Most large automobile manufacturers are considering adding hybrid electric vehicles (HEV) to their product portfolio for environmental reasons. Some, like Toyota, Nissan and Honda, have already begun producing or have plans for producing hybrids. Skeptics in the industry see these efforts as mostly intended to enhance the automaker's environmental image at a cost that is not recoverable in the marketplace. Few in the automotive industry claim a sound economic basis for hybrids, and furthermore are repelled by the disruption of existing systems they promise.
To test the validity of the industry's generally negative view of HEV economics, this paper establishes a logical, mission-based classification for HEV system architecture and performs a present value analysis for the three classes. The study projects product values over the next decade, computing present value (in the year of production) for a given size vehicle of a given hybrid class using hybrid propulsion technology approximate costs, government and other external incentives, local fuel cost savings projections, and consumer's perceived premium value. Cost figures are typical of specific technologies and not actual production validated parts.
Findings of the study include the emergence of California, Sweden and the UK as already fertile markets for early introduction of hybrids due to high government incentives in addition to high taxes on petroleum fuels combined with significant annual mileage values. Furthermore, the study reveals that the hybrid architecture with the highest economic potential has the lowest level of advocacy among automakers, and employs the highest degree of “hybridization.”
This “energy hybrid” benefits more than other hybrid architectures from California's Partial Zero Emission Vehicle (PZEV) credits and reduces petroleum usage and energy costs more than the others. Other hybrid classes also show positive direct economic value, but not until later in time, as projected battery life costs decline and not to the same magnitude as the “energy hybrid.” The economic evaluation tool of this study can be used with alternative assumptions of cost, feature value, and environmental incentives to satisfy divergent market views.