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Aug 17, 2012

Hybrid market grows as budget-conscious consumers turn green

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While hybrid sales remain minuscule in South Africa, the market has been steadily picking up speed, especially over the last four years. The recent trend could be attributed to an increasing fuel price, a keener sense of awareness among consumers of the need to preserve the planet, and a larger model selection as more manufacturers continue to enter this segment of the local market.

This year’s newcomer is BMW, which joined the local ‘green’ gene pool with its ActiveHybrid 5, apparently the first of many models to follow from the German manu-facturer’s stable.

Hybrids, of course, promise better fuel consumption than other vehicles of their size – a sip from the Middle Eastern oil wells, rather than a gulp – as well as lower carbon emissions from the tailpipe. They do so through the use of two or more power sources.

Most hybrids are hybrid-electric vehicles, which means they house an internal com-bustion engine, as found on traditional vehicles, as well as an electric motor. It is this motor, coupled to a battery, that is left to do most of the grunt work in the slow, fuel-intensive, stop-start traffic city commuters often find themselves in.

Toyota South Africa Motors (TSAM) introduced the first hybrid to the local market in 2005 with the launch of the Prius. With consumers skittish to engage this new technology, the vehicle was first only available to lease, but this was soon changed to a purchase option.

In 2006, 204 hybrids were sold in South Africa – all Toyota Prius models, and then still the only model available locally.

However, jump ahead five years, and 627 hybrids were sold in 2011, with the biggest seller being the Honda Jazz at 166 units. By this time, Toyota, Honda, Porsche, and Toyota’s luxury brand, Lexus, all had hybrids available, says Honda Motor Southern Africa sales and marketing director Graham Eagle.

In total, Honda sold 339 hybrids in 2011, Toyota and Lexus 268 cumulatively, and Porsche 20.

This year, it looks as if South Africa may set a new record when it comes to hybrid sales. For the first six months of 2012, South African consumers bought more than 410 hybrids. Doubling that would see the market breach 800 units or more. This seems especially feasible since Toyota in July introduced the country’s lowest-cost hybrid in the form of a new Yaris derivative, which it hopes will sell between 20 and 25 units a month.

Consumers can currently choose between 14 hybrid models.

Interestingly enough, the pioneering Prius’s numbers are declining, down from 204 units in 2006 to 31 in 2011.

The most popular hybrids are the Honda Jazz and Toyota Auris, but Toyota may still upset the apple cart with its Yaris.

Why a Hybrid?
Environmentalist and TV presenter Dave Pepler drives a Prius. He does so because he believes he has to “make a contribution, and start a revolution” to save the planet.

Then there is also his love for efficient, quiet driving, he notes.

Porsche Centre South Africa spokesperson Christo Kruger believes hybrid technology offers the “best of both worlds” – even for a brand historically known more for its agility than its frugality.

He says Porsche has been able to employ environment-friendly hybrid technology without compromising the sporty character of the German manufacturer’s cars, “resulting in a scintillating drive”.

“Smaller engine capacity, coupled with energy stored in batteries, produces excellent acceleration when required. Given adequate momentum, or in urban environments, the Porsche hybrid runs on battery power alone. Energy created by braking is converted and stored as electrical energy in the battery, for use when required, thereby making the car a more efficient unit, with minimal energy waste.”

Kruger says Porsche Centre South Africa has “experienced great success” with its hybrid models, particularly the Cayenne S.

“Porsche offers an in-car graph to measure the duration of driving time using battery power only, delighting drivers when they notice that up to 50% of their journey was completed with zero emissions.”

Hybrid Market Outlook
The global hybrid market has certainly taken off. The four-model Prius family was the world’s third-best-selling model in the first quarter of this year, at 247 230 units, with the Toyota Corolla in first place, and the Ford Focus second.

However, it must be noted that the Japanese government has been incentivising fuel-efficient vehicles to the tune of some $2 500 per vehicle in an effort to aid sagging domestic demand following last year’s earthquake and tsunami in that country.

But, then again, Prius sales also jumped 42% in the US in the first quarter of 2012.

Toyota, in Japan, also announced in May that it had sold four-million hybrids since the launch of the Prius, as its first hybrid model, in 1997. This came just 14 months after the three-million mark. Then also consider that it took ten years to hit the first million. This means the million marks are coming in quicker succession as hybrids gain traction in the minds of the motoring public.

Honda Motor Corporation said in January that it had sold 800 000 hybrids in total, 12 years and two months after the start of sales of the first-generation Honda Insight in November 1999.

Honda has since introduced six new hybrid models during the last three years to expand its hybrid line-up. The manu- facturer’s yearly worldwide hybrid sales were around 200 000 units in 2011, up 30% compared with 2010.

A research report by UK-based research firm Technavio predicts a 19% a year growth in global hybrid sales through to 2015, jumping from 900 000 units in 2011 to 1.8-million units in 2015.

China is seen as a market that holds much potential, with the hybrid market expected to expand at a compound annual growth rate of 41% from 2011 to 2015.

Technavio sees Toyota continuing its dominance in the global hybrid car market, owing largely to the product launches the company has scheduled in this segment over the next few years.

The research company also does not expect the hybrid to be overtaken soon by any other alternative power train.

“The hybrid vehicle will be the next big thing in the global automotive landscape and will not be overshadowed by battery electric vehicles,” the company says, in response to questions posed by Engineering News.

This overall positive trend could be in danger, however, as global fuel prices have been easing since the beginning of the year. Often hybrid sales are linked to major increases in the oil price.

Another threat to the long-term success of hybrid sales is that many vehicle manu-facturers have been focused on developing normal internal combustion engines capable of quite extraordinary savings in fuel consumption – without the added cost of a hybrid.

Unfortunately, hybrids still cost more than those powered by standard, internal combustion engines.

Technavio does expect, however, that the development of more efficient battery systems and their lower costs will cut the price of hybrids going forward, reducing this price gap. The report predicts that the total cost of ownership of hybrid vehicles will be less than for petrol-only vehicles by 2020, thanks to improved battery technology.

Never Expected High Volumes
Given that hybrids exact a heavier price premium and do not enjoy South African government incentive schemes, as they do in other parts of the world, Toyota never expected to achieve high volumes with these models in South Africa, says TSAM passenger vehicles marketing planning senior manager Lettie Labuschagne.

“That said, we sell whatever we are able to bring into the country.”

She adds that Toyota has been able to make hybrid ownership more affordable locally, with the flagship Prius now offering a lot more kit as standard. The recent launch of the Yaris hybrid has also seen the unveiling of the country’s most affordable hybrid yet, at R223 800.

Aiding the affordability drive would be some kind of government incentive for consumers buying a vehicle that offers carbon dioxide (CO2) levels below the current 120 g/km threshold at which CO2 tax becomes payable, emphasises Labuschagne.

The Yaris hybrid promises CO2 emissions of 88 g/km.

“A change in this policy could result in more significant growth in the hybrid market.”

However, with the market as it currently stands, TSAM expects only stable growth going forward. This will be driven by hybrid technology becoming more familiar and trusted by South African consumers, and by more hybrid entrants being introduced, says Labuschagne.

Next up in TSAM’s hybrid line-up is a new entrant in the Lexus range, which could very well further expand the local company’s current 62% share in the hybrid market, already up from 43% in 2011.

“Hybrid technology is evolving rapidly, gaining increased support and buyer acceptance,” concurs Porsche’s Kruger. “Hybrids will, in my view, increase in numbers as public awareness and tech- nology develop.”

Honda may also still add to its local hybrid line-up, notes Eagle.

“At this time, Honda is evaluating the possibility of introducing the Honda NSX within the next three years. The two-seater sports car will feature a 3.5

Edited by: Martin Zhuwakinyu
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