March 29, 2024

Wanted or Not: Alternative-Fuel Cars Flood Auto Show

If only buyers were arriving as fast as the cars.

Hybrid sales waned as gasoline prices ebbed in 2011, declining to 2.2 percent of the market from 2.4 percent a year earlier, according to the research firm LMC Automotive. Meanwhile, sales of the Nissan Leaf electric car and the Chevrolet Volt plug-in each fell short of expectations.

Analysts do not expect the segment to grow significantly this year: the combination of gas prices below $4 a gallon and higher upfront costs for the cars is not attracting consumers.

But that is not deterring Toyota, Honda, Ford Motor and several European carmakers from introducing new hybrid and plug-in models.

“The market is going in one direction and fuel-economy regulations are going the other direction,” said Jeremy Anwyl, vice chairman of the automotive information Web site Edmunds.com. “Just because people start building more of something doesn’t mean the segment grows.”

Regardless, the automakers have little choice but to develop and try to push more hybrids as they prepare for fuel-efficiency requirements that call for significant increases later this decade. Advances such as Ford’s EcoBoost technology have increased mileage for gas-powered engines — the new Fusion midsize sedan it unveiled Monday can get 37 miles to the gallon, Ford said — but bigger gains are needed.

“Internal combustion can’t get all the way there, so you need an alternative,” said Russell Hensley, a partner with the consulting firm McKinsey Company. “The only alternative we have at the moment is electrification.”

In a report Monday, McKinsey listed “uncertainty around future adoption of hybrid/electric powertrain technology” as one of several challenges facing automakers and their suppliers in the coming years.

McKinsey said hybrids could account for up to a quarter of sales by 2020, with battery-powered cars making up 5 percent. But it said internal-combustion engines would dominate the industry through at least 2030. “The demand is in its infancy,” Mr. Hensley said.

Hybrids and electric cars typically cost at least several thousand dollars more than their conventional counterparts. BMW said Monday that its ActiveHybrid 5 would be priced at $8,700 above the gas-powered 535i. The Volt costs nearly twice as much as the similarly sized Chevy Cruze, after a $7,500 federal tax credit.

Most consumers want to be able to recoup the additional cost of an alternative-technology vehicle within a year, Mr. Anwyl said. At today’s gas prices, the payback generally takes several years, if not more.

Automakers said shortages of batteries and other parts also held back sales in 2011.

“We have a bottleneck with the batteries,” said Carlos Ghosn, the chief executive of Nissan, adding that he expects supplies to increase as the Leaf enters new markets in the United States and production of the car and battery begins in Tennessee later this year.

“A lot of consumers are thrilled that they have the option of buying an electric car,” Mr. Ghosn said. “We sold 9,700 the first year. We can double that.

“I am much more optimistic on the prospects for electric cars than many people. We are very, very far from our potential.”

General Motors has said it wants to sell 45,000 of the Volt this year, despite falling short of its 10,000 target in 2011. G.M.’s chief executive, Daniel F. Akerson, said on Sunday that the company would build only as many Volts as the market called for.

“We’re going to match production with demand,” Mr. Akerson told reporters. “There are new variables in the equation, so we’ll see.”

Sales of the most popular hybrid, the Toyota Prius, declined 3.2 percent in 2011, after disruptions caused by the earthquake and tsunami in Japan, where it is built. The Prius accounted for almost half of all hybrids sold.

On Tuesday, Toyota will unveil the Prius C, a smaller version. It began selling the larger Prius V in the fall and plans to bring out a plug-in Prius this spring.

Toyota also is showing off a plug-in hybrid concept called the NS4 on Tuesday. Its premium brand, Lexus, on Monday unveiled a hybrid concept sports coupe.

Honda showed off two cars, the ILX and NSX, that will be the first hybrids ever for its upscale Acura brand. Honda said it planned to build a new plant in Ohio to assemble the NSX.

Volkswagen unveiled a hybrid version of its Jetta compact car Monday. BMW brought two new hybrids and a pair of electric concept cars to Detroit. Mercedes took the wraps off two E-Class hybrids, though one will not be sold in the United States, and a tiny electric pickup truck concept for its Smart brand. Volvo is showing a plug-in hybrid concept.

Ford is taking away the hybrid option on its small sport utility vehicle, the Escape, but it is bringing out hybrid and plug-in versions of the Fusion, which it introduced Monday. The plug-in Fusion will get the equivalent of more than 100 miles per gallon, Ford said.

“We still believe electrification is going to play a big role in the industry, both to meet CAFE requirements and because of consumers’ sensitivity to gas prices,” said Mark Fields, the president of Ford’s Americas division, referring to the government’s corporate average fuel economy regulations. “We want to give people an opportunity to choose, and we have a manufacturing strategy that allows us to be flexible with what we produce. Whatever way the market goes, we will be able to respond.”

Bill Vlasic contributed reporting.

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In Its Rebound, Detroit Focuses on Selling Smaller Cars

By refocusing on small cars and de-emphasizing the gas-guzzlers that had long sustained the industry, General Motors and Ford in particular are preserving jobs and positioning themselves to prosper. Their efforts are already paying off in the marketplace. Ford’s tiny Fiesta is the best-selling subcompact in the United States this year, and G.M.’s Chevrolet Cruze outsold every other compact car in America last month except the segment-leading Honda Civic.

Nearly one in four vehicles sold in the United States in April was a compact or subcompact car, compared with one in eight a decade ago. Of the small cars sold in April, about 27 percent were American models, compared with 20 percent a year earlier. Data on sales in May will be released on Wednesday.

“There is a less-is-more mentality,” said Jeremy Anwyl, chief executive of the auto research site Edmunds.com. “The market demand and receptivity for these vehicles just didn’t exist four or five years ago.”

The transformation in Detroit was sparked by the worst financial crisis in generations, but was also assisted by an unusual set of circumstances.

The United Auto Workers made steep concessions on wages and benefits. The Obama administration used the opportunity of the bankruptcies of G.M. and Chrysler to prod them on fuel efficiency. Japanese carmakers like Toyota and Honda became complacent about their frontrunner status. And the psychology of the American car buyer underwent a stunning change.

“The most important thing we had to do was restore our reputation as a fuel-economy company,” said James D. Farley Jr., Ford’s head of global sales and marketing. “Without that, we couldn’t get a wide group of people to even consider these new products.”

After decades of turning out embarrassingly uncompetitive small cars like the Chevy Vega and Ford Pinto that rarely contributed to their bottom lines, G.M. and Ford have devoted their vast global resources to producing new models that are both fuel-conscious and laden with technology and attractive features. Chrysler, the smallest of the Detroit car companies, has been slower to make the changes, but with the help of its Italian partner Fiat it is headed in the same direction, with a new compact model expected next year.

The emphasis on smaller vehicles has proven to be a necessity for the recovering auto companies. Rising fuel prices have prompted a steady migration away from bigger vehicles since the spring of 2008, when gas hit $3.50 a gallon. Industry analysts and company executives say the shift is likely a permanent one, as consumers flock to small cars packed with features like heated leather seats, Internet access and voice-activated entertainment systems.

With every new small car sold, the acceptance of American brands is reinforced as automakers erase the bad memories of their cheap and unappealing “econo-boxes” of the past.

“This car has changed my impression of Detroit, big time,” said Christopher L. Garcia-Rivera of Northborough, Mass., who averages nearly 40 miles to the gallon in the Ford Fiesta he bought for $14,900 in April.

The signs of change are apparent everywhere in the industry’s home state of Michigan, where Ford has converted a former S.U.V. plant to build small cars that will be available in hybrid and electric versions, and G.M. is preparing to make the first subcompact model it has ever produced in the United States.

Ford got a head start on its small-car push when it hired an outsider, Alan R. Mulally from Boeing, to reorganize its operations five years ago. G.M., however, had to go through bankruptcy in 2009 before it could shed its big-truck mentality.

“We focused our resources where the market was before,” said Mark L. Reuss, president of G.M. North America. “You have got to spend money to do great small cars.”

The dominance of the Japanese small car has eroded, in part, because Toyota and others didn’t consistently update their models in recent years. “Toyota really dropped the ball with their bland styling and plastic interiors,” said John Menschede, a retired county assessor in High Ridge, Mo., who paid $19,700 for a Cruze with a turbo-charged engine and Bluetooth wireless communication equipment. “I wanted something with a lot of bells and whistles and that’s what I got.”

Still, foreign cars continue to give Detroit stiff competition. The Korean carmaker Hyundai has introduced well-received models, and Honda recently started selling a new version of the Civic, the perennial market leader. But instead of a few Japanese models grabbing the bulk of the sales, the compact-car segment is now a wide open field.

John W. Mendel, Honda’s top American sales executive, said the Japanese carmaker was confident that its small cars would meet the challenge from the latest American models. “Better products from our competitors?” said Mr. Mendel. “That’s a good thing for the U.S. marketplace, but the Civic remains the trendsetter.”

In the past, Detroit automakers neglected small cars because they could not make money on them. That has changed for several reasons. Labor costs are lower since the U.A.W. agreed to concessions on health care for retirees and a 50 percent wage reduction for new workers. G.M. and Ford are also spreading the development costs of compact and subcompact cars across their global divisions in North America, Europe and Asia.

Ford is building variations of its new Focus at factories across the world. The car’s basic design and engineering, however, was done in Europe, where consumers have long appreciated the value, fuel efficiency and performance of smaller models. “The way we work now is to use the teams that know the markets the best,” said Derrick M. Kuzak, Ford’s global product chief.

The companies still earn far bigger profits on trucks and S.U.V.’s. But small cars are now commanding better prices in the showroom. A year ago, G.M.’s previous small sedan, the Chevrolet Cobalt, sold for an average price of $18,400, according to TrueCar.com. Last month, however, the typical Cruze sold for $20,600.

Detroit executives are aware they still have a lot to prove. Mr. Reuss cringes when reminded of some of G.M.’s subpar products of the past, and vows never to repeat those mistakes. “Our company has been changed forever,” he said. “We’ve got a window to get it right this time.”

He knew G.M. was on the right track when he parked one of the first new Cruzes off the assembly line at a supermarket in suburban Detroit, and a store employee rushed over to check it out. “She said, ‘I can’t believe Chevrolet is building a car this size that’s this good,’ ” Mr. Reuss said.

Article source: http://feeds.nytimes.com/click.phdo?i=c185c78a0904075867f1db61074e85d2