"Hybrid System Production Costs To Tumble With Increasing Demand, Says Study" Green Car Advisor

Hybrid System Production Costs To Tumble With Increasing Demand, Says Study

Just in time for global economic collapse and the resulting really, really tight pocketbooks, comes word that if we buy enough hybrid cars, the increased volume should help automakers slash hybrid production costs by two-thirds over the next decade.

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The cost of building hybrids such as the upcoming 2010 Prius would fall dramatically with volume increases, says investment bank's study.
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A report by JPMorgan Chase & Co., predicts that gas-electric hybrid systems will cost automakers an average of $1,919 apiece in 2018, down 67 percent from the present average of $5,869.

The report bases its numbers on the supposition that global sales of hybrids will rise dramatically, from about 600,000 this year to 9.6 million in 2018.

With new car sales expected to be in the toilet for the next few years, we're hoping the big bank knows a lot more about the timing of an economic recovery than bankers seemed to know about the present collapse.

The Morgan Chase study, reported by Bloomberg news service, says that North America will continue to be the world's leading hybrid market, followed by China and Europe, where hybrids will experience strong growth after 2013.

Demand for hybrids will continue to be pushed, the report says, by rising gasoline prices and tightening emissions standards that are boosting global demand for more fuel-efficient vehicles.

We suspect that the lowering of production costs will be welcome to whichever of the world's auto companies make it out of the present economic crunch alive, but we also suspect that consumers won't see all of the benefit reflected in reduced sticker prices.

That's because most car companies now are subsidizing their hybrids, losing money on each one sold (Toyota Motor Corp. claims to be the exception). Lower production prices means they'll be able to start recovering some of their early stage losses, and we expect that will mitigate their desire - and ability - to pass the savings along to customers.

We know, though, that the Morgan Chase report is on the right track: Honda Motor Co. has said that it has managed to engineer a less-costly version of its Integrated Motor Assist hybrid system that will enable it to price a new 5-passenger hybrid, the 2009 Insight hybrid due out next year, at about $19,700, almost $3,250 less than Toyota's Prius, the top-selling hybrid in the world.

The Prius is larger than the Insight will be, so it's not a straight-across comparison, but it does show that prices (and sizes) are coming down.

Now all we gotta do is keep the auto industry alive and producing hybrids, and figure out how to make sure enough of us hang onto our jobs, or find new ones, over the next decade to enable us to collectively buy 16 times as many hybrids as we buy now.

John O'Dell, Senior Editor