006 an after-market plug-in upgrade for the Prius ran approximately $10K.

Vincent said at January 17, 2008 1:53 PM:

How about a pickup truck? I guess I'm just SOL for the next five years. :(

Randall Parker said at January 17, 2008 5:12 PM:

Rob,

The Prius battery is too small for much range and it isn't designed for deep discharge. Upping the capacity and ability to do thousands of deep discharge way ups cost.

Lithium batteries have heat and safety issues too.

Battery technology is the obstacle.

Wolf-Dog said at January 17, 2008 7:12 PM:

Only 1 % of the money wasted in Iraq would have solved the battery problems. Just imagine if $5 billion were spent on battery R & D instead of a few million dollars Bush gave for hydrogen fuel cells, which are not viable.

hybrid vehicle said at January 18, 2008 4:41 AM:

.....................................
http://www.activehybrid.com

hybrid vehicle said at January 18, 2008 4:45 AM:

ooops the comment didnt show...I said now their coming out with solar powered hybrid cars. Now with that type of hybrid the car would use the electric motor more with free energy from the sun. .... way to go hybrids

.....................................
http://www.activehybrid.com

Nick G said at January 18, 2008 2:15 PM:

Batteries are ready now. They've been ready for 100 years - the first serial hybrid was invented by (IIRC) Ferdinand Porsche in 1904.

Lead acid would work perfectly adequately, and li-ion will work better.

It took a couple years after oil prices spiked for people to realize we had a permanent problem - GM only really starting taking this seriously when the Volt was introduced as a concept, everyone went crazy, and they realized that the idea would really sell.

No one wants to believe it, but it takes 3-4 years to launch a completely new vehicle, no matter how well tested the basic tech is. It takes time to do the initial design, testing, supply sourcing, manufacturing planning, etc. It just does.

Given that the tech here is relatively new, and an unusually large amount of engineering needs to be done, including hardware (battery pack & power electronics), software (and lots of it - 1000x as much as in the space shuttle), aerodynamics, drive by wirre, etc., GM's timeline is very, very aggressive.

Randall Parker said at January 18, 2008 5:24 PM:

Nick G,

No, batteries definitely are not ready now. GM doesn't think so. Ford doesn't think so. Toyota doesn't think so. GM is hoping that batteries will be ready by the fall of 2010. But GM does not know they will.

Lead acid weighs too much.

GM's biggest risk factor isn't the totally new car design. It isn't the electric motors. It is the batteries. Listen to them. Keep reading the statements coming out of the car companies. When GM execs admit to a lack of certainty about their delivery schedule their biggest voiced doubt is over batteries.

GM also fears that what they can ship in fall 2010 will cost too much due to battery costs. They are going to have to decide to either raise price over their $30k target price or sell at a loss initially. Again, their execs have said as much.

Randall Parker said at January 18, 2008 10:08 PM:

Here's what Marakby of Ford thinks of the prospects for lithium batteries for pluggable hybrids:

Marakby said it would likely be five to 10 years before plug-in hybrids were sold widely, in part because of the technical challenge of building lithium-ion batteries designed to be frequently drained of all their power.

The expensive battery packs required for a plug-in vehicle are also as much as much as six times larger than the briefcase-sized batteries Ford expects to deploy in its first lithium-ion powered cars.

Ready now? 5 to 10 years?

Bob Lutz, GM Research and Development VP says the batteries might not be ready in 2010:

But the development, particularly of the lithium ion batteries that would power the Volt, is “complicated,” he added.

Said Lutz: “You don’t know what you don’t know. Could it go later than 2010? Yes.”

Norihiko Shirouzu of the Wall Street Journal also reports that GM doesn't yet have a sufficient battery solution.

But there is one thing the car people won't be charged up about: batteries. For all the hoopla, nobody yet has figured out how to make a small enough battery that will hold a big enough charge for these new cars -- and not be a risk to burst into flames.

The limits of electric-car technology are achingly clear in one of the most-heralded cars on the drawing board: GM's Chevy Volt. GM executives mention the prototype, which the Detroit auto maker aims to put into production in three years, nearly every time they discuss their vision for "gas free" cars. But GM still hasn't solved the battery problem.

The article is pretty interesting.

I can't find the article quoting a top GM executive saying that maybe they can't build the Volt for $30k. But it is out there if you want to go looking.

I'm expecting the early years of Peak Oil to be pretty tough since we aren't going to have electric cars initially. We can do hybrids, diesels, and even diesel hybrids. Plus, we can go to smaller cars. But I'd feel a lot better going into it with great batteries.

Randall Parker said at January 18, 2008 11:15 PM:

Here's the Lutz quote about how the Volt might cost more:

Toyota, Honda and Ford have all said that the lithium-ion battery technology will not be ready by GM’s 2010 time-frame. Few believe GM can deliver the car with a capable battery that will be small enough and cheap enough to meet Lutz’s goal of a car that will cost below $30,000. Indeed, Lutz himself recently told BusinesWeek that delivering a car that will cost $30,000 or under without losing money on each one “may not happen.”

But if we are past Peak Oil and on the decline by that point a $35,000 Volt with 40 mile range might be a good deal. Keep in mind that once we get on the downward slope every year is going to get worse for gasoline prices.

Nick G said at January 19, 2008 3:11 PM:

Randall,

As far as lead-acid, don't forget that GM proved it works just fine in the EV-1. The EV-1 was expensive because it was basically handmade (about 850 produced), and the 60 mile range (for the 1st, lead-acid version) was inadequate, but a 40 mile range is just fine in an EREV (aka serial hybrid). It had a 25KWH battery pack - the Volt's is only 16KWH.

Weight is relatively unimportant with regenerative braking. It might increase your rolling resistance a bit, and it's a little bit of a design challenge, but it's no big deal.

NIMH would also work - the 2nd gen EV-1 had NIMH, and a range of 120 miles.

Lead-acid gives a cost of roughly 7.5 cents per mile, equivalent to about $1.75 per gallon in an average 22 mpg vehicle. It would work just fine in the Volt, but wouldn't be good PR - GM wants to be the tech leader. There is a secondary concern: it would have to be replaced every few years, just as lead-acid starter batteries do. GM would prefer something that lasts the life of the car, even if it's proportionately more expensive - others disagree with that strategy.

Now, as to li-ion: A123systems iron phosphate chemistry has been demonstrated in very large production DeWalt hand tools. The engineering needed for the Volt is the battery pack, and the power electronics. Iron phosphate essentially eliminates the thermal runaway problem. There are other strategies as well, like more durable separators in cobalt li-ion.

GM now says that they have very little doubt about the batteries (the article quoting GM management's concerns about batteries is old, from August 07). Other articles are from competitors, who are, to be blunt, spreading FUD. Of course, you'll still see a little hedging and expectations-lowering from top management, which is still feeling badly burned by the bad PR from their termination of the EV-1, but basically the mid-level engineers are very confident about the project.

Your best source is gm-volt.com for good info.

Randall Parker said at January 19, 2008 5:08 PM:

Nick G,

The Lutz quote about higher cost is from Jan 2008. The Lutz quote on "could it go later than 2010" is from Jan 2008. The WSJ article (I have since fixed the link) is from Jan 2008 as well.

GM EV-1: You are telling me your guess on "it works just fine" versus a conversation I had with the engineer who ran the program at GM. He said batteries were a problem, especially with reliability. I wasn't expecting to be sitting next to the guy who managed that program at this conference I was at. Or else I would have asked better questions. But I believe what he told me.

Lead acid in practice: Range. Lead acid batteries weight too much. Okay for a dedicated short ranger commuter car. Not good for much else.

A123Systems and DeWalt: GM has harder requirements. They need to work over the temperature range, humidity range, intensity of vibration and G forces, and other conditions. A person who used to have a job testing vehicles for Ford told me an adventure story of driving cars across Brazil, up thru Mexico, thru the US, and up thru Canada. We are talking very hard driving. I had no idea they covered such a range.

Little doubt: I know what managers will say inside of certain companies and what they say in public. Been there. Sat in the right engineering meetings to see the contrast. Don't be too impressed by public spin. Boeing was predicting no more slippage on Dreamliner orders 4 weeks before they announced the new slip. I bet some bottom level engineers could have told you the truth much sooner.

Nick G said at January 19, 2008 8:33 PM:

hhhmmm. Ok.

On the quotes: I was referring to questions about the batteries. Here's what Lutz says in the Autoweek article "“I’m confident in the batteries". On timing, not quite so much, but that's different.

"a conversation I had with the engineer who ran the program at GM"

Who was it? I know there was a specific problem with the batteries at one point, but my understanding was that it was not fundamental. I could find out more if you could tell me who it was. If we don't know who it was, it reduces our ability to know whether he was really as responsible for the program, and as knowledgeable as he presented himself to be.

"Lead acid in practice: Range. Lead acid batteries weight too much. Okay for a dedicated short ranger commuter car. Not good for much else."

We don't seem to be making progress here. Wouldn't you agree that range of 40 miles is enough for a EREV?

more later...


Nick G said at January 20, 2008 8:44 AM:

I looked a bit more at the articles. Yes, my mistake, they're all current - I got a date wrong.

But, if you look closely, they're consistent with what I was saying. Here's the first quote from Ford: "I think within three to five years you'll see lithium-ion hybrid electric vehicles out there in some volume," Ford's chief hybrid engineer, Sherif Marakby, said on Tuesday." That's a vote of confidence in GM's timetable.

Except for the WSJ article, which is misleading. The writer says the battery tech isn't ready, and that's incorrect: it's the engineering of the ancillary systems: battery pack, power electronics, control software that's not ready. There are questions of timing about those, but no question that they can be done.


"A123Systems and DeWalt: GM has harder requirements. They need to work over the temperature range, humidity range, intensity of vibration and G forces, and other conditions."

No question power tools are different: they're more demanding. Think about it: a vehicle battery pack is nestled within something 10x larger to reduce g forces, not attached to a power drill(!) or saw, not dropped from several stories.... Vehicles can provide bullet-proof thermal and discharge management, while tradesman are going to run tools until they're hot and 100% depleted.

As far as the engineers on the floor: have you taken a detailed look at gm-volt.com??

Again: EV/EREV's are waiting for design of the overall cars, not waiting for batteries, at least at GM. Toyota is handicapped, because they're committed to their keiretsu. GM has locked up a couple of the best suppliers.

Randall Parker said at January 20, 2008 9:25 AM:

Nick G, People aren't posting on gm-volt.com without some senior supervision. They are all on-tune.

I agree that GM has a big advantage in its willingness to consider all suppliers.

3 to 5 years: Well, there's 3 years. But then there are 4 and 5 years. 5 puts us out to 2012 or 2013. Also "in some volume" does not instantly solve our problem. Suppose the first year the PHEV cars are are available in volume only 100,000 are made (that's how many Ford F150s get made per year and they are top of the pops in the US) and the amount of oil available for input into the United States drops by 7%. Suppose it dropped by 7% the year before too. At what year does PHEV volume get up high enough to compensate for that drop in oil availability?

Now, go out to 2016 or 2017 and maybe the picture is brighter. But the global oil production decline might start in 2008 or 2009. We are not out of the woods yet.

Still, things could be worse. Imagine A123Systems and LG Chem were 5 years behind where they are now and GM couldn't even seriously entertain creation of a PHEV. Then we'd be in trouble for sure.

Our other problem is electricity supply. Will we have enough coal and natural gas to ramp up electric production to power the PHEVs? Keep in mind that post-peak oil the demand for natural gas and coal will rise for use as substitutes for oil in other ways as well. North American natural gas production could go into decline any year now in a serious way. Maybe we can scale up wind fast enough to compensate. Nuclear's build time is too long. So it isn't going to start helping before 2015 in the United States.

Nick g said at January 20, 2008 5:29 PM:

"People aren't posting on gm-volt.com without some senior supervision. They are all on-tune."

The site is maintained by (IIRC) a neurologist who has "gotten the bug". He's not affiliated or committed to GM. AFAIK he just understands, as we do, the importance of plugins.

"5 years. 5 puts us out to 2012 or 2013. "

Yes, it's frustrating that GM wasted so much time treating the EV1 as a PR & CARB compliance thing, complaing about CARB and blaming consumers for the termination of the EV1, instead of gradually improving it. We could have been here 5 years ago.

"Suppose the first year the PHEV cars are are available in volume only 100,000 are made "

Well, about 350K+ hybrids were sold in 2007, and they've been doubling about every 2 years, so they could easily be at 1.5M in 5 years. They could all morph into plugins pretty easily - they would just need a plug and a bigger battery, as Toyota is playing with for the Prius.

And, Toyota & Ford style plugins can be retrofit very, very easily, with the proper battery.

Now, we need to get plugins to about 50% of new sales to compensate for reduce light vehicle fuel consumption by roughly 5% per year. That won't fully compensate for a 7% annual decrease in overall oil consumption. We may have to carpool after all. The horror....

I'm joking of course, as I know it would be hard to deal with 7& depletion. OTOH, I suspect that the peak won't be until 2011, and the depletion less than 7%. I'm more worried about our trade deficit, as oil prices skyrocket.

We would only need about 15% more electrical production to fully electrify light vehicles, and night time production is sufficiently under utilized that it could handle 85% of that. We can certainly scale wind up quickly enough - there's 125 GW in applications for interconnection with the national ISO organization. The bottleneck is turbine manufacturing capacity, which is growing fairly quickly, though it would grow faster with better & clearer national public policy...

Randall Parker said at January 20, 2008 5:54 PM:

Battery upgrades on existing hybrids: That will help some but not all of them. Not all them can go very fast under pure electric power. But, yes, some do.

The other obstacle here might be ECU software. It would work best if the car companies released software updates and hardware upgrades that dealers could do to upgrade hybrid into PHEVs. Then the software could be compatible and well calibrated. After market calibration of aftermarket ECUs isn't done very well in the experience of people I know who know the tuning market.

CARB and EV1: This was really CARB's mistake. Instead of going for pure electric they should have set the bar lower to something practical and achievable. If they'd set a regulatory requirement for some fraction of California car sales to be at hybrid level of emissions they could have jumpstarted the hybrid market sooner. But they wanted to take a much bigger step than was technologically possible.

The other problem with aftermarket PHEV upgrades: By the time the panic sets in all the battery production capacity will probably get eaten up by new vehicle use.

Nick G said at January 20, 2008 11:39 PM:

"Not all them can go very fast under pure electric power. "

Are you thinking of the 35 MPH Toyota limit? Yes, that's annoying, but IIRC the average commuting speed is about 20MPH.

"It would work best if the car companies released software updates and hardware upgrades that dealers could do to upgrade hybrid into PHEVs."

Yes, absolutely. Also, they should honor their warrantees.

"CARB and EV1: This was really CARB's mistake."

In retrospect, yes. OTOH, you could also argue that their mistake was in not hanging tough. GM has said that dropping the EV-1 was their biggest mistake in recent history. It was perfectly viable (was your aquaintance at that conference talking about the lead-acid, or the NIMH versions?), and just needed to be persisted with - at least, that's what GM is saying now.

"By the time the panic sets in all the battery production capacity will probably get eaten up by new vehicle use."

IOW, a basic limit is the speed with which overall battery production capacity can expand. I agree. I would bet that it has a doubling time of around 15 months, as a wild guess. Whoever gets the Volt contract will instantly become the largest li-ion supplier in the world.

Reality Czech said at January 21, 2008 10:18 AM:
Lithium batteries have heat and safety issues too.
Firefly Energy's 3D2 technology has energy capacity approaching Li-ion, with none of the heat or runaway issues of cobalt-based lithium-ion. Power capacity is stellar also, and the lifespan is very good.
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