The cost to develop and produce hybrid systems is probably one of the two single biggest impediments to a full scale market blitz of hybrid products. The other being battery technology and availability. As much criticism as the domestic guys draw for "not getting it", fact of the matter is, they do get it, but have trouble internally justifying the huge losses required to get into the game on a serious level.

Because of the high investment and material costs of developing hybrid systems, expect to see a lot of co-development and joint venture activity as hybrid systems start to shape themselves into the next Apple v PC type of a showdown. Ford and Nissan appear to be aligned with Toyota / Aisin. GM and DCX are now drawn together. Honda's pretty much on their own. There's a lot more similar activity brewing just under the radar screen. The driving impetus is cost management. Toyota could afford to be first to market because they have the stronger cash reserves and could afford to take SIGNIFICANT losses on 1st and 2nd generation hardware in order to build the market and build demand for the product. At the same time, they've been aggressively marketing their system to other automakers with the intent of reducing cost. Their path to cost recovery is not through price recovery from the vehicle buyer, but from revenue through licensing and system component sales to other automakers.

Had Toyota been able to land Ford and DCX as "customers", it would no doubt have been game over. The GM - DCX co-development announcement on car, truck, and SUV strong hybrid systems means that there will be credible competition.

The cost to develop a hybrid system is pretty much on par with the cost to develop an entire vehicle program. For cash tight manufacturers, that leaves tough decisions. Do I spend money to develop XYZ Vehicle, or do I focus on a hybrid system that won't bring positive revenue for several years? The material cost of hybrid components, controls and hardware is equal to or in excess of the cost of the most expensive part of the vehicle, the powertrain. Basically, a hybrid is a vehicle with two powertrains. A typical vehicle ICE powertrain (engine, transmission, driveaxle), at high volume production efficiencies, costs from $5 - 12,000, depending on what powertrain we're talking about and what vehicles it's going into. Add that number in again if you're talking about a strong hybrid system. And keep in mind that most hybrid vehicles do not charge a $5 - 12,000 premium and what you get is, the option is being presented as a loss to the manufacturer. Only continued development and refinement of components and improved mass volume manufacturing of simplified components can bring those prices within a cost structure that the average vehicle manufacturer can chin. That's why co-developments, joint ventures, and licensing agreements will be critical to bringing costs , and prices, down over the next several years.

Peace,

Martin

I am NOT the official voice of GM with respect to Hybrid issues

I am NOT the official voice of GM with respect to Hybrid issues

I am NOT the official voice of GM with respect to Hybrid issues