Hybrids — the way to go in emerging markets

Just last year, Toyota Motor Corporation (TMC) passed a unique milestone — selling more than five million hybrid vehicles since introducing them in 1997. These vehicles, running both on petrol and electricity, today account for 40 per cent of Toyota’s domestic sales in Japan, establishing them as mainstream cars. The crown jewel of the line-up in Toyota’s hybrid models is Prius, the world’s first mass-produced hybrid car that is doing well in the US and European markets, too.

The next target is emerging markets such as India that may soon see new hybrids suited to local conditions, says Satoshi Ogiso, TMC’s Managing Officer, while interacting with a group of visiting journalists from Asian countries. Having been directly involved with hybrid vehicles ever since the Prius project was taken up two decades ago, Satoshi knows a thing or two about the complex technology. Excerpts from an interview:

In developing hybrid vehicles, what is the priority — fuel conservation or the environment?

From the time we started work on the Prius, we have given equal importance to both fuel economy as well as reducing emissions.

Where are hybrids popular? What is the cause of their popularity?

Hybrids are popular in Japan for various reasons. One, we introduced hybrids into the market way back in 1997, that is, 15 years ago. It was only in 2000 that they were launched in the US and European markets. We thus have a long history of hybrid vehicles in Japan.

Two, in Japan, the tax on petrol is very high compared with other countries, making people opt for hybrids.

Do you see a possibility of diesel hybrids?

For hybrid vehicles, gasoline engines have good fuel performance. But in terms of technology, the diesel hybrid can increase the fuel economy a bit more than the gasoline engine. However, for the former, we need to have the emission cleaning system to make a contribution for a cleaner environment. Now, diesel vehicles are popular in Europe, so a system that complies with Euro VI is something that we are going to develop.

How far are you in the development of next generation vehicles?

We are taking major initiatives in the areas of next generation mobility, not just for vehicles but for energy management of the entire society. We are engaged in mobility areas in electric vehicles, plug-in hybrids and fuel cell vehicles.

With respect to electric vehicles (EVs), last year, we introduced the eQ, an extremely small vehicle, in Japan, Europe and the US in limited numbers. These vehicles, which face issues with range and charging times, are best suited for short distances. In the US, we have a joint venture with Tesla which produces Raffle EVs. With respect to Prius plug-in hybrid (PHV), since the beginning of last year, we have cumulatively sold 40,000 units in Japan, US and Europe.

Regarding fuel cell vehicles, we only produced trial models of 100 units, but starting in 2015, we are going to launch them. They have a much greater range than EVs and require only a short time to refuel, but new infrastructure is necessary.

What kind of incentives is the Japanese government giving its customers?

Earlier, half the cost difference between conventional and hybrid vehicles was covered by government subsidy. Today, when hybrids in Japan account for 40 per cent of the new cars sold, this sort of incentive is not really appropriate. The current tax incentives are aligned to fuel economy.

Do you have specific initiatives for regions such as Europe and the Asia Pacific to raise awareness of hybrids in those regions?

As a car manufacturer, we do not have different policies for different countries. Our aim is to offer high-quality hybrid cars that appeal to customers around the world with focus on good fuel economy and affordability.

However, the type of cars preferred varies depending on the region. For example, hybrids are popular in Japan, Europe and the US. Further, in these markets, the type of vehicles customers prefer is somewhat different. Compact cars are preferred in Japan. Since the fuel cost is very high, people largely opt for hybrids. But in the US, people prefer bigger cars such as the Camry.

Now we understand the most critical component of hybrids is the battery. Have you made an environmental assessment of the long-term impact of the batteries that are used in vehicles?

While cars are produced, used, and disposed of, we look at the environmental impact throughout the life of the vehicles, calculate it and come to grips with it.

While looking at the life cycle assessment indicators, through technological innovations, we try to reduce the energy required for the manufacture of hybrid components. We are also devising methods to recycle batteries.

Do you expect the cost of battery pack to come down further? How will this impact sales globally?

A hybrid vehicle has a motor, power control unit and the battery — the cost of each of which is critical. From 1997 to 2009, the cost of the nickel hydride battery used in the hybrids has come down by one-third. We will further reduce the cost drastically in the next generation Prius.

Last year, Toyota sold over 1.2 million units of hybrid cars, which is about 16 per cent of our global car sales. At the moment, I cannot officially disclose the number of units we intend to sell globally.

Will hot humid weather and traffic jams affect the life of the battery?

We tested hybrid vehicles not only in Japan but in some of the hotter places too, such as Death Valley in the US — where the temperature soars above 50 degree Celsius — and in Asian countries with high humidity. We have considered all types of climatic conditions in developing and designing the lifetime of our batteries.

By the way, while the bodies of the hybrid vehicles were severely damaged by the tsunami in 2011, the batteries did not suffer significant damage as they were protected by the body frame and battery packing.

While the cost of nickel hydride batteries has been reduced to one-third, will you be moving to lithium ion batteries?

As we have been using nickel hydride batteries since 1997, we have accumulated the technological knowhow. Based on this experience, we have been developing technology for lithium ion battery to reduce cost and ensure safety.

In 2011, part of the hybrid vehicles and the Prius plug-in hybrids adopted lithium ion battery. We have to minimise usage of the material (nickel in the case of nickel hydride and lithium in the case of lithium ion) to reduce production cost. And as safety is very critical for lithium ion battery, we should not compromise this in our process to reduce the cost.

What are the challenges in popularising hybrids in the emerging markets?

In emerging markets, vehicles that would be acceptable to society — be they hybrid vehicles or conventional vehicles — should be affordable, user-friendly and environment-friendly.

Also, crash safety is another factor. However, sustainability and continuity are important from an R&D point of view. We should have a mid- to long-term perspective in emerging markets.

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