Nissan VP calls hybrids "unprofitable"

 

Two exceptions are Toyota and Honda who sell the vast majority of hybrids. It may be fairer to state that companies that failed to design hybrids are unable to build and sell them at a profit.

My understanding is Toyota began making a profit on their hybrids around 2003 and this is the end of 2006. The non-hybrid companies are looking at startup-costs and the 'bean-counters' are trying to stand it the way of progress.

Bob Wilson

 

This subject came up over at Edmunds so I thought I'd throw it out to the well-informed here as well.

When did the prius and its HSD siblings go profitable?
By how much?

I've never seen any figures in print but based on other models I'm going to guess that the developmental costs for 'hybrid vehicles' ran about $2 - $4 Billion.

Most of this was for the development of the Prius of course since it was the first and it was a stand-alone platform. While the 1.5L existed it had to be incorporated into the new configuration. In addition of course the entire electrical side of the HSD had to be created and tested from scratch. Also the programming of the entire system had to be created from scratch.

Typically in Toyota's system a platform has 10 years of life over which the developmental costs are amortized.

The powertrain system, HSD, is somewhat different since like the 4.0L and 3.5L it can be exported over several other existing platforms/vehicles. It too generally has a 10 year life.

By the end of next year Toyota will likely have delivered 1 Million hybrids. Some of these vehicles like the Camry, Highlander, RX and Estima are existing vehicles that are profitable in and of themselves. The Prius is stand alone of course. By the end of 2008 the number will likely be 1.5 Million hybrids delivered and then the new Prius/THS III will be intro'd.

So to profitability..
Based on 1.5 Million hybrids by 12/08, of which 1 Million are Prius' and 1/2 Million are other models with only HSD power system/programming, my 'blue sky' guess is
.. the Prius as a new stand alone vehicle has to bear the full developmental cost of it's platform and a pro-rata share of the developmental cost of the HSD system/programming;
.. the other hybrids have to share the rest of the developmental costs of the HSD system/programming, but none of the Prius platform costs;
.. all the hybrids have 'extra' variable costs incurred during production due to the additional equipment in the vehicles and possible extra manufacturing costs.

I believe that it's these 'extra' variable costs that are so often discussed in the press. The developmental part was done back in the 90's so those costs are complete for these models. Other than the management directive to cut the cost of hybrids ( variable costs ) by half has anyone ever seen what the costs are for the hybrids?

Profitability:
The Camry and Highlander and RX and Estima I will guess make tons of money by themselves whether they are hybrids or not. They only have to bear the burden of the developmental costs of the HSD and the extra variable cost of manufacturing. I will estimate that all of these are solidly profitable.

The Prius is just begining to hit good volumes. It has to bear the full cost of the development of the platform plus the development of the HSD plus the extra variable costs of manufacrturing. I will estimate that due to it just hitting stride that the Prius is marginally unprofitable or by 12/08 will be just at breakeven.

 

Toyota announced profitability of the Prius in 2003 (search the archives.) Of course a lot of the engineering and 'lessons learned' from the Prius NHW10 and NHW11 models led to the improvements in the NHW20 and current HSD models.

Bob Wilson

 

I wouldn't believe a word from the Nissan VP. Easy to criticize what you don't have. If hybrids were not profitable in some way, they would not be here after all this time.

 

It seems to me that Nissan is just unwilling to accept a 4-5 year time horizon between product launch and profitabity. Sure, the Prius was a money loses for the first few years. But think of how many extra non-hybrid cars Toyota has probably sold because they had hybrid offerings. I'm sure there were plenty of folk who were drawn into the showroom by the Prius but rolled out driving a Corrolla.

 

Nissan finally eases into hybrids
Listen to this story
Nissan is launching its own hybrid and has plans for a next generation fuel cell car, but the Japanese company is headed down greener roads in the slow lane. Janet Babin reports.
see more at http://marketplace.publicradio.org/s...200612127.html