insiders-look-at-hybrids

An Insiders Look at Hybrid Cars: [How They Work and Why They Matter] By Bradley Berman

Introduction In the fall of 2002, I walked into a Honda dealership looking to replace my tenyear-old Toyota Corolla. I was completely surprised to find a hybrid gas-electric Honda Civic, promising combined city-highway fuel economy of nearly 50 miles per gallon. I didn’t have to think twice. At a visceral level, I knew this was the car I wanted—that the hybrid would minimize the environmental impact of my driving. I also wanted to do something, however small, to help reduce America’s dangerous dependency on foreign oil. (At that time, the country was preparing for another bloody war in the Middle East.) I became one of 38,000 Americans who bought a hybrid car in 2002. I drove off the lot in my new hybrid and a journey began. I started monitoring my fuel economy very closely. I changed the way I drove. I began reading everything I could get my hands on, to learn more about the consequences of oil addiction. I looked at the drivers all around me and wondered how I could get them to see the good sense of ditching their gas-guzzlers for hybrids. I knew it would be a hard sell, but I decided to set up a website to pitch the benefits of hybrid cars. I continued to search out every article I could find about hybrids. When that research was exhausted, I began speaking directly with people who engineered, sold, and serviced hybrids, and those who advocated for their use. I was only able to use snippets of those interviews for hybridcars.com—because website users generally scan information rather than reading. Many visitors to the site sent notes asking for more of the whole story. This book is a response to those requests. Thanks to John Voelcker for his editing services, my wife Angela Karran for reading them over (and suffering through my obsession with hybrid cars), and Abigail Rudner for her design work. As the story of hybrid cars continues to evolve, so will my research. This book is the first in a series of publications produced in association with hybridcars.com.

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Table of Contents Jason A. Mark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Director, Clean Vehicles Program, Union of Concerned Scientists The Consumer’s Most Important Environmental Decision – Improving Fuel Economy on Conventional Engines – Hybrids in the Spectrum of Automotive Technologies – Improving Hybrid Technology – Battery Electrics and Fuel Cells as an Alternative – The World Oil and Hybrid Market – The Impact of Hybrids

Craig Van Batenburg

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Master Hybrid Service Technician, Automotive Career Development Center, Worcester, MA Hippie Mechanic – Revolutionary 1973 Honda Civic & The CVCC Engine – Brushless Motors as Part of the Puzzle – Putting All the Hybrid Pieces Together - Hybrids and Constantly Variable Transmissions (CVT) – Gas Mileage and Gas Pedals – Maximizing Fuel Efficiency – Real versus Actual Miles Per Gallon – Software Challenges at Ford and GM – Car Weight, Batteries and Safety – Hybrids in Cold Weather and Long Inclines – The Durability of Hybrids – Buying New or Used: Shopping Tips

Jim Kliesch 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Research Associate and Author, ACEEE's Green Book®: The Environmental Guide to Cars and Trucks, American Council for an Energy Efficient Economy What is the ACEEE? – Establishing a Vehicle’s Greenness – How to Find a Vehicle’s Pollution Info – EPA versus Real Fuel Efficiency Numbers – How the Hybrids Ranked – Health Costs and Environmental Damage – 20 Tons of Carbon Dioxide Per Year – Hybrid Cars As a Starting Point

Jason Dove Mark

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Director, JumpStart Ford Campaign, Global Exchange The Consequences of Oil Addiction – Responsibility: Automakers, Oil Companies, or Government – Return on Investment on Hybrid Cars – Hybrid Cars, Oil, War, and Peace

Sam Williams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Prius Yahoo Group Moderator Patterns on Prius Yahoo Group – Concerns for Prius Drivers – Toyota’s Relationship with Customers – Rivalry between Toyota and Honda Hybrid Drivers - Hybrids as Elite Vehicles Moving into the Mainstream – Proselytizing – Ten Times the Pollution versus One-Tenth the Pollution – Hybrid Owners, Connecting and Splintering

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Walter McManus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Executive Director of Global Forecasting, J.D. Power and Associates Measuring Consumer Opinions and Attitudes – Problems Per 100 Vehicles – Uncertain Future for "Clean Diesel" – Sales and Production Trends for Hybrid Cars – The Typical Hybrid Driver – Is Hybrid SUV an Oxymoron?

Elizabeth Frame . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Honda Sales Associate A Career Selling Hondas – Hybrid Customers – Blank Responses from the Uninformed – Hybrids Don’t Move As Fast – Activism on the Sales Floor

Dave Hermance

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Executive Engineer for Environmental Engineering, Toyota Forty Year Career – Toyota’s Hybrid Czar – American versus Japanese Corporate Cultures –Toyota Hybrid Release Schedule – More About Speed, Size, Fuel Economy and Sales – Tough Stuff: The Hybrid Computer Control System – The Leasing of Toyota’s Hybrid Technology – Consumer Concerns: Fuel Efficiency, Battery Life – Demand - With or Without Television Ads – Collective Gas Savings from All Priuses – What Ads Can and Can’t Do – And Finally, The Future…

Therese Langer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Transportation Program Director, American Council for an Energy Efficient Economy Understanding the CLEAR Act – Trying to Make Sense of the Legislative Landscape – Ford and the Coalition Supporting the CLEAR Act – Governmental Role in Gas Prices – Hybrids Driving Solo in Carpool Lanes – Defining "Hybrid" in Legislation – California’s ZEV Mandate – Corporate Average Fuel Efficiency (CAFE) Standards SUV Incentives Eclipse Hybrid Incentives

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Jason A. Mark

Director, Clean Vehicles Program, Union of Concerned Scientists The Consumer’s Most Important Environmental Decision BB: Let’s start with a statement that the Union of Concerned Scientists has made saying, "the choice of vehicle you drive has a greater effect on the environment than any other choice you make as a consumer." JM: The Union of Concerned Scientists did a study in the late 1990s, looking at consumer choices and their impact on the environment. We went through a whole range of environmental impacts—air pollution, global warming, water pollution, and solid waste. And then we went through your average consumer’s budget. Dollar for dollar, the impact that makes the largest print on the environment is car choice. Second is where you get your food. BB: Do you think car choice and its impact on the environment resonates with consumers? JM: One of the reasons we did that study was because, in many Americans’ minds, doing something for the environment had to do with how much you recycle. And while recycling is absolutely important, if you’re going to the recycling center in an inefficient gas-guzzling vehicle, you’re not really doing your part. You could be doing far more for the environment. In other words, we shouldn’t be sweating the small stuff; we should be focusing on the big picture choices. And given how much national conversation there’s been about recycling—or do you get paper or plastic at the grocery store—there are far more important choices to be making. Your car choice is the most important. Improving Fuel Economy on Conventional Engines BB: Let’s go over the full range of automotive technologies, from the most familiar to the most exotic—and what is their potential for decreasing impact on the environment, reducing tailpipe emissions, or improving fuel efficiencies. What about advanced technology for conventional cars? Does it have a role? JM: Absolutely. In fact, in many respects, the ho-hum technology for making better versions of today’s internal-combustion cars will be the most cost-effective option. Unfortunately, you can’t walk into an auto dealership today and choose a 30-mileper-gallon SUV versus a 20-mile-per-gallon SUV. With hybrid SUVs, we will start to see some of that, but quite honestly, there are a whole host of technologies before you get to hybrids that would be incredibly cost effective. It’s higher-efficiency Jason A. Mark

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engines used in cars today, but not in trucks. It’s better transmissions offered in parts of the car market but not available market-wide. There are so many cheap strategies for boosting fuel economy sitting on the shelf, if you will. The key question is why car companies aren’t offering them to consumers. BB: Is it because it raises the cost of producing the car? JM: They do raise the cost of the car, but they pay for themselves so much faster than the hybrids. I’m thinking of payback times for the typical consumer. We think that boosting vehicle fuel economy using conventional technology could pay for itself in less than five years. Hybrid vehicles will take 10 years of ownership or more to pay for themselves BB: In terms of consumers making this choice, one of the most frequent comments on hybridcars.com is that the extra expense doesn’t pay for itself. And yet we already know that some consumers will make a conscious choice to spend the extra money for a hybrid. UCS has argued that over the lifetime of a vehicle, it does pay for itself, and in fact it represents a savings to the consumer. JM: In terms of mass production, we looked at the potential for large production hybrids (over 50,000 a year on an assembly line, which of course we’re now reaching with some of these hybrids) plus a bit of maturation on the technology. We think there’s a strong case to be made that over the lifetime of the vehicle, consumers will save up to several hundred dollars. In some cases, it’s more than a thousand bucks. From the consumer’s perspective, the extra cost paid at the dealership is going to be paid back through fuel savings at the gas pump. For some of these extremely cost-effective—sometimes even forgotten—conventional technologies, those would be a very easy final choice for consumers. Solely through fuel savings, you’d pay for the extra cost of the vehicle in just a few years of driving. In the case of hybrids, it’s going to take longer—but you’re also seeing much larger gains from an environmental perspective. We can’t stop with these improved conventional technologies if we want a 50% or greater fuel economy improvement. If you want twice the fuel economy, you’re going to have to go to hybrid technology. BB: What about diesel technology? JM: We put diesel in the traditional combustion category because it’s an option that’s been around as long as traditional gasoline vehicle technology. There’s a lot of progress recently for diesels—as there is for gasoline. The challenge, of course, is the emission from diesel vehicles and whether they can meet the latest pollution standards for tailpipe emissions. If they can, they will offer an important Jason A. Mark

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fuel economy boost. We’ve just completed a comprehensive study of diesel versus gasoline cars, and we asked whether diesel can really match gasoline on emissions. That remains to be seen, but if diesel could meet clean air standards, how would it stack up against gasoline technology as a tactic for reducing fuel use? We concluded that, while diesel vehicles do offer larger total fuel economy improvements, we’re not convinced they’re as cost-effective as improving fuel economy in gasoline cars. In other words, if you want to reduce fuel use for the average vehicle by 20 to 30 percent, doing that with diesel costs 2.5 to 4 times more than doing it with a gasoline vehicle. BB: You’re talking about upstream auto production costs, as well as downstream (in car) use? The total upfront cost? JM: Right. In other words, it’s going to cost several thousand dollars more to produce the diesel vehicle. In simpler terms, today our average vehicles get around 24 miles per gallon. If we wanted to get that up to 30 miles per gallon, we estimate that the average price for a vehicle would increase by a little under $500 if they were gasoline cars. If you were going to get to that 30 mile-per-gallon equivalent using a fleet of diesel vehicles, it might cost $2,000 more per vehicle.

............. There are so many cheap strategies for boosting fuel economy sitting on the shelf. ..............

BB: From that, can the average consumer extrapolate some helpful information on whether they should look for one of the few diesels that are available today versus a hybrid car? JM: Versus a hybrid car, yes. Many hybrids offer greater fuel economy gains than the diesel options. In general, we’ve argued that well-designed gasoline hybrids will also be cheaper. For an equivalent fuel economy improvement, gasoline hybrids should be cheaper than just straight diesel technology. BB: Cheaper to purchase or cheaper over the lifetime of the car? JM: Both. BB: Are there diesel hybrids in the works, perhaps in Europe? JM: Yes. A couple of automakers have talked about diesel hybrids. Putting a diesel engine into a hybrid car would deliver even larger fuel economy improvements, Jason A. Mark

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there’s no doubt about that. But it will obviously add some costs as well. BB: Why are you less supportive of diesel? Is it the cost issue or the environmental impact? JM: It’s both. There are major questions about whether diesel vehicles can ever be as clean as gasoline cars.

.................... On one end, [you have] improved conventional vehicles. At the other end are purely electric vehicles. Hybrid vehicles are the bridge in between. ....................

BB: Today, they’re not? JM: They’re not. They are several times dirtier, and they’re allowed to be dirtier by law. New pollution standards coming online will force diesel cars to be cleaner, to match the average gasoline vehicle today. There are questions about whether they can, although the technology is moving in the right direction. BB: If diesel achieves higher miles per gallon, why is it still dirtier? JM: Diesel vehicles are generally more efficient, in a couple of ways, compared to gasoline engines—which means you’re using less fuel. A diesel’s greater efficiency comes from operating at very high compression ratios in the engine, which can increase emissions of Nitrogen Oxides, a key smog-forming pollutant. The specific characteristics of diesels that make them very efficient in low-speed driving also creates pockets of incomplete combustion inside the cylinder, and generates emissions of soot. In some respects, the very features that make diesel engines more fuel-efficient are the same ones that cause increased air pollution. Hybrids in the Spectrum of Automotive Technologies BB: What I’m seeing from the UCS reports is that you think hybrids pave the way to a host of future technologies, most notably fuel cells. JM: On one end of the automotive technology spectrum will be improved conventional vehicles that deliver better fuel economy very cost-effectively, really the best that the century-old technology can be. At the other end are purely electric vehicles, say powered by fuel cells. Hybrid vehicles are the bridge in between. They mix the electric world and the combustion world quite elegantly. That speaks to another issue around hybrids: Really, what is a hybrid? There is a range of designs. The ones closest to that electric future deliver, by and large, far greater environmental gains. Jason A. Mark

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The "full hybrid" designs embodied in the Prius or the Ford Escape are the best example of these fully electric systems. The Honda Civic is impressive because it’s a more mild hybrid, and yet it delivers similar fuel economy gains—in part because they’ve done a lot with conventional technology, not just hybridization. BB: I drive a Civic Hybrid, so I’m partial to that. You’re saying that what it achieves today is pretty miraculous. But if you’re looking to pave the way to the other technologies, then the Prius is a glimpse into the future. JM: Again, thinking of this as a spectrum, the Prius embodies more "electric driveness" than the Civic. And yet, at the end of the day, you’ve got to measure these vehicles based on what they’re doing for the environment. In that case, the Civic and the Prius are pretty similar in their improvements over the base vehicle. Honda has blended more conventional technology into a less aggressive hybrid system than Toyota. At the end of the day, diversity makes all the sense in the world. Technological diversity is absolutely vital in this early stage in hybrid development. The systems that I find unfortunate, quite honestly, in the hybrid regime are—we haven’t quite come up with a good term for them, partial hybrids, pseudo-hybrids—systems with only a 42-volt starter/generator system. We would argue that’s just a natural extension of conventional technology in vehicles like the Chevy Silverado pickup and the Dodge Ram Contractor Special. These technologies, while they’re important innovations in automotive design, are not really hybrid cars—from our perspective.

.............. It’s certainly going to be some time before we see fuel cells at the stage of technological readiness that the hybrid vehicles are today. ..............

BB: Are these vehicles using electric components to boost performance, or to get some other kind of functional gain, rather than improving fuel efficiency?

JM: That’s clearly one of their priorities, although there are fuel economy gains. They’re talking about 10 to 15 percent increases in efficiency in a lot of these models, and they’re getting it by having a starter-generator that shuts off the engine at idle, at a stoplight. It really underutilizes the potential of hybrid technology. Again, it’s a continuum. I credit Daimler-Chrysler, and GM, for Jason A. Mark

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developing pickup trucks that are more fuel-efficient. They’re just marginally more fuel-efficient. And the label of "hybrid technology," in my view, should be reserved for those hybrid vehicles—already on the market, and a few coming—that demonstrate real breakthrough gains in fuel economy improvement. BB: In your reports, are you looking at broad programmatic changes in the fleets, as opposed to individual car choices today?

.............. Our economy is held hostage to the ups and downs of the world oil market as long as we consume large quantities. ..............

JM: We build up these fleet estimates from modeling individual vehicles. We traditionally look at five different classes of vehicles. We have a sub-compact, a full-size car, a SUV, a minivan, and a pick-up truck. We model the energy use for each vehicle over the federal driving cycle, and come up with projections of how fuel-efficient they could become using different technology packages. Then we estimate the costs associated with them. We modeled a diesel subcompact and compared it to a gasoline subcompact, and looked at the costs and fuel economy associated with it. And then we often roll up the costs for all these individual comparisons into fleet-wide results, to give us a sense, from a policy perspective, what you might do if you wanted to boost fuel economy.

Improving Hybrid Technology BB: What about plug-in hybrids, or next-generation hybrids that might include improvements in battery technology? JM: I think the next generation of non-plug-in (or standard) hybrids will continue to move towards a higher fraction of total energy coming from the electric motor systems. That’s from improved batteries that keep the cost down while you do that, and improvements to the rest of the vehicle package. You know, reducing aerodynamic drag, rolling resistance, vehicle weight—no matter what your drive train is, hybrid or otherwise—can have a huge impact on fuel economy. There are benefits to be had both from the hybrid drive train, making it even more electric oriented, and also continuing to improve the rest of the vehicle. The plug-ins make a whole lot of sense. It’s not clear that any automaker has gotten to the point of recognizing the strong potential for plug-in technology. The costs are likely to be higher than the non-plug systems because you need more batteries. [But] plug-in hybrids [also] make a whole lot of sense from a consumer perspective: having a vehicle that actually runs as an electric car for most of your driving needs, but with Jason A. Mark

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the engine there when you need it. It’s an intriguing concept. Whether or not it can be done cost-effectively remains to be seen. A lot of automakers are researching the issue, none of whom have made a serious commitment. It would be nice to see an automaker really test the waters on that technology. My personal sense is that there’s a lot of consumer interest in a completely non-polluting car that could be run on electricity for a large chunk of people’s driving needs. BB: Full hybrids already achieve that at lower speeds. JM: Right. And for many hybrid vehicle drivers—you can’t do this with Civic Hybrid or the Insight, but with the Prius—you get this game of trying to stay in electric mode as much as possible. In some sense, a plug-in hybrid just lets you do that to a much greater extent. BB: So the same kind of improvements we saw with the (secondgeneration) 2004 Prius we might anticipate right across the board? JM: We should continue to see these types of gains. Engineers haven’t extracted all the fuel economy gains they could out of hybrid designs by a large margin. There’s lots to be done. BB: Does that concern you at all, in terms of the resale value of hybrids? I’m seeing some people hesitant to get into the market. It’s like computers, where the technology improves so much that you don’t want to buy something now that’s going to be much better next year. JM: In the evidence that I’ve seen, talking with automakers about resale in their markets, that hasn’t been an issue at all. The first-generation technology offered such a breakthrough in environmental performance that people’s investments in the older technology are still pretty safe. Things are getting incrementally better, and there will be more options. But resale values seem to be holding strong.

.............. The auto industry says that consumers don’t care about environment. The early market success of hybrid vehicles flies in the face of that reasoning. ..............

Battery Electrics and Fuel Cells as an Alternative BB: Let’s move onto another technology: all electric cars. Ford and GM have discontinued their electric Jason A. Mark

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vehicle programs. Any hope for folks out there who want an all-electric car? JM: It does appear that the large automakers are pulling the plug on battery cars. Folks involved with batteries are starting to think of the plug-in hybrid as the next step. It’s unfortunate because I think the battery technology affords use. Limited range vehicles make a whole lot of sense, but the automakers ultimately don’t think it makes business sense. The zero-emission technology that really captures automakers these days is fuel cell technology, obviously. They’re spending an amazing amount of R & D dollars, and perhaps even more PR dollars, on fuel cells. BB: Everything I read says we’re anywhere from a decade to two decades away from seeing this technology available to consumers. JM: It’s certainly going to be some time before we see fuel cells at the stage of technological readiness that the hybrid vehicles are today, no doubt about it. It’s an important reminder that we should really squeeze what efficiencies we can out of conventional vehicles, as well as pushing hard on hybrids as first priorities. It’s far more cost-effective and it’s ready now. But does that mean that we should ignore the long-term potential of fuel cells? I don’t think so. If you look over the next 30 years, and project out potential oil savings from putting the best conventional and the best hybrid vehicles on the road, ultimately we can’t meet the long-term goals of reducing oil dependence and global warming emissions without moving to a next step. And fuel cells could well be that next step. The World Oil and Hybrid Market BB: Does the Union of Concerned Scientists have an opinion about when we might see the end of oil? Or when we might get past its peak production, which could drastically change the price of oil? JM: We don’t have an official position. We haven’t spent as much time researching it as others have. But obviously you’re familiar with the literature that suggests that as soon as the next decade, we could see a peak in world oil production. As oil demand continues to grow, seemingly exponentially so, we’re headed for a mismatch there. My view is that whatever your long-term outlook, there are very important reasons to reduce our dependence on the world oil market. From an environmental respect, it’s impact on global warming. From a national security impact, it’s how our dependence on oil drives a lot of our political choices. Perhaps more importantly, from an economic perspective, each of the three world oil price shocks in the last three decades was followed by a recession in the United States. It’s a reminder that our economy is inextricably tied to the world oil market. Whether we’re getting the oil from pristine Arctic wilderness or buying it from Saudi Arabia, our economy is Jason A. Mark

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held hostage to the ups and downs of the world oil market as long as we consume large quantities. Even if we had lots of oil to spare, I think there are sound economic arguments for weaning ourselves from it. BB: People might be most familiar with the price shock in the early 1970s. What are the other two you’re referring to? JM: 1973, which was the Arab Oil Embargo. 1979, which was the Iranian Revolution, and 1991, the first Persian Gulf War. BB: What about these issues as they relate to other regions of the world? Is Japan ahead of us in terms of hybrid use? JM: I don’t have a numerical sense of their market. In terms of automakers, before Detroit has its first hybrid vehicle on the market, the Japanese will have sold at least 100,000 hybrids in the U.S. BB: How is oil use and hybrid technology playing out in Europe, in Latin America, or in Asia? JM: My sense is that other world economies take the issue of oil dependence and global warming—probably the two factors that drive interest in hybrid technology— far more seriously than the United States. Most of these countries have signed up for the Kyoto Protocol, the 1997 treaty to limit greenhouse gas emissions. Most of these countries have decades of experience in more progressive policies to reduce oil consumption, not the least of which is gasoline taxes. They have a stronger track record in lowering consumption, whereas the United States has led the world in lowering air pollution from cars. Europe and Japan have led the world in setting responsible energy usage policy for cars. The Impact of Hybrids BB: There’s a statement on the UCS website about various transportation technologies and green cars. You say, "hybrid technology could transform the whole passenger fleet…in this decade and into the next." Is that overstating the case? JM: It depends what you mean by "transforming the whole fleet." Do we think that 100% of all vehicles sold by 2010 could be hybrids? No. But I would argue that its impact is transformative on vehicle technology. Obviously, now we’re less than 1% of sales. Until we get to a large fraction of the 17 million-plus vehicles sold in America, we’re not going to have a major national impact on the environment or, say, oil security. BB: Didn’t UCS mention that one of the biggest current challenges is Jason A. Mark

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marketing this technology? JM: One of the issues we run into, having watched the car market for more than a decade, is that consumers aren’t faced with a lot of choices in car technology. One reason we’re so excited about hybrids is that finally consumers have an option that is a marked improvement for the environment. We’re actually going to have a SUV or two that will be higher efficiency. That’s tremendous. The auto industry is fond of saying that consumers don’t care about environment. I think the early market success of hybrid vehicles flies in the face of that reasoning. But there’s a lot more to be done. The first step, quite honestly, is offering consumers more hybrid products. BB: Are we currently in a nascent phase? Are we just barely tiptoeing along? JM: Without a doubt, hybrid vehicles are still in this crawling stage. Ultimately, to make a dent in our oil use or global warming, we’ve got to get to a very fast run. For more information: Visit the Union of Concerned Scientists Website at http://www.ucsusa.org/clean_vehicles/ Read Consumers Guide to Environmental Choices at http://www.ucsusa.org/publications/report.cfm?publicationID=130 Read The Diesel Dilemma: Diesel’s Role in the Race for Clean Cars at http://www.ucsusa.org/clean_vehicles/cars_and_suvs/page.cfm?pageID=1307]

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Craig Van Batenburg

Master Hybrid Service Technician, Automotive Career Development Center, Worcester, MA Craig Van Batenburg, 53, was the owner of Van Batenburg’s Garage, in Worcester, Massachusetts, for more than 26 years. He now runs the Automotive Career Development Center (www.auto-careers.org), which trains mechanics throughout New England. He writes on repair technology and garage management for Motor Age, Auto-Inc.and Action magazines, delivers management and technical seminars nationally, and is a leader in electric-hybrid technical training. He also works with the Massachusetts government on air-quality issues. He has received many awards, including the 1999 "Import Car Top Ten Shop", and has hosted call-in automotive radio shows. Outside the garage, he is known to impersonate Elton John, play the trombone, and help find permanent homes for foster children. Hippie Mechanic BB: How did you become a car mechanic? CVB: I bought a used Honda motorcycle on my 16th birthday. I had so much trouble with it that I had to bring the engine-transmission assembly to the local Honda motorcycle shop. They fixed it and gave me a bill for $300; I think I had 10 cents. So the motorcycle shop owner, Joe Bolger, gave me a job to pay off the bill. I worked the entire summer, for free, and fell in love with Hondas.

.......... There’s zero maintenance on the hybrid system. Zero. ..........

If you’re a motorcycle mechanic in Massachusetts, you’re laid off every October. That was okay at 18, 19, 20. I spent my winters in a ‘59 VW bus in Arizona. I’m an old hippie from the sixties; when I got laid off, I just headed to Arizona. I didn’t work. I hung out. I did crazy stuff. Around 22 or 23, I realized that I had to have a full-time job. The obvious choice was to become an automotive mechanic because they work year-round. They also get paid better. I got my first job at a Volkswagen dealership. From there, I went to Toyota. Then in 1972, when the Honda Civic was first introduced, I got excited about Hondas. I applied for a job at the local Honda car dealership, which also sold motorcycles. And I was more than qualified, with a car and a motorcycle background, and I was a little more mature at 22 or 23. So that’s when I got into the Honda car thing. Craig Van Batenburg

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The oil embargo hit in 1973, so the Honda Civic became the car of choice: frontwheel drive and 30 – 35 miles to the gallon. I was politically inclined to think that we should be fuel-efficient anyway. Today, I drive my Honda Insight for the same reason I bought a brand-new 1974 Honda Civic. BB: Did those political ideas mean anything to your friends or fellow mechanics? CVB: They thought I was weird. But they respected me because I was intelligent enough to explain why I felt this way. My appreciation for the finer aspects of technology, and how things fit together, came out of the motorcycle end of it. Motorcycles are finely built instruments; they are very different than cars. I saw that motorcycle thinking applied to cars when I saw the 1973 Civic, which was remarkable. It was revolutionary.

................ I’m going to recapture somewhere between 11 and 17% of the braking energy, and use it to turn an electric motor to generate electricity. ................

The Revolutionary Honda Civic & The CVCC Engine BB: How was the ’73 Civic revolutionary? CVB: It was the first front-wheel drive transverse engine that was modern, a very good drivetrain layout. 1 It was $2,300 brand new. It got 30 – 35 miles to the gallon. What really lit me on fire was in 1975, the year that catalytic converters became mandatory. To meet the 1975 emission standards, everybody except Honda had to add a catalytic converter to their car. Everybody. The reason we had automotive emissions was that we weren’t burning fuel efficiently in the combustion chamber, and we were burning it at too high a temperature. What Honda did, and you’ll see this in their corporate advertising: They believe if there’s a problem, you go to the source of the problem. If you lower the temperature in the combustion chamber, and you burn the fuel more efficiently and more of it, then you would have less emissions, meaning hydrocarbons, carbon dioxide and NOx (Nitrogen Oxide). So in 1975, they introduced the Civic with an optional CVCC engine, standing for compound vortex-controlled combustion. They went to the source of the problem, and redesigned the combustion chamber to burn the fuel at a slower rate. That kept the heat down, and burned more of it. Guess what? No catalytic converter required. Honda didn’t have to use a catalytic converter until 1980, in California, and then, in Craig Van Batenburg

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1981, they came out in the rest of the states. BB: So what’s the connection between that technology and the hybrid technology introduced by Honda in the Insight, which was the first hybrid car sold in the U.S.? CVB: If you take Honda’s philosophy of addressing problems at the source, one large source of global warming is CO2 emissions, which is a product of burning fuel. Given that the source of carbon dioxide is the engine burning fuel, you can’t make the problem go away. How would we do it? Burn a different fuel? We have no infrastructure. Can’t do it. Or we stop driving as many miles as we do. That’s very difficult; it’s hard to drive less. The only real option we have right now is better fuel economy. Bingo. We go to hybrid vehicles to get better fuel economy, to burn less fuel. Hence, less CO2. Brushless Motors as Part of the Hybrid Puzzle BB: Tell me the components of hybrid technology, what they are and what they do.

.............. I’m never going to use more than 80% of the battery up. ..............

CVB: There are really about five components necessary for hybrids to operate. Most of them have been invented before. To some degree, it can be traced back to the electric car owners, all these tinkerers who played with electric cars in the seventies. Let’s start with the electric motor. Because of cost, these guys used typical AC electric motors that you might see in your refrigerator or heavy industrial applications. They have carbon brushes that are pushed against the armature by springs. And the electricity is transferred right through the carbon brush to the armature. It’s a good technology, very efficient and inexpensive. But eventually the brushes wear out; they get weak and short. We no longer have an electric motor that works. That’s not desirable in cars. Brushes would mean bringing your hybrid in, and having the motor taken apart and the brushes replaced, from time to time. People wouldn’t put up with that. So we have to use brushless electric motors. Those have been around a long time; they’re just expensive. Plus, the clearance between the moving parts of the motor in a hybrid is probably four-thousandth of an inch, roughly the thickness of a human hair. That clearance has to be maintained all the time, which means the bearings that hold the center rotor can virtually never wear. We need a motor that’s incredibly strong, very Craig Van Batenburg

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sophisticated, well built, and so durable it will last the lifetime of the car. That’s one thing. Putting All the Hybrid Pieces Together BB: How does the electric motor fit into the entire picture? CVB: Let’s go back to the beginning; let’s say I wanted to build a hybrid. What do I need to do? I need to get a battery pack that has probably 150 volts or more. I need a battery that I won’t have to replace all the time, so I’ll use Nickel Metal Hydride batteries because they’re the most cost-efficient. Now, I’ve got to hook up an electric motor somewhere in the driveline. If you’re Honda, you’ll put the electric motor between the engine and transmission. If you’re Toyota, you’ll put an electric motor where the Honda one is, put a transmission next to that—the CVT transmission we’ll discuss later—plus, you’ll have another electric motor on the other side of the transmission. You’ll have two big electric motors. That’s Toyota’s concept. There are really only two basic layouts: Honda’s and Toyota’s.

................ If you’re sitting in park in the driveway and you floor the gas pedal, the computer will say "Why would it do that? It’s in park." ................

Now, I can make my internal combustion engine smaller. I don’t need as much horsepower; I don’t need as much torque. I can get better fuel economy. The battery pack adds back the quick acceleration from stop that I lose with the smaller engine.

I need a way to charge the battery pack, so I don’t have to plug the car into my house. To do that, I’m going to re-capture somewhere between 11 and 17%—the numbers I hear from Honda and Toyota—of the braking energy, and use it to turn an electric motor to generate electricity. Now, I can charge up the battery. I’m going to take one of those electric motors if I’m Toyota, or the only one I have if I’m Honda, and use it as part of the braking system to capture some electricity instead of wasting that energy as heat from the brakes. And, of course, I need a few computers to control all of this. I need a computer for my main battery pack, so I don’t overcharge it, undercharge it, or overheat it. I’m going to have to watch the temperature of the battery. I’m going to watch the voltage and amperage, and also how much I deplete it. I’m going to keep that battery at least 20% charged all the time. But I’m never going to use more than Craig Van Batenburg

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80% of the battery up, either. I’m going to slowly charge it and slowly discharge it, within that range of, say, 20% to 80%. If I do that, my battery is going to last 15 years. If I don’t do that, my battery might last 15 months. And at $2,000 to $5,000, that’s not good.

............... All the Priuses sold in five years have saved about 125 million gallons of fuel. But in the L.A. basin area, 33.5 million gallons of fuel are used every three days. ...............

Because I can’t take all the power out of the battery when I want to accelerate in a hurry, I’m going to put some capacitors inside this vehicle. That’s a component that functions like a battery. It stores electricity and releases electricity. It doesn’t do it chemically. You can discharge it and recharge it quickly and it doesn’t damage it. I’m going to charge those capacitors up, and if they’re good, they’ll stay charged for years. And when I need a burst of electricity, I’m going to grab it from the capacitor, so it doesn’t damage my battery.

So far, I’ve got batteries. I’ve got some capacitors. I’ve got some computers. I’ve got an electric motor that I can use to drive forward, and to recharge the battery. I’ve got a conventional gas engine that can do everything that a conventional gas engine would. I should also mention some of the other computers we need. I mentioned we need a computer to watch that battery. We also need a computer for the braking system, so it knows how to combine the electric motor with conventional brakes. BB: In current hybrids, is there one central computer? CVB: No. No cars have one central computer, believe it or not. Conventional cars have a computer for the transmission, a computer for the engine. Somewhere between seven and 14 computers today. In cars, they are little modules stuck inside the car that the technician has to go find [laughs], and scrape his knuckles getting it out. Hybrids and Constantly Variable Transmissions (CVT) BB: You mentioned the term CVT, or constantly variable transmission. What does it mean exactly? Is that only available for hybrids? CVB: No. Snowmobiles have had a CVT since they were first designed, and they’re Craig Van Batenburg

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extremely simple. The first time I saw CVT, constantly variable transmission, was a 1962 Skidoo. A CVT is just a transmission that has no gears. If you have a 10-speed bicycle, you know there are steps in the transmission when you see the chain go from one gear to the next. You can see it go from 32 teeth to 38 teeth. But if the gear ratios aren’t spaced right, all of a sudden your legs are spinning too fast, or you can barely push the pedals down. A constantly variable transmission, however it’s designed, has no steps in the gear ratio. This can be accomplished in many ways. 2 Then some were built by Subaru at least 15 years ago. They were not real successful; [there wasn’t a real need, with good conventional automatic transmissions at the time]. There were some problems. Audi now makes one. Honda makes one. Obviously, Toyota does too.

............... When you have a hybrid vehicle, you can install a smaller engine, and still have the same performance for passing trucks and going up hills. ...............

The way that Toyota does it in the Prius is unique; totally different than the way anyone else does it. Toyota calls it a "power split device." There’s a lot of information on it. There are lots of schematics on how it works. And it’s built around something called a planetary gear set, which will go right over the average person’s head. And no matter how much they try to understand it, they’ll never get it. And they don’t have to.

But Toyota uses a planetary gear set in a unique way of designing a CVT transmission, making it the central hub where all the power sources send their power. The internal combustion engine sends it there. The two electric motors send it there. They can send in three different sources of power simultaneously, at any RPM range, or any torque speed that they like. And Toyota’s CVT transmission knows how to handle it. If you had a standard transmission, there’s no possible way it could accept three different power sources at the same time. Regular transmissions are only designed for one. BB: Is that the main difference between the Toyota and Honda CVTs? CVB: Honda uses a CVT transmission, slightly modified, that they designed for

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their Civic back; I’m going to say, in the Nineties. It’s what we call "a belt-driven CVT," which is the conventional type—what the snowmobile used back in 1962. The snowmobile had a rubber belt that was exposed to the air, and Honda has a steelchain belt that’s bathed in oil inside the transmission, so it lasts a lot longer. The only thing that’s the same between the Toyota transmission and the Honda is the name CVT. There’s nothing else that’s similar, except that it doesn’t use gears. Gas Mileage and Gas Pedals BB: You can get a manual Honda Insight or Civic Hybrid, but you can only get a CVT in the Prius. Would you get an additional boost in fuel efficiency with a manual transmission? CVB: If you want a [hybrid] stick shift, the only option is Honda. If you look at the fuel economy numbers on the Civic, the five-speed is higher than the CVT. But the automatic transmissions are so sophisticated today; they can equal a stick shift. And here’s the other thing, a key point. The Prius does not allow the operator to do much except send signals to a computer. With rare exceptions, you don’t have a lot of control over anything.

............... To have that electric motor start up and shut off, and have the gasoline engine start up and shut off, and the customer not perceive a thing, is very hard to do. ...............

If you step on the gas pedal on a Prius, you’re sending a signal to the computer connected to a sensor, a pedal position sensor. The computer then sends a signal to the throttle that opens it electrically. So you have no control. In the Prius, for example, if you’re sitting in park in the driveway and you floor the gas pedal, the computer will say, "Why would it do that? It’s in Park." It will let you go to 1,800 RPMs, and that’s as far as it will go. People who drive stick shifts have the ability to do really stupid things. They can over-rev the engine, and go into what we call "fuel cut," where the computer starts taking over and backing off on how much fuel goes in. You can drive in the wrong gear. You can slip the clutch. You can burn your clutch up. You can do all kinds of things in a five-speed to destroy your fuel economy. So, Toyota takes away your ability to operate the gas pedal. It takes away your Craig Van Batenburg

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ability to shift. If a carmaker takes that away from the consumer, you’re going to get better fuel economy because you can’t be an idiot, even if you’re driving like one. The computer won’t let you be an idiot. BB: Does the Civic Hybrid do the same? CVB: No. On Hondas right now, the Civic and Insight—although it may change—you control the throttle through a cable. So, your foot is connected to the throttle opening. They’re doing that to keep costs down. That’s an expense thing. And if you have a five-speed, you’re shifting. I control the shifting and the throttle in my five-speed Hondas, where I can’t do either one of the things with the Prius.

Maximizing Fuel Efficiency BB: What hints do you have for people on how they can maximize their fuel efficiency? CVB: Leave earlier.

............... Deaths per miles driven in SUVs are 2.5 times as high as passenger cars. ...............

I’m serious. It’s a lifestyle change. I have a two-family house and I rent out the apartment upstairs. The woman who lives upstairs is always late for everything. She’s a wonderful woman. She drives a Toyota RAV4. She must get horrible fuel economy because she runs downstairs, starts it up, throws that thing in gear, and down the highway she goes. She’s not going to get fuel economy that way. You leave early so you can drive more slowly. Enjoy your ride. The difference in drag, wind resistance, between 50 miles per hour and 75 miles per hour is not 25 percent more. It’s like 100 percent more. You’d have to talk to somebody who knows physics to give you the exact numbers. BB: Think of how much gas we would save if people, even without getting a hybrid, simply changed their driving habits. CVB: [Sighs] We’ll never get this conversation done if we go down that road. [Laughs] Yes.

I got this number from Toyota: All the Priuses sold in the five years since they started in the United States have saved about 125 million gallons of fuel, against a comparable car like a Corolla. But in the L.A. basin area, 33.5 million gallons of fuel are used every three days. In less than two weeks, just in L.A., they’ve consumed Craig Van Batenburg

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something like 125 million gallons of fuel. BB: You’re saying that the contribution that the Prius has made, and you could add the Civic Hybrid and the Insight, has been very small. CVB: Infinitesimal when you look at our thirst. Don Schnell is a buddy of mine, an educator. He was driving from Philadelphia to Worcester to speak at a conference I was holding, and he got stuck in a traffic jam. He had his laptop, and he spent the time computing how much fuel was used for all the idling cars on that eight miles of road. It was an astronomical number. If all of those cars were hybrids, those engines would all have been off. So the amount of fuel consumed at idle, in traffic jams, is huge. And where you live, do they have the tollbooths where you can drive through rather than stop to pay? Just getting the little transponder so you drive through instead of stopping, how much fuel does that save? A tremendous amount. If you have to stop and start again, that’s where you get nailed, which goes back to regenerative braking. At least while I’m stopping, I’m stealing a little bit of power so I can start up again without paying the full penalty from having stopped. BB: What about Honda versus Toyota technologies as they relate to city versus highway driving? CVB: If you know you’re going to be in gridlock, buy a Prius. You’re going to get into idle-start more often. You’ll be able to creep along on electric-only. Plus, Toyota thought through a lot of little nuances. In the Prius—unlike both Hondas—the heater system has a small electric pump built in. A heater system circulates the hot engine cooling water through hoses into a small radiator under the dashboard, called a heater core, and back out. We put a fan behind it, and blow air across that. That’s how heat gets across to our cabin. In a Prius, when you’re stopped in the winter time, and the engine shuts off, the little electric motor continues to circulate the coolant under the dashboard, so you continue to have heat. You don’t have that in the Civic Hybrid or Insight. So in the dead of winter, when it’s really cold outside, when your [Honda hybrid] goes into idle-stop and you leave the heater on, you’re going to start blowing cold air in 30 seconds. So the Prius is heads and shoulders above Honda’s technology on the idlestop feature for sure. BB: Will a hybrid get improved fuel economy when you’re on the highway, not in stop-and-go traffic?

Craig Van Batenburg

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CVB: When you have a hybrid vehicle, you can install a smaller engine, and still have the same performance for passing trucks and going up hills. Therefore, hybrids are absolutely more fuel efficient on the highway than a comparable car. Now, if you want to look at an old Geo Metro, which had a three-cylinder 1.0-liter engine, made by Suzuki, that was a very fuel-efficient car on the highway. It was lightweight and fairly aerodynamic. But the car had no performance. None. So someone could make the argument that a hybrid isn’t any more fuel-efficient than the Geo Metro was on the highway. But hybrids get the same fuel economy, and they actually have good acceleration too. Real versus Actual Miles Per Gallon BB: One of the big complaints from new hybrid drivers is that they don’t get the advertised gas mileage. Some people get a lot less. On the other hand, some people seem to get super mileage. There’s a lot of variance in terms of mileage. How do you explain that? CVB: There are things we cannot control that have to do with fuel economy. Are you in a headwind or are you in a tailwind? Huge difference. The weather: Are we driving on snow? On ice? Or on asphalt? Your actual commute: Are you in an area where you can never really get up to speed? Are you always accelerating and decelerating? Or take a close look at the car. Here’s an example. The Honda Insight, when it gets a wheel alignment, what they call the toe adjustment is set to zero degrees. That’s highly unusual. You never set the toe at zero on any other car because it doesn’t handle as well. But, it gets better fuel economy at zero. So Honda made a trade-off. It won’t give you great high-speed handling, but it’ll give you better fuel economy. Now the customer drops the car off for new tires. If that store isn't up to date on hybrids, there could be a problem. The guy doesn’t put high-pressure tires on, and he aligns the tires by using the Civic’s specifications because he couldn’t find it for the Insight. You’ve just lost 10 to 15 miles per gallon with the wrong tires and wheel alignment. Those things can happen. BB: So there are cases where it’s not the fault of the manufacturer but because settings aren’t observed… CVB: After it was manufactured, somebody altered something. This could happen at a dealership as well. Get to know your service tech. A few days after the service, if you’re happy, go back with a ten-spot and drop it on the tech. You’ll get great service after that. Not too many people respect and thank their techs. And I mean, thank the tech directly—no one else. BB: What do you say to somebody who’s getting nowhere near the Craig Van Batenburg

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advertised mileage—say no more than the high 20s for Civic or Prius, and the 30s for the Insight? CVB: It’s not to say that there might not be something wrong with that particular car. To say that Honda or Toyota builds lemons would be way off track. But something could go wrong to ruin fuel economy on any car. If a fuel injector starts to leak, your fuel economy goes in the toilet, or if a spark plug is fouled. But these would also be performance problems. In other words, it wouldn’t run very well. You wouldn’t have much power so you’d notice it. Your MIL (check engine light) would most likely come on. Software Challenges at Ford and GM BB: Some American carmakers say you’ll get a higher percentage increase in national fuel efficiency by putting hybrids in vehicles that get the worst gas mileage. CVB: General Motors makes that point. They’re the only ones. GM goes to great lengths to explain that they’re only going to use it on their trucks because they don’t want to waste their time putting it on cars. Ford Motor Company has been designing software to put Toyota’s drive system in their Escape. There was a story in Automotive News where Ford was very upfront. They said, "Our engineers can’t figure this out. We’re going to delay the project until they figure it out. We do not want to buy Toyota’s or Honda’s computer program, because then we won’t know what’s going on. We really need to learn." So Ford’s being honest. "We’re way behind. We’re trying like heck. We’ll get there." The General Motors story is a different one. They’re saying we’re only going to use it on GM trucks. The truth of that matter is that they can’t get the technology to work either. BB: Is the technology that tricky? CVB: Absolutely. To have it work seamlessly, to have that electric motor start up and shut off, and have the gasoline engine start up and shut off, and the customer not perceive a thing, is very hard to do. And that’s what Ford is having a hard time doing. Because they bought the rights to use all the Prius stuff they want. Ford’s going to use their own gasoline engine; it doesn’t matter what engine you use. But they didn’t want to buy the software. They’ve got everything they need, and they can’t make it work smoothly enough.

Craig Van Batenburg

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BB: So, it’s a software challenge as much as anything else? CVB: It’s a software challenge. Car Weight, Batteries and Safety BB: How much do the batteries in a hybrid actually weigh? CVB: Not that much. On the Prius, it’s about 100 pounds. And on the Insight, it’s about 50 pounds. That’s nothing. The average person is running around with that much in their trunk. A pure electric needs 1500 pounds of batteries to go 100 miles. The beauty of the hybrid is that we’re constantly charging and discharging a small battery pack. BB: You’re saying that the extra weight is negligible, as opposed to critics who say that the hybrid’s increased performance, coming from improved aerodynamics and light weight, is wiped out by the extra weight. CVB: Well, they’re missing the point. A lot of additional weight has been added to make cars safe. I’m talking about the beams in the doors, the collapsible steering column, the whole structure of the vehicle, air bags, safer seats, and crush zones. You know, at 35 miles per hour, smashing into a brick wall, they want you still be alive. So we’ve added a tremendous amount of weight, for good reason. I’m all for it. Things like ABS, that adds weight. These are all safety-related issues. When they’re talking aerodynamics and light weight, they’re only talking about the Insight. The old Prius and the Civic are about as aerodynamic as your average vehicle. The ‘04 Prius is quite aerodynamic because it’s .26 coefficient in drag, which is .01 more than the Insight, which is .25—a record nobody’s beaten for a production car. BB: Some people stay away from hybrids, at least the current offerings, because they feel that they’re not safe. Are hybrids less safe in any way? CVB: No. Absolutely not. You look at the Star ratings [issued by NHTSA for survivability in various types of crashes]. Somebody’s going to drive what they’re going to drive. If the fear factor is big, you’ll put the biggest car or SUV you can around you. And you’ll die at a higher rate, as you probably know. Deaths per miles driven in SUVs are, I think, 2.5 times as high as passenger cars. If "safety" is their reason for not buying a hybrid, then they’re just looking for a reason to justify their SUV because it’s not valid.

Craig Van Batenburg

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Hybrids in Cold Weather and Long Inclines BB: What about winter driving? Do hybrids work in cold temperatures and snowy conditions? CVB: I drive an Insight with full snow tires with steel rims in Massachusetts in bitter cold. I’ve had four winters now. I get about 20% to 25% lower fuel economy than in summer. Partly due to the tires, and driving through the snow. I warm my car up. I start it up, warm it up, when it’s really cold, like 20 degrees. I let it run for five or ten minutes before I get in it. That’s hurting my fuel economy. I can live with that. I get 46 to 52 mpg in winter, where I’m going to get 52 to 65 in summer on average. But that’s perfectly fine. Hybrids are just as good in winter as any other car. In some ways, when the electric motor kicks in, they’re better. When you’re going in snow, you want to have torque. You don’t want to spin the wheels. So you put it into low gear, and you nail the throttle, and your little LED lights light up, so that your "assist" is on, and that sucker is perfect in the snow. It’s all torque from the electric motor. I love it. But it’s lightweight, so you’d better not go fast. Nobody should go fast on ice. BB: You mentioned before that the computer sets the batteries to run between 20 and 80 percent of power capacity. Could the batteries run all the way down if the idle-stop assist is on for a long time? CVB: No. Not unless something is wrong with the car. BB: Could you reach a point where the assist is no longer working, for example, on a long, steep incline? CVB: It’s happened with me. BB: At that point, you’re 100 percent on gas? CVB: Right. And then the car takes some of that gasoline power away from the car to charge the batteries back up again. So the performance gets even worse. But it still has reasonable power. BB: So there’s no risk, for example, of damaging the car or having to replace the batteries? You’re just going to remove the extra benefit of having the electric assist? CVB: No damage to the HV batteries will result. All of a sudden, your Insight turned into a Geo Metro. You’ll say, "Holy cow, I don’t have any power." You’re still going, and doing 60 miles an hour. You just don’t have any extra power because of that unusual and very unlikely situation you’re in. It will correct itself very quickly. Craig Van Batenburg

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The Durability of Hybrids BB: What about the longevity, the lifetime, of hybrids? CVB: We’ve got an electric motor that’s going to last forever. It’s brushless. There’s only one moving part. And the bearings that support that rotor assembly—on the Honda it’s the crankshaft of the engine, so unless you ruin the crankshaft bearings inside your internal combustion engine, you don’t have a problem. On the Prius, we’ve seen five years of driving and lots of miles and no failures. They’re using a bearing that’s lubricated with transmission fluid. So far, so good. It looks like they’re fine. BB: So they haven’t been around long enough to be really proven, but you’re saying that hybrids should last as long as any car. CVB: If not longer. The battery packs, by the way, we’re seeing maybe a 3 percent deterioration over a simulated 150,000 miles, where they cycle it back and forth, 20 to 80, 20 to 80. There’s a bunch of companies that have been doing battery simulations for a long time. So these Nickel Metal Hydride batteries—as long as they’re protected, and all the systems work as planned—can easily go 200,000 miles, maybe 300,000. You just don’t replace them. Buying New or Used: Shopping Tips BB: I look online, and I see that there are used Priuses out there. What should I be concerned about when looking at a used hybrid? CVB: The same thing as anybody buying any used cars. Has it been in an accident? Was it maintained? Was the gasoline engine maintained? Did they change the oil when they were supposed to? There’s zero maintenance on the hybrid system. Zero. So there’s no maintenance to do to make sure the hybrid system is okay. There’s nothing there. All of these cars, by the way, have a 12-volt battery, so when those get older, they need to be replaced like any 12-volt battery. But major battery replacement just doesn’t happen. BB: What is the most critical consideration when shopping for a new hybrid? CVB: You only have three choices right now: You have the Civic, the new Prius, and the Insight. The three are so distinctly different, people should be able to figure it out quickly. They’re not going to buy the Insight if they need a lot of room. They’ll buy the Civic if they want a five-speed. The Prius loaded is now $27,000. It’s gone up. You can still buy a $21,000 one, but if you want all the bells and whistles that most people will want, you’re going to need some trim level upgrades.

Craig Van Batenburg

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I’ll tell you quite honestly, right now, if I was out looking for one, and money wasn’t an object, I’d buy a Prius in a heartbeat. You have to understand that my roots are with Honda. Now, when the Accord V6 Hybrid comes out, that may change my mind. I have a lot of respect for Toyota. They have a lot to be proud of. BB: Do you anticipate the day when hybrids are so commonplace that all mechanics and techs will know about them? CVB: I don’t, because not all mechanics, we call them technicians for good reason, are trained for the non-hybrid 2004 models out today. Our industry does not have a fully trained workforce. Right now, most technicians are afraid to work on hybrids and won’t touch it. The more progressive independent shops are just gearing up. They know that this is the wave of the future. I spent a lot of my time traveling the USA doing just that, helping techs get ready for hybrid service and repairs. For more information: Visit the Automotive Career Development Center Website at www.auto-careers.org.

R NOTES 1 Honda didn't pioneer this configuration; Austin launched the transverse-engined, front-wheel-drive Mini in 1959, using an existing engine. But Honda was the first carmaker to sell large numbers of these cars in the critical United States market. 2 The CVT was introduced in the late Fifties by a Dutch company called DAF, which

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was the only company in the world to produce it during the Sixties.]

Jim Kliesch

Research Associate and Author, ACEEE's Green Book®: The Environmental Guide to Cars and Trucks, American Council for an Energy Efficient Economy Jim Kliesch is a green-vehicle technology expert at the American Council for an Energy-Efficient Economy (ACEEE) in Washington, DC. He’s the co-author of the annual publication, ACEEE’s Green Book®: The Environmental Guide to Cars and Trucks. Since joining ACEEE in 1999, he has worked on an array of vehicleand energy-related topics, including computer modeling of vehicle emissions, vehicle life-cycle assessments, and CO2 emissions trend analyses. He is also the manager and principal vehicle analyst of the GreenerCars.com website. Kliesch has been consulted by various news media—including The New York Times, CNN, MSNBC.com, and Automotive News—on automobiles and the environment. He holds a bachelor’s degree in electrical engineering from Ohio University, and a Masters degree in environmental and energy policy from the University of Delaware. What is the ACEEE? BB: What’s the role of the American Council for an Energy Efficient Economy? And what’s your position there? JK: The American Council for an Energy Efficient Economy, also known as ACEEE, is a non-profit in DC that’s been around since 1980. We’re essentially a nonpartisan think-tank whose mission is to promote energy efficiency as a way to strengthen the economy and improve the environment. BB: How broadly do you define energy efficiency? A lot of things get examined here, as you can imagine. For example, we look at energy-efficient dishwashers as well as power plants. We cover the range from industrial to building to commercial uses. I happen to work in the transportation program here, which is just one component of ACEEE. We don’t exclusively work on transport issues. I am a research associate, working solely in transport. I’m essentially a vehicle analyst and green-vehicle technology expert. I do an annual publication called Jim Kleisch

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ACEEE’s Green Book, which is an environmental guide to cars and trucks. I also manage the greenercars.com website, which is a companion site to the book. I do most of the research and writing for the book, which takes about half of my time in a given year. BB: What kind of training got you involved with this? JK: My undergraduate degree was in electrical engineering. Then I did some work in a biomedical company, but decided I wanted to get a degree in energy issues. So, I got a Masters in environmental and energy policy, which was an interdisciplinary program at the University of Delaware that looked at a number of things, from renewable energy, such as solar power and wind power, to some vehicle stuff. Vehicles were an interest, but they weren’t the primary focus of my Masters program. As it was, this position opened up, and it was a good fit with my interests and my technical background, combined with my understanding of energy and environmental issues.

............... Today’s gasoline vehicles meet some incredibly clean standards, levels lower than anyone thought even five years ago that gasoline vehicles could meet. ...............

BB: Average consumers don’t have an inkling about engineering or energy policy. How do you work to help them make purchasing decisions? JK: That was the whole idea behind our publication of the Green Book. We wanted to provide an environmental score for today’s cars and trucks, and make that information available to consumers in an accessible fashion. And that’s essentially what we’ve done. We’ve taken the major components of a vehicle’s greenness—its fuel economy, how clean its tailpipe emissions are, plus some other information about upstream emissions, vehicle mass, etc.—and we’ve combined all that information to provide a "green score," a comprehensive rating for every car and truck on the market. In other words, we took out the guesswork. We’ve done all the legwork and given consumers a resource that allows them to compare one model’s environmental friendliness to another. So, if they want to find the greenest pick-up truck on the market, or the greenest car bar none, they can easily do that.

Jim Kleisch

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Establishing a Vehicle’s Greenness BB: What would be a low score, a high score, and what are the criteria that go into scoring? JK: Our scoring is based on a 0-to100 scale, where 100 is the theoretical score for a vehicle that would have no environmental impact, use no fuel or materials. The greenest score this year is a 57. And the lowest vehicle is between 9 and 10. The first factor that affects a vehicle’s environmental friendliness, or lack thereof, is fuel economy. The amount of fuel a vehicle burns is proportional to the amount of greenhouse gas emissions that it puts out.

............... A lot of people purchase hybrids because of their environmental benefits, and not merely because of the savings they offer at the pump. ...............

BB: Tell me more about the various pollutants and the damage they cause. JK: The primary greenhouse-gas pollutant is carbon dioxide, or CO2. There are others, such as nitrous oxide (N20) and methane (CH4). There’s also the upstream emissions of a vehicle: the emissions from the energy consumed to get the fuel from the wellhead to the gas tank—extracting the crude, refining it, and transporting it to the gas station. All of that requires energy and has emissions associated with it before it ever reaches your gas tank. So the more gasoline you consume in your vehicle, the greater your share of upstream emissions are going to be as well.

BB: That’s fuel economy. What else? JK: The second factor is tailpipe emissions. There are four primary regulated pollutants: carbon monoxide, hydrocarbons, nitrogen oxide (commonly known as NOx), and particular matter, also known as PM. Each of these four pollutants is regulated, and depending on how clean a vehicle is, it has to meet a certain government-defined standard. For instance, a vehicle can be certified "Tier 2, Bin 5," which denotes a certain maximum emission level for each of those four pollutants. Or can be certified to "Tier 2, Bin 9," which is a less stringent—dirtier, if you will— level of each.

Jim Kleisch

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BB: Those go into a separate category from carbon dioxide? The greenhouse pollutants are not considered tailpipe emissions?

............... The Ford Excursion’s health costs are $330 a year. The Civic Hybrid is just a third of that, $110 per year. ...............

JK: That’s right. I mean, CO2 does come out of the tailpipe per se, but when people refer to tailpipe emissions, they commonly mean these four pollutants— also called "criteria pollutants," because they’re regulated by the government. CO2 is not expressly regulated. But, fuel economy is regulated, and CO2 is inversely proportional to fuel economy, so you could say it’s kind of regulated by proxy.

There’s actually quite a range on how clean a vehicle can be, with respect to tailpipe emissions. Today’s gasoline vehicles meet some incredibly clean standards, levels lower than anyone thought even five years ago that gasoline vehicles could meet. Great strides have been made in our ability to clean up vehicles. That’s not to say that all vehicles are meeting those standards. In fact, there are many that just meet the bare minimum standard. That’s one of the reasons we have a range from 9 to 57 on the green score. The third factor in the green score is emissions or energy consumed during the manufacturing process. This has less impact if you look at the entire environmental lifecycle of the vehicle. It’s not as important as fuel economy or tailpipe emissions. And unfortunately, there’s not enough transparency in the industry to get accurate data on the environmental performance of every factory. That information just isn’t publicly available. Honda Accords are built in Marysville, Ohio, but we can’t get the data that says the Marysville plant emits so many pounds of Nitrogen Oxide per dozen Accords that it puts out, and how that differs from other vehicles built at other plants. What we do know are general numbers based on research done by folks from the University of California-Davis on the environmental impacts of vehicle manufacturing facilities in general. We use vehicle mass as a proxy, and evaluate the so-called "embodied impacts" of the vehicle in our scoring methodology. A Ford Excursion large SUV uses more materials, and requires more energy to put together, than, say, a Toyota Echo, so that’s reflected. But because there’s not the transparency that lets us do that on a plant-by-plant basis, in effect we have to assume that all vehicles are made on the same line.

Jim Kleisch

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BB: It sounds like you are taking every step possible to quantify… JK: The cradle-to-grave lifecycle analysis of the environmental impact of the vehicle. BB: Focusing perhaps on the vehicle in use? JK: That’s right, though we’re not specifically choosing to focus on it. Our analysis shows that the greatest environmental impact is found during the in-use period. How to Find a Vehicle’s Pollution Info BB: Does any of this information end up on the window sticker that consumers see in the showroom? JK: A couple of key pieces of information are there, though some of it might be unfamiliar to the general consumer who isn’t paying close attention. Clearly, fuel economy labels are on the window of every car and truck sold in this country— the city and highway fuel economy label. It’s easy to compare two vehicles’ fuel economies. The emission standard, the designation that shows how clean the tailpipe emissions are, is also on a label on the vehicle. If you pop the hood, there’s a sticker on the underside saying, "this vehicle is certified to meet Tier 2/Bin 5, SULEV, ULEV," etc, whatever certifications that vehicle meets. The only problem is that unless you understand that a "Tier 2, Bin 5" is cleaner than a "Tier 2, Bin 8," it isn’t very useful to a consumer. BB: Most hybrid cars are way up into SULEV and ULEV categories. What do those terms mean? Are all hybrid cars equal in terms of tailpipe emissions?

............... One gallon of gasoline produces 19 pounds of CO2. Over 15,000 miles of annual driving, think about how many gallons you’re burning. ...............

JK: Let me take a step back. There are two sets of standards. There’s a California standard and a federal standard. It used to be that the federal standard was called Tier 1. There was just one of them. A vehicle was certified to Tier 1. And then there were three or four different California standards. There was LEV, ULEV, and something called TLEV, which is not quite as clean as a LEV.

Jim Kleisch

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BB: What do those acronyms mean?

............... Fuel economy has gone nowhere, literally, in the last 20 years. ...............

JK: TLEV was "transitional low emission vehicle." LEV is "low emission vehicle." ULEV is "ultra-low emission vehicle." And SULEV is "super ultra low emission vehicle." Unfortunately, things got a lot more complicated (!) as of this model year, 2004. A new set of emission standards went into effect both federally and in California. So the Federal Tier 2 standards went into effect, which affect 45 states. The Tier 2 standards, unlike their prior setup with a Tier 1 standard for cars and one for the different truck classes, have this range of bins. You can have "Tier 2, Bin 5" or "Tier 2, Bin 9" or "Tier 2, Bin 11," etc. So it’s a different beast than its predecessor. And, California has phased in a new set of standards, called the LEV II standards. By LEV II, I mean the low-emission vehicle family, not to be confused with the low-emission vehicle standard. It really does get confusing. If you go to greenercars.com/howbuy.html, about half way down the page, there’s an explanation of tailpipe standards. Unfortunately, the nomenclature gets really confusing—for example whether something is a ULEV II or a ULEV I. California did not make it easy on us. The California standards affect California, but also Massachusetts, New York, Vermont, and Maine. The federal standards affect the remaining 45 states. What we’re typically seeing is that automakers are certifying a single vehicle to meet both a federal standard and a California standard. BB: The average consumer won’t be aware of any of this. Are there any simple rules? With the federal Tier 2 standards, the lower the bin number, the better. Something cleaner than a Bin 5 is pretty clean. Tier 2, Bin 9, is really nothing to write home about. The cleanest vehicles this year, for example the Prius, is certified to Bin 3. That’s extremely clean. For California, if you really want to buy clean, a number of vehicles this year are certified to the Partial Zero Emission Vehicle (PZEV) standard. If you really want to be on the cutting edge of clean gasoline vehicles, PZEV is the way to go. Ford Focus has a PZEV. A number of vehicles, hybrids included, are certified to PZEV—though not all hybrids are PZEV. Jim Kleisch

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BB: Which hybrids are certified to PZEV? JK: Civic Hybrid has a PZEV version. Prius is a PZEV. The Insight is not, but a version of it meets the Super Ultra Low (SULEV) standard. There’s very little difference between SULEVs and PZEVs. BB: So what do you have to do to get the PZEV? JK: Primarily, live in California. The main difference with PZEV, and for that matter SULEV, vehicles is that they have really sophisticated emissions-control systems, notably catalytic converters, to get them to meet these stringent limits. Your catalytic converter can be thought of as a washing machine that washes the pollutants while they travel from the engine to the tailpipe. Catalytic converters are notoriously sensitive to the amount of sulfur that’s in the gasoline. Sulfur is bad for a catalytic converter. If you run fuel with high levels of sulfur in it through a vehicle, it’ll poison the catalyst, rendering it much less effective, so you get higher levels of emissions coming out your tailpipe. To meet these really clean levels of SULEV and PZEV—and we’re talking about near zero levels of emissions, really spectacularly clean levels—you need sophisticated catalytic converters that are particularly susceptible to sulfur. California is one of the few states where low-sulfur fuel is widely available. The good news is that over the next couple of years, lowsulfur gasoline, and for that matter diesel, will be available nationwide. So PZEV and SULEV cars will become more common over the next couple years.

............... While you have both the fuel economy and the low tailpipe emissions benefits for hybrid vehicles, diesels offer only the fuel economy benefits. ...............

Right now, it’s largely a warranty issue. Manufacturers don’t want to sell these vehicles in areas where you may run them on a high-sulfur fuel, because that will trip the "check engine" light. Then they’re going to have to take their car into the shop, the vehicle will be under warranty, and it’s going to cost the automaker money to check out the cause. BB: So one technology is largely waiting on another, which is cleaning up the fuels during the refining process. JK: Yes. There’s been a regulation that requires the oil industry to get the sulfur Jim Kleisch

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out of its fuel. Interestingly, some vehicles, I believe Ford with its Focus PZEV, are said to be available nationwide. So maybe they’re confident in their after-treatment system, their catalytic converter. Or perhaps they’re saying it’s available nationwide, but only selling it regionally. For the most part, you’re seeing these vehicles in California. EPA versus Real Fuel Efficiency Numbers BB: Let me focus on a different issue: the city and highway fuel efficiency numbers. Hybrid buyers get enthusiastic, even euphoric, when they’re promised 50 or 60 mpg. Then they don’t achieve it, and get disappointed. Should drivers just plan on disappointment? JK: The problem is not unique to hybrid vehicles. Hybrid drivers may be more aware of the fuel economy stated on the label than others. All vehicles, when they are tested for fuel economy, are run through a standard set of tests. It’s called the federal test procedure, and it’s supposed to simulate typical driving in the United States. In simplified terms, you take a vehicle, you run it to X miles per hour, wait so many minutes, and take it down to another speed. The problem is, this test doesn’t reflect how city and highway driving has evolved. The fuel-economy variation is exacerbated by the fact that hybrid vehicles are of a different design than conventional cars: they have fuelsaving behaviors such as regenerative braking or engine-off that occur during certain kinds of driving. But for both conventional and hybrid cars, the test will overestimate your fuel economy. BB: Equally?

............... Choosing a vehicle with better mileage offers, in effect, insurance against volatility in the fuel market. ...............

JK: No. Not equally. You simply have different technologies on the cars. The same holds true when comparing two hybrids. For instance, the IMA design for Honda’s Civic Hybrid is different than the Toyota’s Hybrid Synergy Drive on the Prius. So those technologies are going to behave differently under a constant test procedure. A better method needs to be developed for hybrid vehicles, and there’s work now being done on that topic.

BB: When folks are trying to compare the Prius to the Civic Hybrid, does the testing favor one of those technologies over the other?

Jim Kleisch

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JK: I don’t know. I’m not that familiar with whether one of those technologies is more amenable to the test than another. Both of those vehicles have good designs, and offer a great fuel-economy benefit over conventional vehicles. In fact, folks in my office have both cars. I’ve driven them both, and I’m happy with them. BB: Is there a little competition between the ACEEE Prius drivers vs. the Civic Hybrid drivers? JK: [Laughs] Yeah. I should point out that nobody in our office drives to work. We’re in Washington, which has a great mass transit system, so everybody takes the Metro to work. But driving around personally in the suburbs, or going on vacation or whatever, there’s some good-natured ribbing that occurs. How the Hybrids Ranked BB: I know you can’t make a recommendation, but can you compare the two hybrids? JK: Last year, the Civic Hybrid and the Prius scored nearly identically, because their fuel economies were virtually identical and they met the same tailpipe emission standards. This year, the 2004 Prius offered about a 5-mpg increase over its previous version. If you look up the greenest vehicles, the Prius takes the Number Three spot this year, which beats out the Civic Hybrid, but does not beat out the Insight, because the Insight has remarkably better fuel economy. The Insight is Number Two, just barely edged out by the Honda Civic GX, which is a Compressed Natural Gas (CNG) powered Honda Civic. BB: Is that car available to consumers? JK: It’s on the market, but primarily for fleet purposes. For somebody who has a fleet of multiple vehicles, say a city government, "alt fuels" make sense because you can have a centralized refueling location, take the vehicles out during the day, bring them back home, and fuel them up at night, all in the same facility. But individuals would have to find a source for refueling with CNG. Health Costs and Environmental Damage BB: Tell me about the upfront costs of purchasing a hybrid, including whether you’ll recoup that investment in gas savings. JK: Regarding fuel costs, we make an assumption about the annual amount of driving. I believe it’s 15,000 miles. Those numbers are taken from the Department of Energy and posted on the fueleconomy.gov website. There are some general assumptions about the cost of diesel, the cost of gasoline, the cost of premium gasoline, that also go into our number. So, it’s just 15,000 miles divided by X miles per gallon times a buck fifty per gallon, or whatever the price is for the type of fuel Jim Kleisch

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the vehicle uses. That’s going to be your annual fuel cost. BB: So you’d have to spread that over many years before you’re recouping the $2,000 or $3,000 more for a hybrid car. JK: Sure. It’ll take a number of years before you recoup your investment in fuel savings—or maybe not necessarily years, if you drive coast to coast every other week. It depends on how much you drive. That said, I think a lot of people purchase hybrids because of their environmental benefits, and not merely because of the savings they offer at the pump. BB: Which leads us to other kinds of costs. On the GreenerCars.com site, you have health costs, greenhouse-gas emissions, and an environmental damage index. JK: Health costs are a monetary representation of the damage caused by the various pollutants that the vehicle emits. We’ve examined epidemiological studies that state that, for example, Nitrogen Oxide causes so many millions of dollars worth of damage in respiratory ailments, etc. We calculate the damage that an individual vehicle causes in a year through the sum of its various pollutants—for its particulate matter, its nitrogen oxide, its hydrocarbons, its smog impact, etc. We monetize that health-cost damage so we can estimate that, say, driving that car for one year causes $120 per year in health damage. BB: Compare the unhealthiest cars, let’s say a big SUV, to a smaller car or a hybrid car? JK: Let’s look at a classic large SUV, like the Ford Excursion—which may not necessarily be the worst. The Ford Excursion’s health costs are $330 a year. The Civic Hybrid is just a third of that, $110 per year. So an additional $220 a year in health damage is caused by the extra pollutants from the Excursion. That’s a "savings" from a hybrid too, although it’s not something you can put in your pocket when you’re buying the car. BB: And the environmental damage index? JK: The green score we talked about earlier is just another representation of the environmental damage index. We took the index and converted it into a logarithmic scale, 0 to 100, to make it easier for consumers to understand. The environmental damage index is the overall amount of damage, everything included—upstream emissions, in-use emissions, embodied emissions, the whole nine yards. So, for instance, the Ford Excursion causes 4.14 cents per mile driven of environmental damage, compared to the Civic Hybrid at 1.42 cents per mile. With the index, you can just look at the ratio to compare two vehicles. Jim Kleisch

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BB: But if somebody really wanted to hold your feet to the fire, you can’t really say it’s costing you personally that much. JK: No. It is. It really is costing you that much, as best as we can calculate, using current estimates of damage cost and such. But you can divide those numbers to get a scale, and find that the Ford Excursion on a per-mile-traveled comparison is 2.9 times as damaging as the Civic Hybrid. It’s a comprehensive way to look at the overall environmental impact of the vehicle. 20 Tons of Carbon Dioxide Per Year BB: Let’s look at the fourth category: greenhouse gas emissions. I’m looking at the Civic Hybrid numbers, and it says six tons a year. So, a very clean hybrid car is emitting six tons of CO2 a year? JK: That’s right. Compare that to the Excursion, which is 20 tons a year. The reason is that gasoline has a lot of carbon in it. You burn carbon and it combines with the oxygen to produce CO2. One gallon of gasoline produces 19 pounds of CO2. Over 15,000 miles of annual driving, think about how many gallons you’re burning, plus the upstream emissions related to that, as well as the greenhouse emissions of other pollutants. CO2 is your primary greenhouse gas pollutant, but there are others as well. Nitrous Oxide, for example, N20, has some global warming potential, though much less of it comes out the tailpipe. That’s taken into account as well. Look outside, and you see just how many cars are on the road, and frankly just how many large trucks there are on the road. Although I don’t think I said this earlier, the meanest vehicles list is dominated by large SUVs that have poor fuel economy and only meet the bare minimum tailpipe-emissions standards. Conversely, the cars on the greenest vehicles list have high fuel economy and meet the most stringent tailpipe emissions standards. That technology is already on the shelf. We can definitely clean up cars. In fact, over the last five years, tailpipe emissions from vehicles have been getting much better. Unfortunately, fuel economy has gone nowhere, literally, in the last 20 years. In average fuel economy for each model year, we’re at the lowest level since 1981, across all cars, makes, and models, comparing the average fuel economy of 2004 vehicles versus 2003, etc. A big reason for that is the popularity of SUVs throughout the Nineties. The growth of the SUV market has just been astounding. BB: Are you optimistic about the growth of hybrid cars? JK: Yes. We are. A couple of different studies have come out and estimated sales at between 350,000 and a half million vehicles annually by 2006 or 2007. We think that’s doable, and we’re excited by the prospects. A number of new models have been announced, as you know, for some very well known nameplates: Honda Jim Kleisch

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Accord, Ford Escape, Toyota Highlander—popular vehicles that we feel will be really promising in hybrid versions. BB: And yet when you look at the total U.S. annual sales of cars, which I believe is 16 million … JK: Sure. It’s still a drop in the bucket compared to 16, 17 million vehicles annually, but you’ve got to start somewhere. BB: What kind of feedback do you get at greenercars.com that doesn’t agree with your views? JK: A number of the alternative viewpoints are diesel-focused. Diesel advocates promote the high-efficiency benefits of diesel as a great alternative to hybrids. The primary drawback of diesels is that, while the fuel economy is great, they’re not nearly as clean in tailpipe emissions as today’s hybrids. So, while you have both the fuel economy and the low tailpipe emissions benefits for hybrid vehicles, diesels offer only the fuel economy benefits. BB: One last question. The cupholder phenomenon? What’s that? JK: [Laughs] There’s a common joke that people are going to be more interested in how many cup holders a vehicle has than its fuel economy. I say that tongue in cheek, although clearly there is a wide range of opinions on the importance of fuel economy. Whenever gas prices climb to record levels, such as they are now, the first people who start complaining about them are the people driving the large SUVs that get 15 miles per gallon—and they are the folks who weren’t considering, or chose not to consider, fuel economy when they were bought. One of the things commonly overlooked when people are deciding to buy a new vehicle is that choosing a vehicle with better mileage offers, in effect, insurance against volatility in the fuel market. You don’t have to worry as much about price spikes. But people get onto the showroom floor, and are understandably excited about the many different features of the vehicle—cupholders included—and some folks, though certainly not everyone, don’t pay as much attention to fuel economy as perhaps they should. For more information: Visit ACEEE’s Greener Car Website at http://www.greenercars.com.

R Jim Kleisch

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Jason Dove Mark

Director,JumpStart Ford Campaign, Global Exchange Jason Mark, Global Exchange's Jumpstart Ford campaigner, is a veteran corporate accountability organizer. He has helped developed campaigns challenging Nike and Gap to end sweatshop abuses and calling on Starbucks and Procter & Gamble to offer Fair Trade Certified coffee. He is the co-author, with Kevin Danaher, of Insurrection: Citizen Challenges to Corporate Power [Routledge Press; 2003]. The Consequences of Oil Addiction BB: For a consumer thinking about buying a hybrid car, or buying any car, what should they know about gas consumption and its effects? JM: There’s no question that the United States is addicted to oil. We’re only 5 percent of the world’s population, yet we consume 25 percent of the world’s oil. Like any addiction, oil addiction is very dangerous. First, it endangers our economy. The periodic oil shocks since the early 1970s have cost the U.S. economy literally trillions of dollars. Our economy is literally held hostage to oil prices. Right now, we’re seeing an increase in oil prices, and that has an inflationary effect on everything we buy and sell—every good and service that we may use. Oil has become the lifeblood of our industrial society. Being addicted to oil isn’t even good for the auto industry. Look at how the Japanese auto companies have taken the lead on hybrids; that’s hardly good news for GM, Ford, or Daimler-Chrysler. Unless American auto companies make an immediate U-turn, I think we’re looking at a repeat of the early 1980s, when Japanese car companies hammered the North American ones. That’s not good for U.S. workers or the U.S. economy. Second, oil addiction quite obviously endangers our environment. The most obvious proof of that is global warming. By now, any respectable scientist—any scientist who has not been bought and sold by the oil and gas industry—will confirm that global warming is real. We’re changing the entire climate of the globe. Even the Pentagon acknowledges that it’s happening: The Pentagon recently commissioned a report on the geo-strategic risks of global warming, and it’s not a pretty picture. Third, our oil addiction leads to habitat destruction, huge damage to sensitive ecosystems in the world’s rain forests and other sensitive areas—for example, the Arctic Circle and the Antarctic. You can see the impact here in American waterways, where thousands of gallons of oil are spilled into America’s streams, rivers, and Jason Dove Mark

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lakes every day. So, there’s a very real environmental cost. Finally, oil addiction endangers human rights. There are a number of different books—a great one is Resource Wars, by Michael T. Klare—that look at how oildependant nations are some of the most violent, repressive countries in the world. Look first at Saudi Arabia, and then less well known examples like Angola, where you’ve had a brutal civil war that’s based in part on competition for control of the country’s natural resources. You can look at Colombia, currently in the midst of a 40-year civil war, where competition for its oil resources has led to violence that kills innocent bystanders. Nigeria. The list goes on and on. BB: How do you make something that seems so big and broad, so catastrophic, seem relevant, so consumers will change their behavior? JM: I think you bring it back home by talking about auto safety. Not in terms of side-door crash panels or airbags. I mean, does gas guzzling make your family more or less safe? On all these different measurements—air pollution, global warming, war, U.S. national security—oil addiction makes us less safe. If you want your family to be safer, what should you do? You should find the most fuel-efficient vehicle available. Right now, that’s going to be a hybrid car.

............... We’re only 5 percent of the world’s population, yet we consume 25 percent of the world’s oil. ...............

We all have to take individual responsibility for our actions. As the Union of Concerned Scientists points out, the most important environmental decision you make is your choice of car.

Responsibility: Automakers, Oil Companies, or Government? BB: Your campaigns at Global Exchange have broadened the responsibility to automakers, as well as oil companies and the government. Who should be responsible? JM: Some of it certainly lies with the American people; that’s why we have a public education campaign underway to raise awareness of the real costs of our oil dependence. But certainly a great onus lies on the automakers. They say, "Oh, we’re just responding to consumer demand." But of course they shape consumer demand. The auto industry spends $8 billion, with a "b," on advertising and marketing. Either the advertising and marketing is ineffective, in which case they’re throwing good money after bad, or it works. If it does work—and clearly it does—they are helping to shape consumer opinion. I have yet to see a TV commercial dedicated solely to Jason Dove Mark

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a hybrid vehicle. I can hardly turn on the TV without a seeing a commercial for an SUV or a Hummer. So I think responsibility for molding consumer demand certainly lies with the auto companies. BB: And the oil companies, or the government? JM: The government, for sure. With the oil companies, it’s a little harder. That gets us into supply-side economics, and I think supply-side economics doesn’t work. The oil companies will not put themselves out of business. They’re not going to say, "You’re right; we should stop drilling the earth into Swiss cheese to find this stuff." To deal with the negative consequences of oil dependence, you’ve got to start with demand. That means going to Detroit, since 40 percent of all the oil we use goes into our personal cars and trucks.

............... Unless American auto companies make an immediate U-turn, I think we’re looking at a repeat of the early 1980s, when Japanese car companies hammered the North American ones. ..............

Does the government have a responsibility? Definitely. I think it’s disgraceful the way that, year after year, Congress fails to make meaningful increases in fuel economy standards. In my view, our elected officials have been bought off by the oil and gas companies. That said, the auto companies could make changes on their own. They shouldn’t have to wait for the federal government to tell them to eat their vegetables. They should do the right thing. BB: Are you aware of the tax breaks that small businesses get for SUVs?

JM: The incentive structure in the tax code is really perverse. In some cases, a small business owner can write off almost the entire cost of an SUV. At the same time, the tax write-offs for a hybrid are very modest. I think it should be completely reversed. If the federal government agrees that oil dependence is not a good thing for our country, then we should use the tax code and government incentives to encourage people to buy hybrids, not Hummers. BB: One incentive is granting the privilege to drive a hybrid car solo in carpool lanes, which has been requested by California, Virginia, and other states, but has not been approved at the Federal Highway Administration.

Jason Dove Mark

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JM: I think a great many things are doable, and again, we seem to have been hijacked by oil and gas interests. There’s a plan out called the Apollo Alliance. The idea is to make a massive federal investment in creating a clean energy infrastructure. The idea is that you invest $300 billion dollars over 10 years, or $30 billion a year, and you could basically wean us from many of the fossil fuels we currently depend on. The Apollo Alliance projects that we could create 3.3 million jobs over 10 years, mainly through construction of highspeed rail transit corridors for mediumdistance trips—like St. Louis to Chicago, New York to Chicago—and creating wind and solar power-generation capacity, putting new investment into hybrid cars. Hybrids show that this is not rocket science. It’s not Buck Rogers-type science fiction. It’s happening. It’s on the roads. The alternatives exist. They’re attractive and exciting, and we should be taking advantage of them.

............... The auto industry spends $8 billion, with a "b," on advertising and marketing… I have yet to see a TV commercial dedicated solely to a hybrid vehicle. ..............

Return on Investment on Hybrid Cars BB: Hybrids cost a couple of thousand dollars more than conventional versions of a car. If you calculate the savings in gas, you’ll never recoup that. Why spend the extra money?

JM: The only way to remedy that is by creating government tax incentives that make it more attractive. I recommend that people make sure their purchasing decisions reflect their values. You’ve got to walk the walk, as well as talk the talk. If environmental sustainability and human rights and protecting American’s national security are important to you, then you should recognize the important of getting off the oil. Spend just a little bit more to put your money where your mouth is. Of course, that’s easy for me to say: I don’t own a car, and won’t be making that investment any time soon. Global Exchange tries to encourage people to align their purchasing decisions with their values. It’s a way of voting with your money. It’s a way to vote every day. Previous Global Exchange Campaigns for Social Change BB: Tell me about the goals of previous campaigns against Nike, The Gap, Jason Dove Mark

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or Starbucks, and if you were successful. JM: Global Exchange is an international human rights organization dedicated to social justice. We are a well-known member of the corporate accountability movement, which believes that multinational corporations have a responsibility to make sure they do not harm communities and environments on which we depend. We feel that corporations need to be held accountable for their misbehaviors, especially in an era of deregulation in which the federal government does not hold them accountable. For example, we helped give Nike a household name for sweatshops. First, we investigated to uncover the sweatshops, and then we wrote different reports and exposés to show the public the conditions in which Nike products were made. Nike needed to be held accountable, since its profitable products were produced in sweatshops. It needed to make sure that the people making its clothes were treated with dignity, and paid a living wage for their labor. BB: How do you take on a corporate behemoth like that?

............... Hybrids show that [increasing fuel economy] is not rocket science. It’s not Buck Rogerstype science fiction. It’s happening. ..............

JM: First, through grassroots public education. That means talking to anybody who will listen. Global Exchange accepts three-quarters of all speaking invitations. Any day of the week, some Global Exchange staff person is talking to an audience about how to create a more sustainable world. High school audiences, college audiences, church groups, labor unions, community organizations, you name it—wherever we can get the invites. Second, through direct action—organizing street protests or rallies, leafleting in front of Nike stores or Ford dealerships, doing public education right there at the point of purchase. All of this is an attempt to shame Nike or Ford into better behavior. It takes one of their greatest strengths, their brand power, and uses it against them. Nike was supposed to be the equivalent of "Victory at any cost." It was Michael Jordan. It was Tiger Woods. By uncovering the sweatshops, we revealed a whole class of losers, namely the women actually making the clothes, who were equally associated with the Nike "swoosh." BB: How do you measure success?

Jason Dove Mark

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JM: Sometimes through tangible improvements. For example, Nike workers are now much less likely to be injured on the job, abused by managers, et cetera. We know that from our own reporting and investigation. Serious structural issues remain with Nike sweatshops; among them are failure to guarantee workers basic rights to freedom of association and to form independent trade unions, and failure to pay a living wage. But we have made some progress. In other campaigns, the victory is very tangible. You can walk into just about any Starbucks in the U.S., and you’re going to find fair trade certified coffee—coffee that provides the farmers a living wage for their harvest. That wouldn’t have happened five years ago, because Global Exchange hadn’t undertaken its campaign. BB: What’s the goal of your Ford campaign? JM: We asked Ford and the other Big Six automakers to take immediate action to make their entire new-car fleet average 50 mpg by 2010, and have zero tailpipe emissions by 2020. We will have to see a concrete, detailed plan for how they will reach those goals before we stop our public campaigning and direct action and protest. BB: Have they responded? JM: We’ve had two meetings with Ford, and we have a third coming up. They say they’re not going to be able to meet our demands. We say, we bet you can find a way to try. They say our demands are unrealistic. We point out that they have at least two full production cycles between now and 2010 to overhaul. We also point out that from 1942 to 1943, the entire American auto industry shut down, retooled, and became, quote unquote, "the arsenal of democracy." What we’re asking is not impossible, if the environmental and social challenges we face, associated with war and threats to our national security, are every bit as pressing as those in 1942. BB: In reading some of your material, I saw that Ford cars today on average get fewer miles per gallon than they did 20 years ago. JM: That’s correct. In fact, the typical Ford vehicle on the road today gets worse gas mileage than the Model T did 80 years ago. The car companies say they’re responding to consumer demand. We point out that they’re molding consumer demand for SUVs, because SUVs are, hands down, the car companies’ biggest moneymakers. So they have a huge incentive to sell as many as possible. Largely, the reason that fuel economy is going backwards is that North American auto companies have become so reliant upon SUV sales for profit. Jason Dove Mark

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BB: Ford made a promise regarding the fuel efficiency of SUVs. What did they promise, and why did they renege? JM: In 2000, Ford promised that by 2005, they would improve the fuel efficiency of SUVs by 25 percent. They announced last year that they would not be able to meet that. They were unable to meet their promise because the Ford Escape, their hybrid SUV, was delayed a year. And they were banking on that to pull everything up.

............... The typical Ford vehicle on the road today gets worse gas mileage than the Model T did 80 years ago. ..............

It remains unclear why they had to push back the Ford Escape Hybrid by a year. It’s unclear whether it was technical incompetence. I use the term incompetence because the Toyota Prius has been on the road for several years now, along with the Honda Insight. Was it technical incompetence or did engineers not get enough support from company management? Was it a matter of technical glitches or a matter of lack of company will?

Ford’s current average is around 24 miles per gallon. They weren’t going to hit 30 by any means. We’re basically asking for a doubling in fuel efficiency in the next six years. And we’re asking this of the entire U.S. auto industry, not just Ford. We sent the letter to everybody. Why single out Ford for a grass-roots campaign? Basically, because Bill Clay Ford has said he’s an environmentalist. We’ve got the best chance of getting him to lead the industry on these issues. We also think, as an icon of American business, as a company that really did revolutionize American industry, that Ford has a special responsibility to take a leadership role again. They say they’re a leader in American industry, and we’re going to hold them to that. BB: When the Escape Hybrid SUV comes out, would you encourage consumers to buy it to support the efforts Ford is making? JM: I encourage people, if they’re going to buy a vehicle, to buy a hybrid. I don’t tell people to buy the Prius, or the Insight, or the Civic Hybrid. We don’t endorse any one company’s products. BB: GM’s approach is to put hybrid technology on the worst gas-guzzling vehicles, like trucks and vans. In Canada, I believe, they’ve waged a Jason Dove Mark

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campaign to put hybrid technology on public buses rather than personal vehicles, which they argue will have a far greater impact on total gas savings. JM: It shouldn’t be an either/or. It should be a both-and. GM, with the weight of the market it has, can do the public transportation fleet and the individual cars and trucks. I don’t understand why GM would throw away that market opportunity. That’s what I was alluding to earlier, the North American companies having their lunch handed to them. Clearly the market is there. Both among auto industry pundits—you saw the accolades for the 2004 Prius—and among the general public, the popularity of hybrids shows the market is there. And it’s growing.

............... If broccoli were the main export from the Middle East, we would have not gone to war in Iraq. ..............

BB: Tell me about another tactic that you and others have used: SUV tickets. JM: We actually borrowed the idea from a group called Earth on Empty. We distributed about 40,000 mock SUV tickets. They look more or less like a parking ticket. We have volunteers place one under somebody’s windshield, and it says "VIOLATION." Then it says, "Gas guzzling fuels global warming and war." That’s part of the public education campaign, part of raising awareness about the costs of our oil addiction. The tickets have been criticized as sophomoric or juvenile. Critics say, you’re just getting people pissed off. You’re not getting them engaged. Those criticisms aren’t entirely unfounded. At the same time, the tickets force people to pause, and get them to consider, if even for a second, the consequences of our oil dependency. Hybrid Cars, Oil, and War and Peace BB: How is oil dependence a security issue? I also saw that you guys are saying that oil dependence promotes terrorism and war. How so? JM: Fifteen of the 19 hijackers on 9/11 were from Saudi Arabia. According to the well-respected Council of Foreign Relations, charities and individuals in Saudi Arabia are the Number One financiers of Al Qaeda. The Saudi government has turned a blind eye to the problem for years, and so have U.S. government officials. When you’re an addict, you don’t challenge your pusher on anything. Saudi Arabia is the second largest source of U.S. foreign oil imports. I think you can see the connection between oil and terrorism. Jason Dove Mark

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The connection between oil and national security? Saddam Hussein was a bad guy, no question about it. But if broccoli were the main export from the Middle East, we would have not gone to war in Iraq. It just wouldn’t have happened. Maintaining a steady, cheap supply of oil drives U.S. foreign policy. If you have any doubts about that, I would direct you to a Wall Street Journal story published June 10, 2003, in which the U.S. military high command admits that they’re moving soldiers out of West Germany to West Africa and Central Asia to protect oil supplies. We’re putting U.S. soldiers at risk to keep oil flowing. The U.S. government is spending $100 million to train battalions of troops in Columbia to protect oil pipelines there. It’s very clear that oil, because it’s the lifeblood of industrial society, is the key to geo-strategic politics. So let’s get off the stuff. Why are we propping up dictatorships and monarchies? Because they send us their oil. It doesn’t make sense in the long run. It doesn’t make sense in the short run. BB: I look at that challenge, and sometimes it seems insurmountable. I drive around in my hybrid, and I almost never see another one. Hybrid availability has not permeated the American consciousness. JM: I think the Prius print and billboard ads have been very good. Flash ads you see online are good. I don’t understand why it’s not on television. Perhaps Toyota considers it to be a niche market. I would challenge them to take it from a niche market to a mainstream market, which it definitely is. These issues do seem insurmountable. But from other corporate accountability campaigns, we know that change is possible. One hundred years ago in this county, women couldn’t vote. Most Blacks, though they technically could vote, didn’t enjoy the franchise. Today women vote, and we no longer have Jim Crow laws—because people got together and organized for real social change. I think this issue has that same kind of potential. Because of the grip oil has over our lives, we can’t get away from it. At some point, we’re going to have to deal with this dependence and this addiction. I think change is possible. It happens slowly, sometimes glacially. But working together, we can see real progress. In our lifetimes. BB: And there’s such a real and tangible step people can take, in the car they drive and even the way that they drive. JM: Exactly right. It’s the Ghandian idea of "be the change you want to see." For some people, it’s going to mean riding bicycles or taking mass transit. But face it, most American geography, the design of our cities and suburbs, is not going to accommodate that. So I tell people, getting out of our SUVs and into a hybrid car is not the end of the world. But not getting out of our SUVs just might be. Jason Dove Mark

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For more information: Visit Global Exchange’s Website pages about oil and autos at http:// www.globalexchange.org/campaigns/oil/ Visit the Apollo Alliance Website at http://www.apolloalliance.org/

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Jason Dove Mark

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Sam Williams

Prius Yahoo Group Moderator Sam Williams, 49, has moderated the toyota-prius Yahoo Group for almost four years. He also moderates the technical group, Prius_Technical_Stuff. In August 2000, he took delivery of a new 2001 Prius, one of the first to arrive in the Northeast. He lives in Acton, Massachusetts, outside Boston, and works as a chemist, engineer, technical manager, and project manager for synthetic membranes and medical products. Patterns on the Yahoo Group BB: How big is your online group? SW: On these Yahoo groups, it’s fairly easy to join and be included in the count. It’s also easy to leave and never say that you left—just stop reading or posting. I’ve been moderating this group, toyota-prius, for three and half years now. The group lists over 4,000 members. That really means that 4,000 different individuals joined the group, and perhaps contributed or read some of the list at one time or another. Only a small percentage of that number is active today. BB: What volume of correspondence do you get? SW: These days, we’re getting 25 to 35 messages every day. It’s been creeping up. It’s been higher and lower than that in the past. My own estimate: about 10 percent of the membership is actually paying attention and reading. Out of that 4,000, maybe 400 are active users. Concerns for Prius Drivers BB: Is longevity of batteries a major concern for Prius drivers? SW: Yes, it is. It’s a natural concern, because most people’s experiences of batteries is in small portable electronic devices whose batteries tend to die prematurely. Of course, the battery in the car is bigger and more expensive, so people regularly ask that question. It’s clear that Toyota recognized that concern up front. They offer a terrific warranty—100,000 miles or eight years. That’s supposed to allay the concerns, and it largely does, but people still worry about it. BB: The Prius was first imported into the United States in the late summer of 2000, almost four years ago. Has anyone reached the 100,000-mile mark? SW: There are quite a number of people who have. There’s one particularly well-

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known example in our group, a taxi driver in Vancouver, BC, Canada, who drove over 200,000 miles in his 2001 Prius. And I think he did that in just a couple of years. We’ve heard from him now and then; although he’s not a member of our group, people have corresponded with him. Apparently, Toyota bought the car back from him because he set a record, and they wanted to study the battery. He’s still a taxi driver up there. He got another one; I believe he might be on to a 2004 Prius.

.............. Prius had the highest rates of owners who would buy the car again, and who would recommend the car to someone else. ..............

That’s an example of a battery that has gone well beyond even what Toyota claims is the expected life. But that’s just in miles; as you say, the oldest hybrid cars in the U.S. are only four years old. In calendar time, we can only speculate about how the batteries will last. BB: And that taxi driver had no problems; the battery remained strong? SW: That’s right. No problems. I’m not aware of anyone who’s had any problems with the hybrid battery. BB: Or the electric motor? SW: Or the electric motor, with one possible exception. There’s a guy in Florida who got his car early on, who apparently got a lemon. There seems to have been something wrong with the power-split device, otherwise known as the transmission. Strictly speaking, that’s not the motor, but they’re all combined together. His kind of blew up on him. Ultimately, Toyota replaced it, but he had to do a lot of yelling and screaming. BB: People are always looking for information about what’s wrong with hybrids. Are there other issues? SW: Anybody that participates in these groups will tend to see the downside more than the upside. And that topic itself comes up. The people who speak up are going to be the people with problems. People who don’t have problems are just reading or keeping quiet. It’s hard to figure out the answer to your question. There have been a few things in the first model. The tires were soft and tended to wear out prematurely. Toyota came out with a supplemental tire warranty, and I was one of the beneficiaries of Sam Williams

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this. Just before my car turned 25,000 miles, I got a complete new set of tires at no charge. A number of people got that, but many experienced premature wear. That disappointed them. There were some problems with the 12-volt batteries. The car has a conventional 12-volt battery, and it uses that to boot up the computer, to close relays, and to start the car. If that 12-volt battery is dead, you can’t start the car. Well, a number of people had a problem with the 12-volt battery dying on them—in a fairly new car. The best we could figure out was that perhaps somebody left the door open, and the battery depleted overnight. In some cases, we think that on the dealer’s lot, before the cars were delivered, those 12-volt batteries were weakened. They ran down dead, and the dealers recharged them. On a lead-acid battery, you’re never going to get the same performance if you let it run all the way down. I think, in this case, Toyota made a mistake. Because the 12-volt battery isn’t used to crank the engine, you don’t need all these cranking amps like you do in a conventional car. So they intentionally put in a smaller battery. I think they overlooked that inevitably people will leave a door ajar, or leave a trunk open by mistake overnight. A traditional 12-volt battery has enough capacity to survive that. But in the Prius, if you do that, you’ll just run that little 12-volt battery down.

.............. Prius owners get these cars not just as a means to get from one place to another. ..............

BB: Was the smaller 12-volt battery carried over to the ’04 model? SW: No. That’s another example of Toyota learning from experience—and I have reason to believe, in part, from us in this group. That’s happened a lot. In that case, owners were covered by the warranty. People got new batteries. But Toyota put a bigger battery in the 2004, more like a conventional 12-volt battery. They also offer an upgrade to a bigger battery for the original Prius, the one we call Classic Prius, if it’s still under warranty. Toyota’s Relationship with Customers BB: It sounds like Toyota’s culture is uncommonly sensitive to their customers. SW: I think it is. I’m really impressed. Even before we got the Prius, we had Toyotas in my family. We already believed them to be a reliable car, with relatively low repair rates. That’s all carried over to the Prius in spades. The Prius has got the highest reliability ratings. The last survey I saw from Consumer Reports, or one of these Sam Williams

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places, the Prius and one Lexus model had the highest rates of owners who would buy the car again, and who would recommend the car to someone else. It’s a reliable, dependable car, and Toyota does pay attention and does respond to these things. The two issues I mentioned, tires and batteries, are components they outsource to other companies. The tires were Bridgestones, and the batteries were from Yuasa, a Japanese battery maker. To me, Toyota is still responsible for all the components they put in their cars, but the things that failed are not things that they made. Rivalry between Toyota and Honda Hybrid Drivers BB: A large percentage of all hybrid car drivers seem to be loyal and would recommend their cars to others. I’ve noticed a friendly rivalry between Prius and Civic Hybrid drivers; I’ve seen Civic Hybrid drivers accuse Prius drivers of having their noses in the air. Have you?

.............. I describe myself as an "over-the-top zealot," I’m also very practical. ..............

SW: In the first couple of years of the group, it was the Prius versus the Honda Insight. This was before the Civic Hybrid. The Insight was actually introduced in the U.S. before the Prius. A number of Honda Insight drivers were members of this group because they were really hybrid fans, as much as they were Insight or Prius fans. Inevitably, somebody would say something to favor one over the other. And somebody else would take offense at that. Somebody would say, "C’mon, we’re all hybrid fans here." [Laughs] At the end of the day, that was really true. People who got the Insight, many of them were right at the forefront. They wanted to be the first one on the block, and they were. But it’s a two-seater, and a lightweight car, and those things were a concern for some people. It was just less practical. I don’t think there’s any rivalry; I see much much less of that in the last year. I think the Honda Civic Hybrid has been well received. On our group, when new people come asking questions, people who have been around for while speak very highly of the Civic. At least a few people on the group have one of each. Hybrids as Elite Vehicles Moving into the Mainstream BB: There seems to be a persona, almost a stigma, about people interested in hybrids. Some might call them "tree-huggers." We saw a bit of backlash against celebrities who arrived at the Oscars in a Prius. Has owning a hybrid moved from a small elite niche to being in the mainstream?

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SW: Prius owners, I find, tend to be very interesting people—interested in a lot of different things. They get these cars not just as a means to get from one place to another. Some of them are making a statement. For some, me included, it’s very practical as a brilliant technology. It just makes a lot of sense to recover energy when you step on the brakes, and to get high mileage. The celebrity thing was interesting at first because it got the car more publicity. We saw lots of articles. More recently, there are organizations that provide the cars to the celebrities just to get more exposure. I don’t pay a whole lot of attention to that. The cars are on their way into the mainstream, mostly because we have a few years under our belts. People like me, who got them in the beginning, had to be a little more courageous than your average person. Most people need a car, they need reliability, and they’ll rely on conventional technology. Also, most people who buy a car need it right now, because whatever they were driving just died. So they don’t have a lot of time to think about it, and they can’t wait. It’s almost always been the case that if you wanted a Prius, you have to wait. There are exceptions to that, but you had to wait several months in the early days. I did. Right now, if you want a 2004 Prius, the vast majority of people have to wait several months. Not many people can look that far ahead for a car purchase. Proselytizing BB: You have called yourself an "overthe-top Prius zealot." I think hybrids engender those feelings. Are you frustrated that more people don’t drive them?

.............. Every hybrid car that Toyota can make, people are buying and driving them. ..............

SW: I wouldn’t call it frustration. Although I do describe myself as an "over-thetop zealot," I’m also very practical. I’m not pounding the pavement every day, expounding about all the virtues of the Prius. If I’m trapped in a SUV, like I will be tomorrow for a few hours, I know these guys will shut me up after a while because they hear too much about it. BB: So you do proselytize?

SW: I do it, but I try not to be heavy-handed. Most people I know are open to the idea. A car is an expensive item; you don’t go out and get one everyday. And you don’t sell the one you’re driving now just to get a new one at the drop of a hat. It’s a long-range thing. The proselytizing that I do is more subtle. I don’t have to remind them of the mileage; they’re acutely aware of that. Mostly I speak out to counteract misconceptions. People still think that you have to plug the cars in. They think they’re underpowered. They think they’re too small. None of that is the case. Sam Williams

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Toyota’s done a really good job on counteracting those false impressions. Yeah, I take every opportunity I can to talk about it, because it’s not easy to understand how these cars work. They’re dramatically different from a conventional car. Some people get excited about that; some don’t. You shift like any other automatic transmission car. You step on the go pedal to go. You step on the brakes to stop. You don’t have to do anything differently, but they way it works is remarkably different. Another reason not to be heavy handed on the proselytizing, besides that it doesn’t work, is that there aren’t enough cars to go around. Every car that Toyota can make, people are buying and driving them. We really can’t do any better than that, until GM and Ford get on track. As more hybrids are available, people will buy them. Ten Times the Pollution versus One-Tenth the Pollution BB: You mentioned that you’re a scientist. What’s your field? Were you an electric-car enthusiast? SW: I’m a chemist. I’ve been working in the medical device industry. I guess I’m becoming an electric-car fan because of the Prius. As you know, the gas engine shuts off and you can drive the Prius on electric only. It’s a neat sensation. The silence. [Laughs] It’s whetted my appetite for more. It’s also opened my eyes; I’m more knowledgeable about environmental issues than I was, partly because of the things I’ve learned on the group. For many people, electric cars make the best sense. It’s smarter than a hybrid car in some cases.

.............. The BMW 2002 I was driving put out 10 times the pollution of your average new car. That really bothered me. ..............

Several years ago, I heard on the radio that that the BMW 2002 I was driving put out 10 times the pollution of your average new car. It hit me like a ton of bricks. And it really bothered me. It was something I really hadn’t thought about before. It was an old car, and all the emission controls had been ripped out. And it was a sporty car. I worked on it myself. Almost that day, I stopped driving the car because it really bothered me that I was responsible for spewing more pollution into the air than 10 average drivers. Now, when I drive the Prius, I’m putting out one-tenth the emissions of the average new car. [Laughs] I feel good about that. I’m a drop in the bucket, but moving in that direction is a good thing. Hybrid Owners, Connecting and Splintering BB: You would think that environmentalists would be drawn to a hybrid car, Sam Williams

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but it kind of works the other way. When you start driving a hybrid, you actually get drawn more and more into these issues. You start to realize the positive impact you’re having. SW: The reason that I continue to moderate and participate is the people in the group. I pretty much know everything I need to know about the car, but I’ve learned about other areas, especially environmental topics, from them. I like these people. The vast majority I’ve never met, but I feel like I kind of know them. I know the things they do. They’re just the kind of people that I like to associate with. They’re forward-thinking. They’re intelligent. They’re interested in a lot of different things. And they’re open-minded, and able to have very civilized conversations online, which is a skill in itself. BB: Do you ever meet in person with people in the group? SW: I organized a hybrid-car gathering in the Boston suburbs a couple of years ago. They’re really fun! About 25 people showed up—people who owned the Insight and Prius. In a few cases, I was able to put faces to names that I’d seen online. Across the country, we hear about the gatherings. People advertise them on the group. They’re pretty much spontaneous. An individual says let’s have a gathering, and they’ll do it. We’re overdue to do that sort of thing again. Maybe a big regional gathering, even a national one. BB: Frankly, I was drawn to hybrids for almost purely political reasons— related to war, specifically, war over oil. I can almost see how, by virtue of this affinity that people have about hybrid cars, there could almost form a political or social movement. SW: There’s even a Yahoo group created for that purpose, although it wasn’t well defined—but they knew that. A group of people got together and said there’s something big afoot here. Let’s look at the political side to this, and see if we can come to a consensus. The group still exists but it kind of died out from lack of activity. I think it’s the group called Prius-Org. The irony of the Internet is that we can all easily communicate with one another, but there’s something we don’t have, and that’s a conventional car club. Back when I was driving a BMW 2002, I was an enthusiastic member of that car club. There was a magazine, and there were gatherings. You’d get to meet the people, and that was the only way to do it. After three and half years on this Prius group, I’m absolutely certain that if we didn’t have these online groups, we would have car clubs that would get together like they used to. We moderate these groups and we have very open discussions, but sometimes I Sam Williams

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wonder what the next step would be--if we had something a little more formal, a little more organized. And the online groups have a downside, too. The average person can’t go read every message that’s been posted over the past couple of years. The volume is too big, and there’s a lot of repetition. And there are a lot of little trivial things to wade through. There’s a group called 2004 Prius, and one called Prius2G. Our group, toyota-prius, was the original group. Somewhere about a year ago, someone took the perfectly logical step of creating a separate group for the 2004. That’s 2004-Prius. And the volume quickly became much heavier than our group. Personally, I thought that was fine. I didn’t upgrade to a 2004; I’m still driving my Classic. And the volume was so heavy, I didn’t want to read the stuff anyway. I’m a member of it, and I occasionally take a look around. But then that guy dropped out of the picture. And the group got filled with spam, and people got annoyed. So somebody created another group called Prius2G, and said, everybody, let’s go over here. [Laughs.] For the most part, they did. Most of the 2004 activity and discussions are now on the Prius2G group. And the Classic stuff stayed back in our group. BB: What’s going to happen when there are hybrid SUVs? There’ll be separate Yahoo groups for those? SW: Yes, there will be. You have to remember that we’re talking about cars. People are interested in the details of the car they’re driving; they’re not interested in every other model. I think it’s natural for these things to split off. BB: But do hybrid car drivers have more in common with each other than they have with drivers of the exactly the same model? SW: They do. That’s the conflict. They’re splintered by the different models, but they’re brought together by the things in common. BB: What are the common subjects in your view? SW: Oil, emissions, broad brush numbers such as how many people are driving hybrid cars, what are the automakers doing, big picture stuff like that. For more information: Visit the Yahoo E-mail group called "toyota-prius" at http://autos.groups.yahoo.com/ group/toyota-prius/

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Walter McManus

Executive Director of Global Forecasting, J.D. Power and Associates Dr. MacManus’s business career includes nine years at General Motors Corporation. He developed models to forecast vehicle sales, created visual information tools to stimulate new product development, and spent a year as a manufacturing supervisor in a component factory. Dr. McManus received GM’s Chairman’s Honors twice. Dr. McManus is a subject-matter expert on the market for alternative powertrains. He is a frequent speaker at industry conferences and is widely cited in the industry and business media. He is a member of the Society of Automotive Engineers, the American Economic Association, and the Society of Automotive Analysts. Dr. McManus earned a doctorate in Economics from UCLA in 1983. He has taught economics at the University of Florida and the City University of New York. Measuring Consumer Opinions and Attitudes BB: What does J.D. Power and Associates do? WM: It’s a market information firm. We do original research on consumer opinions and attitudes. Our bread and butter is initial quality and customer satisfaction studies. The group that I’m in does analysis and forecasting for the auto industry. We do consumer surveys across a lot of different industries; we do analysis and forecasting only for the auto industry. BB: How is that research used? WM: The research in initial quality, our main research, is used by manufacturers to improve their processes so they can better satisfy their customers. The opinion or special consumer surveys, like the ones that I’ve done with hybrids and clean diesel vehicles, help manufacturers plan what type of vehicles, and what features they’re going to want and the prices they’re willing to pay. So, it’s used in product planning and development by the manufacturers—and also by suppliers to help them understand what consumers are going to be demanding from manufacturers. BB: Have you done quality research on hybrid cars? WM: Yes. We have two main quality surveys: initial quality – the standard measure there is "problems per 100 vehicles" – and the A.P.E.A.L., which is an acronym Walter McManus

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standing for Automotive Performance Execution and Layout. Those two measures are our main studies—50,000 surveys of each every year. So, 100,000 surveys total. Our samples are large enough to look at every vehicle in the market, pretty much. Sometimes you can’t enough of a sample for Maserati, but we definitely cover the hybrid vehicles, and the diesels out there, with those two measures. Problems Per 100 Vehicles BB: How have the hybrid vehicles performed in terms of "problems per 100 vehicles?"

.............. The most recent forecast has hybrid sales growing to 4 percent of the market by 2009. ..............

WM: The first year of the Civic Hybrid, they had some issues, more problems per 100 than for the regular Civic, but not in the most recent study. In the 2003 study, the Civic Hybrid and Civic were virtually identical. Both Honda and Toyota are the leaders in initial quality; they have very low problems per 100. I don’t have the ’04 Prius results yet, but the ’03 and ’02 were right in there with other Toyotas like the Camry and Corolla. At the Society of Automotive Engineers (SAE) World Congress, I spoke at two sessions: one on diesel and one on hybrids. There are people who say that you don’t get the mileage on the sticker, and that’s true on all vehicles. Some people said it was greater for the hybrids than other vehicles. I looked at our data on the APEAL satisfaction, because that’ll tell me if people are satisfied with the fuel economy and range that they’re getting. In both of those cases, the people that own the Prius— and this is the ‘03, the last generation Prius—rated their fuel economy and range higher than people who had an Echo or a Corolla or a Camry. So dissatisfaction isn’t showing up in the ratings. BB: Overall, you’re saying that hybrid drivers are very pleased with the fuel economy? WM: Oh yes. Definitely with the Prius, and with the Civic Hybrid, people rate it higher on fuel economy and range than the people who have the regular Civic—but there’s not as big a difference as with the Prius. And that makes sense, because the Civic Hybrid doesn’t have such a big fuel economy improvements. It’s still a positive. Uncertain Future for "Clean Diesel" BB: It seems like a lot of your recent work focuses on the relative benefits and perceptions of clean diesel versus hybrid cars. With increasingly stringent standards at the federal level, it’s not clear that diesels will ever hit the market in a significant way. Walter McManus

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WM: It’s going to take two things, both of which are big deals. One is a low-sulfur diesel. By 2006, the oil companies have to make it available nationwide. Right now, you can get diesel most places, but it’s not quite as omnipresent as gasoline. And that’s an issue for consumers.

.............. Folks who buy hybrid cars have a level of education higher than any group of car drivers that I’ve ever seen. ..............

The other thing you need is the aftertreatment of the exhaust to remove the NOx and the Particulate Matter. No one has announced that they’ve solved that. You’re familiar with the EPA Tier II, which has emission-level bins. The three bins that are the dirtiest are even referred to as the diesel bins, or the dirty bins. Those go away. All the people that are talking about diesel—like Mercedes with the M Class and Jeep with the Liberty— are talking about Tier II, Bin 5, which is like a mid-size gasoline car, only in the middle of the standard. They don’t have the technology today to do that. BB: When are those dirtiest bins going away?

WM: They phase out over a number of years. It’s three or four or five years. Right now, we’re supposedly in Tier II, and we’re gradually going eliminate the three bins that are the dirtiest. There used to be an absolute standard, and no vehicle could emit more than X. They’re not going to have these emission standards based on weight and an overall standard. If Bin 1 is the best, and Bin 11 is the dirtiest, you can’t have as many vehicles as you want in Bin 11. You have to balance them, with one in 11 and two in 10 and so on. You average a certain number across all the bins. So Bin 5 turns out to be the average when the old dirty bins go away. That’s where they’re targeting their development. And again, they’re not there yet. The problem is the NOx. Particulate matter is relatively easy to filter out; you just have to put more filters on. But for Nox, you have to have a catalytic converter. They don’t have one for diesel yet. BB: Given all these technology hurdles, and infrastructure hurdles, why does J.D. Power focus surveys so much on diesel? WM: Well, we ask consumers about technologies that are coming. Daimler-Chrysler has said that they’re going to have diesel in the M Class before 2006. It’ll only be 45 states at that point, but in 2006, with low-sulfur diesel, their goal is to sell in all 50 states. We’re asking people about technologies not that we want, but that Walter McManus

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we think manufacturers are bringing to market. Hybrids are here already, and they’ve been here for a while. They have a big advantage in terms of awareness and consideration. Diesels are not as well known, especially not the clean diesels. Sales and Production Trends for Hybrid Cars BB: That’s a good segue way back into hybrid cars. What have been the sales trends?

.............. Hybrid car buyers are willing to pay more just to have green. ..............

WM: The Honda Insight launched in 1999, in December I think. In that first year, they sold 17 units. From that beginning, Toyota is going to sell 48,000 or more Priuses this year. I say "or more," because it’s going to depend on whether they go for profit or for volume, or some combination. I think they’ll go for a combination. Right now, they’re telling folks 47,000 is the forecast for sales in the U.S. in 2004. I think that they’re going to easily do that, and they could do another 15,000.

In 2004, about 6 or 7 percent of the Civic sales are hybrids. So that’s 18,000 or so a year. Honda can keep doing that. The Accord that’s coming out later this year will probably be 6 or 7 percent too, could be higher. If they come in during the last quarter, that’ll be about 7,000 to 10,000. So this year, we’re going to have some 50,000 cars from Toyota, and about 27,000 from Honda. And then the sport utilities are going to be here too. The Ford Escape Hybrid is going to come out first, then the Lexus and the Toyota Highlander. BB: What’s your prediction for the coming years in terms of sales? WM: The most recent forecast has hybrid sales growing to 4 percent of the market by 2009. This year, it’s going to be about a half a percent. Next year, probably 1 percent. How quickly it grows beyond that partly depends on how quickly new offerings come out. We have seven new ones coming out this year. Some people don’t count all of them as hybrids. I don’t know what you think about the full-sized pickup trucks. Dave Hermance at Toyota counts them as hybrids. He may not count—and we’ve had debates about this—the belt-alternator system that GM is going to do on the Saturn VUE and the Malibu. Do you count that? It’s debatable. I include it, and I’m not sure if he does. It’s actually a low-voltage system.

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BB: My feeling is the proof is in the pudding. Is it increasing fuel efficiency and reducing tailpipe emissions? If it’s just being used for idle-stop and the gain is inconsequential, then it’s not much of a hybrid at all. WM. Right. I understand. The other thing that you have to remember is that drivers of pickup trucks drive more miles than someone in a compact car—like 18,000 versus 14,000 or 15,000. I think the average Prius driver drives 15,000 miles a year. The average Silverado driver drives 18,000 or 19,000 a year. So, you’re driving more miles. Even though it might not be a huge improvement, if you think about how much fuel they’re burning today, 10 percent ends up being a lot. But I agree that it’s not the same order of magnitude improvement as switching from a pickup to even a midsize car.

.............. I think Toyota and Honda are thinking of hybrids as insurance against another energy crises. ..............

The Typical Hybrid Driver BB: What’s the profile of the average hybrid car driver? WM: Today, the folks who buy them, and those that intend to buy them, tend to be—and I can say this because I have a PhD.—over-educated. They have a level of education higher than any group of car drivers that I’ve ever seen. At GM, they consider the Suburban their highest education vehicle, because it’s one of the most expensive vehicles they have. Hybrid drivers have higher income, much higher than the average car buyer, roughly $100,000 a year versus $85,000 a year. They’re more likely to be female. They’re actually a few years older than the average car buyer. The average is 40-something; they’re a little bit older than that. They’re closer to 50 on average. They tend to drive fewer miles. I said they drive about 15,000 miles for the Prius, but that’s also for all the hybrids owners and those who plan to buy them—whereas the average is at least 16,000. The other thing: They say that they plan to keep their car longer than the average person. Where the average might be a little under five years, they plan to keep their car a little more than five years. Probably the three most distinguishing features are: First, they’re willing to pay more for a green product. In other words, they’re not going to make back what they paid in fuel savings over the time that they own the vehicle, but they’re willing to Walter McManus

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pay more just to have green. Second, they personally want to do something to help reduce vehicle pollution. The majority of people don’t, but they do.

.............. When Toyota does fuel cells, they’re going to be hybrid fuel cells. That’s brilliant. ..............

Some people could argue that those are tastes or preferences, and not necessarily rational, but the third thing can be very rational: They expect fuel prices to grow a lot faster than other people do. They’re much more pessimistic about future fuel prices than the average person. And that’s why the Japanese might be leading in this. They remember the fuel crises, when they made gains in market share that they’ve never given back to the domestics. They were here with the right cars at the right time—cars with high fuel economy and, surprise, surprise, excellent quality because of Deming and J.D. Power, and so on. BB: Who was Deming? WM: Deming was an American who went over to Japan, because Americans ignored his philosophy. He’s a systems thinker; he says that quality is free. You build a system that produces quality, not the traditional way where you fix everything at the end of the line. The Toyota system owes a lot to his ideas. Deming went over to Japan when they were devastated after World War II. He’s passed away now, but he was a huge hero in Japan until recently. I met him when I worked for General Motors. He was a consultant for General Motors at 90something. He’s not going to have a big impact at that age, but he had it when he was in his forties back in Japan. J.D. Power didn’t have quite as profound an impact as Deming. Power worked in Detroit and they kind of rejected his ideas of talking to the customers about quality. You know, ask the consumers whether they liked the product or not, and give them what they want in terms of quality. I think Toyota and Honda are thinking of hybrids as insurance against another energy crises. They could be the right cars at the right time if fuel prices take off and keep going. Is Hybrid SUV an Oxymoron? BB: You’re saying that we should expect the hybrid market to grow from a half a percent to something like 4 percent. How do you account for that growth? Could there be a shift in the typical hybrid-car buyer, based on oil Walter McManus

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prices or some other factor? WM: The carmakers are going to have to expand the base. One of the ways of doing it is with SUVs. For the green buyer, it’s almost an almost an oxymoron. A green SUV? But that’s what’s coming. [Laughs] I’m not as sure about those people. I’d have to dig into surveys and see who picked a hybridelectric power train as their first choice, but also said they wanted an SUV. I haven’t thought to answer that question.

.............. Fuel prices are less than half of what they were at peak. ..............

BB: Someone who is clearly focused on environmental issues or trying to reduce foreign oil dependency is going to be the early adopter for the hybrid. You have a lot of other people sitting on the fence. They’re green to the extent that they don’t have to give up any of their creature comforts. When those are packaged together, they’ll go for it. WM: Yeah, I think that’s what Lexus is doing. The Lexus Hybrid SUV is clearly going to be the right demographic: the high income people, educated, and oh, by the way, you’re going to have the performance of your neighbor’s V8 SUV but yours is going to be green, and you’re not going to go to the gas station as much. It does address, as you say, the people who are on the fence. They’re not willing to sacrifice as much as the hard-core environmental Prius buyers. That’s who you’ve got to get for hybrids to go mainstream. BB: Toyota says they’re going to hybridize most of their cars eventually. Are hybrids here to stay? WM: I’ve heard Dave Hermance say this in public—it shouldn’t be any secret—that when Toyota does fuel cells, they’re going to be hybrid fuel cells. They’re going to have an internal combustion engine on their fuel cell vehicles. When I first heard that, I thought, that’s brilliant, because the thing people worry about it with the fuel cell is, where am I going to get fuel? Well, you don’t have to worry as much. You’ve got an internal combustion engine. I think the hybrids are here to stay. I’m not sure that they’re going to grow to a very significant part of the market. I think 4 percent is not enormous. BB: Will they go beyond that? WM: I guess I’m kind of a skeptic about any new technology. You look at something like the internal combustion engine, and diesel as well, it’s been tested, and tuned, Walter McManus

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and tried on every driving surface, and condition, and environment where people have gone, for over 100 years. Any new technologies have a long way to go to get to that level of familiarity and reliability. If you want fuel economy, internal combustion engines can be a lot smaller than they are. Cars would go slower. You’d compromise performance. You do some of that with hybrids any way. Why not just buy smaller cars? Why do people need V8s? People are willing to pay for it. On the one hand, I say if people want it, and they’re willing to pay for it, let them have it. The Lexus hybrid is going to have a V6, but they know they need the performance of a V8. They could actually put a V8 cheaper in that vehicle than they could build a hybrid. BB: Could oil prices drastically shift the market? WM: To be devil’s advocate, the highest fuel prices have ever been in today’s dollars, is a little under $3 a gallon. We’re still below that. Another way of looking at it is the percent of your disposable income that goes to fuel. And in that sense, because engines are more fuel efficient today, even though they’re bigger and you’re towing more, we are a bit more fuel-efficient than we were, and our incomes have gone up. Our GDP per capita is higher, in that sense. Fuel prices are less than half of what they were at peak. They would have to go up a lot to have a big impact on our vehicle preference. People look at $2 a gallon and say it’s outrageous, but most people pay it and don’t pay that much attention. It’s not great a difference, overall. BB: Although if you look at it purely from a green perspective, you can’t make a more important decision in terms of how much you’re polluting than what car you buy. Those two things are battling each other. WM: People reveal their preferences. They say they care, but when they make their decisions, they don’t seem to be willing to compromise anything to do it. For more information: Visit the J.D. Power and Associates Website at http://www.jdpower.com/

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Elizabeth Frame Honda Sales Associate

Elizabeth Frame, a sales associate at Frontier Honda in Longmont, Colorado, has been selling Hondas since 1976. She has lived in Boulder, Colorado for thirty years. She enjoys cooking, reading, hiking, gardening, and spending time with her husband and cat. A Career Selling Hondas BB: Did you set out consciously on a career selling cars? EF: My former husband and I were buying and selling cars just to get by. I thought why not see if I can get a job in a dealership. I knew a lot about cars by that time. I applied several places and got hired on with Honda in 1976. It was kind of unusual being a woman in the business back then, and it’s still unusual. I never finished college, so it was a way to make a little more money than regular work. Now it’s turned out to be my profession. BB: When you first started, was fuel economy one of the things customers wanted? EF: In some ways, it was. I started at a Chrysler store first, and I only lasted there a month. My forté was imports. I got moved over to their sister store, which at that time was selling Honda, Mazda, and Peugeot. It was an interesting group of cars. At that time, Honda’s CVCC engines were clean enough to run without a catalytic converter. Then, in 1980 they started using the converter. Before that, one of their selling points was that they didn’t have to use unleaded fuel. They could run on regular and still burn clean. BB: Was lower emissions and fuel economy a factor in customers’ decisions? EF: Gas prices had gone up recently; people were concerned about getting good gas mileage. I think that’s always been the case. Customers wanted something small, efficient, that wouldn’t break down, something fun to drive. But I don’t think really the mindset had much to do with air quality, then. BB: When new prospects walk through the door today, what are they looking for? Where does gas mileage rank in the list of priorities? EF: Pretty much everybody I talk to is thinking about gas mileage. Everybody’s trying to get out of their sport utilities, the big Expeditions and so on. People are

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downsizing. I see a lot of change in that direction. Especially, now since Honda has been out for so many years in this country, people have come to expect a lot. They feel safe when they come in to look at a Honda. They know they’re going to get something that’s efficient, and good on maintenance. It’s going to have a great resale value. And it’s going to help them on gas. From all the books that I’ve been reading, oil and gas are peaking out. We really need to think about something other than energy powered by fossil fuels. Hybrid Customers BB: The average sales person might not be as aware of these issues; neither would the average consumer. Do you try to broach that subject with customers coming in? EF: Any time that someone comes in looking for a hybrid here, other salesmen don’t really deal with it. They just say to me, "Hey, would you talk to these people?" Most of the people looking specifically for a hybrid are very different from the norm. BB: In what ways?

.............. People looking specifically for a hybrid are very different from the norm. ..............

EF: They seem to be ecologically conscious. They're more aware of what's going on in that respect. They really have to think about what they’re doing, because to buy a hybrid car over a normal Civic, which does really well—if you put the pencil to it, you’re paying all this extra money for a hybrid. Better gas mileage, that’s not the only issue. The issue is also about how many pounds of Carbon Dioxide, and all the other things that go into the atmosphere when you burn fuel, you keep out of the environment. A lot of people don’t put that into the equation. They think, "Oh, hybrid cars just get better mileage, so it’s not worth the extra money." But people who come in looking for a hybrid are thinking about bettering the environment. Most of these people have grasped where we’re at. BB: Is there a clear distinction when somebody walks in: They’re either interested in a hybrid or they’re not? And if they’re not, then you don’t consider offering it to them? EF: I offer it to them. There are a lot of nice tax incentives from the government. I don’t know why the government is reducing them now. We should be improving them, making hybrids more desirable. For some, it’s quite a leap for people Elizabeth Frame

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financially. A hybrid runs about $20,000 for a five-speed, and $21,000 for an automatic. Compared to the (non-hybrid) EX level, which has similar trim, it’s about $2,000 to $3,000 more. It just depends where people need to be financially. Some people will look at the fact that you don’t get a sunroof or the back seat doesn’t fold down. Others are concerned about power in the mountains, even though hybrids do just fine in mountain driving. Blank Responses from the Uninformed BB: I’m curious about how you size up a customer. At what point in your discussions might you say, well, we also have a hybrid? What kind of customer would you do that for? EF: Yesterday, I had some clients walk in, and they had never been in a Honda dealership before. They’re looking, but they’ve never owned a Honda. They’ve had friends who have owned Hondas, so they were referred in. I basically said, "Let me give you a tour of the product line." I started out with the least expensive Civic. I went up and showed them the hybrid. Basically, I can sense where people are at.

.............. I went up and showed them the hybrid. I got a blank look. It just wasn’t part of their reality. ..............

BB: Did you get any noticeable reaction to the hybrid? EF: No. I got a blank look. It just wasn’t part of their reality. BB: So you can offer something for those looking for a more environmentally friendly car, but you can’t really cross-sell, if you will? EF: The only way to have that happen is if the government puts even more restrictions, so it forces carmakers to make more hybrids. Or incentives. If there was a $3,000 tax credit, instead of a $1,500 tax deduction, it would make a huge difference. Hybrids Don’t Move As Fast BB: Do you get pressure from your employer, or incentives to sell SUVs over smaller cars? I know the profit margin, at least at the manufacturer’s level, is higher on SUVs. EF: No. Honda ships us a certain number of cars. One of the managers here figures out how many cars of this or that category we want, within those limits. We’re really Elizabeth Frame

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close to Boulder, which is a nice oasis for forward-thinking people. We just get a handful of hybrids: three, four, maybe five. That’s not a whole lot. When they first came out, they were selling at pretty close to the window sticker. Then, suddenly there wasn’t that much interest. In the fall of last year, and through the winter, people were able to get some really good deals. Dealers are selling (Honda) hybrids close to invoice. And buyers were also getting incentives from the government. BB: Was the lull with the hybrids, or the entire product line? EF: With the hybrids and some of the product line—because we came into winter and Christmas time. Now it’s picking up again, after taxes. People start wanting to spend again. We sell everything we get in. Right now, I have a ‘03 hybrid brand new—it’s still here—that they’re willing to sell at invoice. [The car sold soon after.] Activism on the Sales Floor BB: It sounds like they’re not selling like hotcakes. The public isn’t quite primed to seek out these cars. And yet, based on your reading, you feel EF: I know. [Laughs]. I feel like, what kind of business am I in? I’ve been on the Internet reading all kinds of stuff. I’m going to put out a newsletter to my clients, because I have 1,000-plus clients in my database—just push people to get a little more educated and in tune with what they need to do for the future. BB: How do you think that will be received? EF: More than generally, most people respect me. Anytime they get stuff in the mail from me, they’re going to read it. I don’t think there’s going to be a huge rush. [Laughs] At least, I might be able to put something forward for them to, at least, think about, and get them prepared. BB: Are you concerned at all that you might be perceived as an activist?

.............. If I can just spread information out to my client base, that’s 1,000 people I’ve been able to touch. ..............

EF: [Laughs] I thought about that, but Honda makes this product. If they want to call me the hybrid lady, that’s okay. I have to use careful language. I don’t think I’m going to out there as The Party’s Over, but there’s a lot of information that any normal person can pick up off the Internet about how car emissions hurt the environment. If I can just spread that information out to my client base, that’s Elizabeth Frame

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1,000 people I’ve been able to touch. And they might be able to touch other people too. Somehow, I think that might help. BB: If there were one key factor you could have all the customers know, what would it be?

.............. If we have to revert back to horse and buggy, it’s going to be a very different world. ..............

EF: It would be how the pollution that’s coming out of the tailpipe affects the environment, and how many pounds of all those emissions and what they equal in the environment, and how it destroys everything. It was such a wakeup call for me to find out, especially when my husband was selling wind power for a while. Fossil fuels are not renewable. They’re wonderful but they also do all these harmful things. We’re not going to be driving these phenomenal vehicles for much longer. Cars are great. They’re very efficient. They’re comfortable. You can go long distances in them. If we have to revert back to horse and buggy, it’s going to be a very different world. BB: So what would it take for people to view the car’s fuel efficiency as a feature on par with cup holders and sunroofs and leather seats?

EF: When gas goes above three dollars a gallon. When they ask, what do I need a car this big for? Or with this many features? Isn’t it better to have something that gets good gas mileage, that doesn’t pollute, that can still help me get where I need to go for work? But our whole structure as a culture is going to be so different, when people aren’t using fossil fuels to get around. That real wakeup call for people will be how much they’re paying at the pumps. BB: Do other worries dissuade people from buying hybrids? EF: There are worries about safety, because people read that the car is a little lighter. When I first starting driving the Insight, I thought, okay, what if I get into a crash? This is a pretty small car. Honda sends out large fact books, and from what I could discern, the Insight is built around a cage similar to Indy cars in terms of safety. They have reinforced the vehicle even though it’s made with lightweight material, to withstand impact pretty well. I followed racing for many years. Just watching those Indy cars, they hit the wall at 200 miles an hour, and people walk out. They wouldn’t put that car out, especially Honda, if it were going to be a deathtrap. It would have to come up to certain standards.

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BB: And from what you read from Honda, did that same approach carry over to the Civic?

.............. The Honda Insight is built around a cage similar to Indy cars in terms of safety. ..............

EF: The Civic hybrid is just a regular Civic. It’s a little lighter in that it has different wheels. I think the brake system is a little different. It’s got different fascia on the body to give it a better drag coefficient. There are a lot of elements that help it penetrate the air better, to give it better gas mileage. At the same time, they didn’t reduce any of the safety features. They all come with side airbags. On the Civic four-door, they have a five-star crash test rating at the front and four stars at the rear. Usually when I tell people what we know, they seem pretty happy.

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Dave W. Hermance

Executive Engineer for Environmental Engineering, Toyota David W. Hermance is Executive Engineer for Environmental Engineering at Toyota Technical Center U.S.A. in Gardena, California. He’s responsible for advanced technology vehicle communication for the North American market, and emission regulatory activities in California. Hermance joined TTC in 1991; from 1985 to 1991 he served as Department Head for Durability Test Development at General Motors. He joined G.M. in 1965, serving in a variety of roles in the Vehicle Emissions Laboratory from 1971-1985. He earned a Bachelor of Science degree in engineering from the General Motors Institute in Flint, Michigan. He is a member of the Society of Automotive Engineers, as well as a pilot who enjoys aerobatic competition. Forty-Year Career BB: In almost 40 years in the auto industry, what roles have you played at GM and then at Toyota? DH: While I was in college, I did coop studies at Allison, which became Detroit Diesel Allison—mostly on the aerospace side of the house. Aerospace was in tough shape in ‘71, so I transferred to the Milford Proving Grounds. I worked at the Milford Proving Grounds from ‘71 to ‘91, about 15 years of it in the emissions business. I spent five years in the department that designed durability tests based on customer use. BB: For those not familiar with Milford Proving Grounds, what is it? DH: The proving grounds are a 4,000-acre facility, essentially GM’s test tracks in Lower Michigan. It’s between Lansing and Detroit, Flint and Ann Arbor—in the middle of rolling hills in rural Michigan. They have over 150 miles of test track in there. It’s where all the central corporate testing is done for GM. Their certification emissions labs are there. Their safety test facility is there. All their road test activities are there. They also had a facility in Arizona, but Milford was bigger. BB: What did you learn during that time about emissions and durability? DH: I have a fairly long background from an emissions compliance and testing standpoint. I designed and evaluated a bunch of emission tests, resulting from rulemaking by the EPA, and to a lesser extent the California Air Resources Board. Being in Michigan, it was mostly about the federal government regulations. I can run any emission test that ever was or ever will be—both from a hardware standpoint, and from the calculations that back them up and the science that backs that up. Dave W. Hermance

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Toyota’s Hybrid Czar BB: I’ve heard you referred to informally as Toyota’s hybrid czar. What is your current title and role? DH: My current title at Toyota is Executive Engineer for Environmental Engineering, so I still have an environmental bent. The PR folks have recently started calling me hybrid guru. I’m not sure quite what that means. BB: [Laughs] What do you think it means? What are they looking to you for? DH: I am the native English speaker who presents hybrid technologies so folks can better understand it. The father of Toyota’s hybrid technology is a fellow in Japan by the name of Dr. Yaegashi. I’m kind of his stepson, if you will. There have been other phrasings, but I’m the American face of Toyota’s hybrid technology.

.............. The U.S. market is clearly saying, "We don’t give a damn about fuel economy." ..............

BB: How do you interact with Dr. Yaegashi? Do you speak Japanese or does he speak English? DH: He speaks some English, and a lot of his staff speaks English. I don’t speak much Japanese—a little bit. Most of the engineering data is in charts and graphs, and those translate fairly easily. One of his key staff members is a fellow by the name of Shinichi Abe. When I first joined Toyota in ‘91, he had just been sent to the U.S. on a rotation, so he and I were new kids in this organization together—he with prior experience with Toyota Motor Corporation in Japan, and me with prior GM experience. We worked very closely together for three years. He’s pretty well up the ladder in the development of hybrid systems in Japan, so he’s provided a great deal of my education. He speaks excellent English. BB: What do you think has been the secret to Dr. Yaegashi’s success? DH: He’s had years of emission-systems development prior to his hybrid exposure. He was one of the fathers of a bunch of different development programs at Toyota. He’s been doing advanced emissions work since the early ‘70s, and has done it well. He developed a lot of the systems that Toyota has used over time. He was given this challenge to do something new for the 21st century—and so here we are.

Dave W. Hermance

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American versus Japanese Corporate Cultures BB: How would you characterize the differences in cultures between Toyota and GM? Not only Japanese versus American culture, but the internal culture of the two companies. DH: In common, they are both very large organizations with a lot of corporate inertia, so it’s hard to change the direction they’re moving. With regard to differences, Toyota is much more customer-focused, so that any problem discovered, be it a durability issue or anything else, gets fixed immediately. GM’s corporate culture was to identify the problem and then eventually fix it—maybe the next model year or more likely the next product cycle. Toyota is driven to address issues on a much more aggressive schedule. BB: What was your first involvement with hybrid cars at Toyota?

.............. " I'd like to leave the planet a little better than I found it. By the same token, I recognize the business realities" ..............

DH: In the summer of ’97, we did a technology seminar for regulators and the press at Toyota’s Arizona proving grounds. Prior to that, I had gone to Japan and had spent some time with Shinichi Abe, and gotten the background. Toyota’s Japanese team brought prototype vehicles and a bunch of technicians to the Arizona proving ground. That was the first time I got to touch the car. I wasn’t directly involved in the creation or engineering of the first Prius.

BB: Do you remember when you heard that it was even in the works, and what your reaction was? DH: It would have been very late ‘96, early ‘97. It was such a different concept. Initially, it was presented as a car that would provide this [very high] level of fuel economy. I said, yeah, sure, because in general, nobody knew how to do that with any conventional technology vehicle. Now, I’ve seen the growth of the technology through three iterations of the Prius. With each generation, it gets better fuel economy. It gets quicker, and now it’s slightly bigger. So it’s bigger, faster, and has better fuel economy—all at the same time. With conventional technology, you just can’t do all three competing things at the same time. BB: How critical was the conviction that it needed to be done? DH: Extremely. You have to have a strong corporate commitment, because you’re Dave W. Hermance

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spending a lot to do this. The Japanese market has much higher fuel prices than we do, and there was a demand for a more efficient vehicle. Also, Japan has signed the Kyoto Protocols. They believe that man-made CO2 is a global warming gas, and it’s their obligation if they want to stay in business on a long-term basis—and they do—to reduce the impact their product has on the environment. So it’s a huge corporate commitment at the top, and it runs down all the way down through the organization. I’ve heard successive Toyota presidents affirm that. Current President Cho is very adamant on that being a part of the corporate culture. It’s his Number One goal for his tenure as president. BB: More than profitability?

.............. It’ll be interesting to see if we made a bad decision [to pursue hybrids] or whether the other guys are going to be playing catchup big time. ..............

DH: Yep. It’s their sense that environmental stewardship, in the long term, is the way not only to stay in business but also to continue to be profitable. It isn’t as if they’re going to do good things for the environment at the expense of staying in business. That would be really stupid. They’re in a position to take the longer-term view that this is the way we’ve got to go, and we need to begin to get there now. By the same token, we weren’t going to make hybrids out of everything. The cost and disruption, the risk, would have been too severe. You’ve got to do it in small steps. Toyota Hybrid Release Schedule BB: I’ve seen it stated that the full Toyota line would eventually be available in hybrid form? Is that true? DH: I’ve never heard that about the full line. It’s stated as, "most high volume products will be available with a hybrid alternative." We build some products in really small volume. It’s likely that those would never be hybridized. BB: Give me some sense of what consumers can expect from Toyota and Lexus.

DH: I can’t tell you what models, what years. I’d have to kill you. The only announced product is the Prius, then the Highlander and its sister vehicle, the RX. The RX 400h actually comes out three months before the Highlander. The RX is late in 2004. The Highlander is early first quarter of 2005. Beyond that, the press has been speculating wildly about what product is next, but there has been no official communication from Toyota. It’s widely rumored that we’ll do a hybrid version Dave W. Hermance

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of Camry. It’s fairly widely rumored that we’ll do a hybrid version of the Sienna minivan.

.............. High speed wrecks fuel economy. ..............

We’ve shown concept hybrids that are rear-wheel-drive Lexus-type products. We’ve shown a concept vehicle that was actually in production in the Hino division in a delivery truck. We don’t sell that product in the U.S. We’ve demonstrated the ability to take the technology and move it to significantly larger platforms. More About Speed, Size, Fuel Economy, and Sales BB: So with each new release, or new generation of a previous model, the cars get bigger and faster and more fuel-efficient. DH: Right. Obviously, there’s a theoretical end point to that. We’re still early in the learning curve. The other thing with hybridization, you get the flexibility to mix those attributes in different ways. Prius has class-average acceleration vehicle, class-average size, and best-in-class fuel economy that’s 100% greater than class average. The RX and Highlander are targeted to be quickest in class, with maybe 50% improvement in fuel economy, and still the lowest possible emissions. You can remix the pieces and the relative size of the components. They won’t all have 100% better fuel economy and class-average performance. You can trade off fuel economy improvement and vehicle performance. The reality is, in the U.S. market, customers won’t pay for fuel economy. At least, not many will. A lot more will pay for improved performance. BB: Could you ever envision a Toyota car running 70, 80, or 90 miles per gallon? And if that was the goal, could it be achieved? DH: It’s unlikely that you can get thermodynamically to 80 or 90 miles to the gallon with gasoline in current vehicles. You might be able to do it with diesel and hybridization. But you’d probably wind up doing it in a much lighter vehicle. Right now the U.S. market will not embrace it. Consumers won’t go for fuel economy, and they won’t accept any compromise of today’s performance levels. In fact, they want more performance with each new model. In some markets outside the U.S., perhaps. Toyota is market-driven, in all the markets it sells in, and the U.S. market is clearly saying, "We don’t give a damn about fuel economy," with some lowvolume exceptions. We’re still half the price of Japan or Europe on gas price. It’s going to take much higher prices for a long time to drive real change in customer behavior. BB: Does the American market drive to any great extent what Toyota offers Dave W. Hermance

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for all markets? DH: The U.S. market is a significant portion of Toyota’s worldwide market, maybe 40 percent of the corporate total sales. So yes, it has some role in driving the product. But you’ve got to meet the demand in all the markets, to the extent you can. The Prius was not originally destined for the U.S. Originally, it was developed for Japan, and the U.S. executives said, we think there is a growing interest in the U.S. in environmental leadership. This is a vehicle that we can use to get there, though it’s got to be quicker than it is now. The original Japan-market vehicle would not have been acceptable here. The next iteration of the product in 2000-2003, the first one we saw here, was quicker. It still wasn’t class-average quick, but it was quicker. With that performance and fuel economy, we were able to test the water and see how many folks were interested. And folks bought them, in growing numbers, through the three years of that product cycle. But it was clear that the vehicle needed to be quicker and somewhat bigger. As a side benefit, we also got a better understanding of the technology to generate better fuel economy. I think the mid-size market would have been content with the old Prius’s fuel economy; the additional fuel economy is kind of an "add-in." BB: Has the market response to the 2004 Prius been surprising? DH: Oh yeah. Both in Japan and the U.S. Those markets are taking orders for the product at a higher rate than expected—to the extent that it slowed down availability in other markets, and the company had to add to capacity to build them. We’re just now starting to see the results of that increased capacity, and we’ll work off the backlog this summer. BB: Could you sell even more than your increased capacity?

.............. You can’t move a buyer away from an SUV if that’s the target vehicle they’re interested in. ..............

DH: That’s the thing you never know in the auto business. If you immediately crank capacity to meet the launch demand, you don’t know how long sustained the launch demand is likely to be. You’ve got to walk a pretty fine line there. You don’t want to rush out and do something foolish, especially since there will be a bunch of new players in the market over the next 12 months. They’ll be a lot of new products. We need to watch that sift out, and see how it goes, see what fraction of that we can get, and what unmet demand there might be then. Dave W. Hermance

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BB: Can you increase production in small enough increments to move quickly on meeting market demand? DH: Probably. There are incremental limits. It’s generally understood that we can get to 120,000 Prius vehicles a year, globally. That’s the capacity of the plant that the line is on. The demand in other markets affects how many we can get in the States. We’ve currently been allocated 47,000. It looks like that will get us through the year, and it’ll be interesting to see what happens next year. Tough Stuff: The Hybrid Computer Control System BB: You’ve mentioned the internal control systems, the computers. How sophisticated is that technology? DH: [Laughs.] As Ford pointed out, that’s where the intellectual property is—in the control system. That’s why they chose to do it themselves. That’s why we’ve done it ourselves, and why we continue to iterate, and why we think that even though folks can look at the system and say, "I could do that," it’s going to take them a while to gain the learning we’ve achieved through years of experience. We think we’re going to be ahead for a while yet.

.............. Clean diesel competing with hybrid vehicles on an absolute emissions basis just isn’t going to happen. ..............

BB: Americans have largely dominated in terms of software development in the software industry, and yet they’re behind the Japanese here. DH: Yeah, but mechanical control systems are quite different than commercial application software. The sophisticated process-control stuff has a broader base than just the States. BB: Is there a difference between the Americans and the Japanese in the will to put hybrids out there? DH: I’m not so sure if it’s a difference in will. It’s a difference in the corporate analysis of what’s going to be profitable and what’s going to be good for the business. If a manufacturer sees a business opportunity, they’ll be there, one way or another. Some of the manufacturers aren’t going there yet—because of the amount of money they’d have to invest, and initial evaluations that say, "We’re not convinced yet that this is a great way to go." Some of us are. Honda, Toyota, and Dave W. Hermance

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Ford are pretty well deep in the [hybrid] business now. And it’ll be interesting to see if we made a bad decision—which I don’t think is the case, but it’s possible—or whether the other guys are going to be playing catch-up big time. Or you can do it like Nissan did, and hedge your bet, where you say, "We’re not sure this is core, but we see the need, so we’ll buy the technology." Constant Variable Transmission and Electric Current/Voltage BB: How significant is the CVT, or Constantly Variable Transmission, in producing the hybrid’s results?

.............. Are we two days or five years away from fuel cell technology? I don’t think so. ..............

DH: You need some kind of mechanism to get a wider range of operating points between the engine and the vehicle speed. You can do it with a multi-gear manual transmission. You can do it with belt-driven CVTs, like our friends at Honda do. Or you can do it with an electrically variable transmission like we use in Prius, which is entirely different than the Honda CVT. That’s not to say that one is better than the other. They’re just different.

The electrically derived CVT functionality is a big piece of the fuel-economy improvement. It’s only the high-voltage electric system that enables us to do that, by electrically varying the speed of the generator to alter the relationship between engine speed and vehicle speed. So, it’s an entirely different way of doing CVT functionality. BB: So voltage level is a key piece of the puzzle? DH: Voltage is a consideration, but current is the main factor of the price of power electronics. So if you can increase the voltage and hold the current constant, you get a more powerful machine and it doesn’t drive the cost up. So the higher voltage system is key to holding the cost down. BB: Why did the Honda and Toyota hybrid systems end up so distinctly different? DH: They’re done by two different manufacturers, and the one who did it second didn’t want their system to look like ours. Honda was keen on having a unique system, and they do. It doesn’t work quite as well as ours, but it works quite well. But it’s a different approach, a different hardware set. Honda and Toyota are fierce competitors, so it’s not surprising that they’re different.

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BB: How would you characterize the chief differences? DH: The Toyota system is referred to as a full or strong hybrid, meaning that the vehicle can move with its engine off. The Honda-type system is what people call a mild or assist-type system, in which the engine has to run for the vehicle to move forward, because the electric machine is directly connected to the engine. There’s no ability to uncouple the electric drive from the engine drive. BB: Ford is saying that the Escape Hybrid can run up to 25 miles per hour on all-electric. DH: Those constraints are based on the rotational speeds of the elements of the transmission. If you look closely at a diagram of the Ford transmission and the Toyota transmission, they look mechanically the same—because they are. Ford buys that transmission from a Toyota supplier, so the mechanicals of the transmission look exactly like a Toyota system. Now, a lot of the other execution is different, and Ford does not buy that transmission from Toyota. They buy it from an outside supplier called Aisin-W, who sells transmissions to a lot of folks, and they sell that hybrid transmission to Ford. So, mechanically, there system is very much like ours. Ironically, Toyota chose to source their transmission internally rather than buy it from Aisin. Now, the speed rating of the generator is what determines how fast you can go electric-only—and the control system determines, practically, how fast it goes. Prius is capable of running 42 miles per hour electrically. But you can’t accelerate from 0 to 42 electrically. The way you get there is to accelerate above 42 mph mechanically, and when you get in the evening rush hour, lift off your foot. The spark and fuel shut off immediately, and if the speed is less than 42 miles per hour, the engine stays off and you can cruise in that speed range without it coming back on. I’m not privy to the control logic of the Ford system. I suspect their mechanical maximum speed is similar. Practically speaking, our system logic says that if total power demand exceeds 10 kilowatts, then you start the engine. If it doesn’t, you don’t. Ten kilowatts road load is a higher speed than 40 miles per hour, but with any acceleration, you get above 10 real quick. My guess is that Ford has programmed their system to turn on the engine at something significantly greater than 10 kilowatts. That’s possible, depending on how hard they want to hit the battery. We won’t know until we have time to play with them a lot. The ability to drive electric-only in some modes can be very advantageous to fuel economy. The way the system works to maximize the regenerative energy you put back in the battery is the other difference. But in systems where the engine has to run in order to move the car, you have one less degree of freedom. You can’t play Dave W. Hermance

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with the cruise speed in order to get to electric-only operation. Only Ford and Toyota customers get to do that, for the time being. The Leasing of Toyota’s Hybrid Technology BB: Toyota is able to lease some of its hybrid technology to Ford. How important is that from a business perspective? DH: There’s been significant misreporting of it. The most recent press announcement that Ford licenses some patented Toyota technology got a lot more play than it might have suggested. The reality is that if you’re first to develop new product, you’ve got much less risk of infringing upon anyone’s patents. If you’re second, even if you go out with a clean sheet of paper and try to develop a system, you’ve got two choices when you develop this great control idea and then find out that someone’s already patented it: You either come up with a new way of doing it or you seek licensing under that patent. (The third choice is that you could violate the patent, but you’d probably get caught. Besides, it’s not good business for anybody to do things like that.) So, you need to be forthright about that stuff. If the licensing is available, then you negotiate to see what kind of price you can get it for. And if it’s rational, you do that. And if it’s not, you find a new way to do it. That happens all the time in the automotive industry. BB: Did Ford have trouble getting their Escape to market? DH: Ford announced a year ago that they were having some control systems difficulties, but those were related to the fact that they had different suppliers doing parts of it. Their press announcement, if you read it closely, says that they had to institute a formal change control in the software process so their multiple vendors all talked to each other, so the software would talk to each other. It’s very understandable. I don’t believe that, quote unquote, Toyota bailed them out. They got part way down the road, and said hey, this control strategy that we like is already patented. Let’s see if Toyota will license us to do it. And we had announced that we would license those patents. So they went and negotiated that, and said, oh, by the way, we’ve got some diesel control technology you might be interested in. And we said, yeah, we’ll do some of that. So, there’s some cross-licensing on some diesel control technology and some of our stuff from our hybrid control system. But we’re not getting rich licensing our technology. BB: Do licensing fees, from Ford and others, help with making the Prius program profitable? DH: It certainly does help. Does it help a lot? I don’t know. I haven’t seen the financials. It doesn’t help us nearly as much as the arrangement we have with Nissan, where we’re not only licensing the technology, but we’re selling them parts. The Nissan deal is much more rewarding financially for Toyota. But the Ford Dave W. Hermance

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licensing can’t hurt the bottom line. How much it helps it, I have no idea. Will we license the technology to other folks? Absolutely. Will we sell parts to other people? Absolutely. We’re in the game for the long run. Consumer Concerns: Fuel Efficiency, Battery Life BB: Let me ask you two questions that are common consumer concerns that you’ve heard many times. They’re probably the two most common ones. One is, "your mileage may vary." DH: Depending on how you drive. I can get EPA values with Prius. I can get EPA values with conventional cars. But you have to know how EPA’s tests are conducted, and you have to have a similar driving pattern. Depending where you live, what time of the year you drive, and what traffic conditions you drive in, you have some flexibility, but you don’t have infinite flexibility in how you drive. BB: What would you recommend? DH: Don’t live in a cold climate is the best advice, but you have no control over that. Ambient temperature has a very big effect on fuel economy, not just for hybrids but for all vehicles. The most applicable piece of advice is, don’t speed. High speed wrecks fuel economy. Any speed greater than 55 starts to deteriorate fuel economy. Greater than 70, you start chewing it off in big pieces. If you want your fuel economy to approach or exceed the EPA values, don’t speed. What fraction of the American public is willing do that? Not a very big one actually. Number of times per day you start the car from cold has a huge effect on fuel economy. Sometimes, you can put your trips together, so you make fewer cold starts per day. Sometimes you don’t have that flexibility. You’re stuck. The reality is that every cold start chews a hunk out of your fuel economy. Every time you go fast chews a hunk out of your fuel economy. Every time you accelerate like a jackrabbit—the traditional jackrabbit starts—chew up on fuel economy. The opposite of that, where you wait till the last possible second and then hammer the brakes to slow down, doesn’t help either, because you’re making power longer than you need to. And in the hybrid vehicle, it really doesn’t help, because you’re now putting so much energy out, that you can’t capture it all regeneratively. So, very rapid braking, very rapid acceleration, high speed, cold temperatures, little things like tire pressure, number of cold starts, all make a difference in fuel economy. How fast traffic is moving, and whether you have to go that speed or get run over, but you can’t control that. Two factors are unique to the hybrid, at Dave W. Hermance

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least in our hybrid: One is that you have the ability to run some of your commute electrically, if conditions warrant and your driving style allows. And the other one is that you can maximize how much energy you put back in the battery if you pre-plan your braking a bit. BB: Another big concern is battery life and replacement. What do you do to make sure the batteries will last? DH: You can test to make sure your system is robust within the engineering parameters that you know to be damaging. High temperatures are bad for the battery. Operations at very high states of charge, and very low states of charge, are bad for the battery. We have an internal control system to prevent that from happening. We know we can control that one. The temperature is one that you have to test for, to see that indeed you are not letting the battery get too hot. We have a laboratory test that’s executed on new battery designs. We put the battery in the vehicle, go out and run various roads in the real world, and then look at the data to see which trip segments are more severe—the ones that generate either higher power requirement, or increased internal battery temperatures. So you grab those segments that are severe, look at how frequently they occur, and then bring them back to the laboratory, and run only the severe pieces, over and over and over again. The battery in the ‘04 Prius has been tested through 300,000 kilometers, or 180,000 miles, of simulated severe use with no deterioration. So, we’re pretty confident that the battery is not going to deteriorate. That said, there will be a few people, hopefully a very small number, that find some way to damage the battery. That’s why it’s got a warranty: 8 years or 100,000 miles. Does that mean that in eight years, two months, or 101,000 miles, it’s going to die? Of course not. Engines are only warranted for three years or 36,000 miles. Very few die at 40,000 miles. So, you make the warranty decision based on what you think will make the customer comfortable. Rationally, we would put the warranty at three years, 36, just like we do with power train, but we said no, this is new technology. Folks will be ill at ease with it. We’ll go ahead and move it up to eight years, 100,000. We think the battery is not going to fail, period. BB: A related concern among some consumers is that resale value will go down. DH: In the first three years, it’s been wholly unfounded. The Prius holds its value better than comparable vehicles, like the Corolla and Camry. Will that change in five or six years? It certainly would if we have a lot of battery problems, but we’re not Dave W. Hermance

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having a lot of battery problems. And we don’t expect to. Demand – With or Without Television Ads BB: What about the front end of it, the creation of demand, the marketing? Why isn’t hybrid technology marketed more vigorously—for example, television commercials? DH: Right now, we don’t have enough cars. The more marketing you do, the more supply you have to have. BB: Isn’t that a Catch-22? If you don’t produce enough, then you’re not going to want to do the marketing. You’re not going to do the marketing unless you’ve produced enough. DH: Your marketing has to be keyed to what you’re willing or able to produce. You certainly don’t want to go out and advertise when you have a three- or fourmonth backlog that you haven’t been able to deliver. We have a very sophisticated marketing campaign ready to go for this car, but they’ve been holding back because the demand has been there without it. The other reality is that marketing costs money. So, you don’t want to create unrealizable expectations because you can’t deliver the product, and you don’t spend the money until you need to do that to support the product plan. We’re kind of in this Catch-22 business now, where demand exceeds the available supply. We’ve got great marketing [for the Prius.] I’ve seen some of the television ads. They’re really cute, but there’s no sense in running them until the demand starts to taper off, and we start to catch up. That could all change in 2005—in a more competitive environment, if the backlog’s not there, or we wind up with new production capacity. BB: Which leads us to J.D. Power saying that hybrids will grow from the current half-percent of the new car market to 4 or 5 percent in the next few years. Do you agree? DH: Could go there. Could go more than that, depending on how many manufacturers offer product on how many different models. That will drive the demand. Right now, at 47,000 units, Prius is about 10% of the mid-size cars Toyota sells. If you add Camry and Prius, we’re close to 500,000 units total. 10% of those are hybrids. If the Lexus RX and the Highlander come out, and we sell them at 10% of that category, then who knows? You could conceivably get to 10% penetration of the whole market, but only if every manufacturer offered hybrid as an option on every high-volume platform. That’s not going to happen in four years. It could happen in 10. It could be that, if demand is really big, and everybody realizes that Dave W. Hermance

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it’s big, you could blow through 10% quickly on a particular model or a segment. BB: What about government incentives? DH: Yeah, although you can’t have a product plan predicated on long-term availability of incentives. It would be nice to have them to get the volumes up to the point where you get the cost down—otherwise, only manufacturers with deep pockets are going to do it. That’s where you’re at now. Incentives are good to kickstart the market, and maybe bring other players in, but you can’t build your product line around them. BB: But isn’t the market predicated on the counter-intuitive decision that people are willing to pay the extra premium for a hybrid, even though it won’t pay for itself over the lifetime of their ownership? DH: Our research suggested that if you can’t show a payback in fuel savings over three or four years, then you have to show some other attribute consumers value, like very low exhaust emissions or great styling or lots of other amenities. Or, in the case of the RX and the Highlander, very good performance—because the market does seem willing to pay for performance. BB: Other carmakers seem to take that route: using hybrids to boost performance, not to reduce emissions and increase fuel economy. DH: But they haven’t brought any of them to market yet. They’ve talked about them. You can certainly get performance improvements through hybridization, but you can do that less expensively by reviving their hemi. 1 It costs a lot less for Chrysler to build that engine than to build a hybridized V6—and besides, a hemi has a lot of market cachet. You say, "I got a hemi" and everybody knows what you’re talking about, or at least they think they do. BB: Isn’t there a certain cachet with hybrids as well? DH: There is, although it’s not viscerally rooted, because hemi is a very powerful marketing name. One of these days, we’ll get "hybrid synergy drive" to be a powerful name, but I’m not sure it’s going to resonate quite like hemi does. [Laughs] Collective Gas Savings from All Priuses BB: You’ve said that the Prius, in 2004, will save 50 million gallons of gas. DH: The total fleet of Priuses that are on the road by end of 2004 will save approaching 50 million gallons. That’s cumulative sales, and cumulative gallons saved. I put it out there just to counter some of the advertising some of our Dave W. Hermance

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competitors were doing. But it’s hardly a drop in the bucket. BB: Is your involvement with the Prius an environmental mission? DH: It is for me, personally, but I’m not sure it is for the mainstream marketing folks. I’m convinced that global warming is real, and that if we’re not principally responsible that we’re at least contributing to that. I’d like to leave the planet a little better than I found it. It’s going to be hard work to do that. By the same token, I recognize the business realities. Unless there’s a market force that requires it—and right now there isn’t because right now the American public, across the entire sampling, doesn’t care about fuel economy, even at two dollars a gallon—it’s not on their radar for consideration when they purchase a new vehicle. Interestingly enough, it is on their radar after they buy the vehicle and start complaining about the fuel economy. It hasn’t made it into the purchase decision consideration yet. It may, at some point in time, and Toyota will be well positioned when it does. You have to go in small steps until the market forces are ready to move you in that direction. Do you know John DeCicco? He’s a senior fellow with Environmental Defense, one of the more lucid environmental NGOs. He had a presentation slide that said, "It’s not just technology. It’s the market, stupid." Until there’s a market force—I don’t care how good the technology is—it isn’t going to happen. What Ads Can and Can’t Do BB: Environmentalists argue that a market has to be created, that the carmakers do mold consumer demand. Take SUVs… DH: A popular misconception. The best a manufacturer can hope for with advertising is to change a buyer’s opinion, from buying Brand X’s SUV to buying your brand of SUV. You can’t move a buyer away from an SUV if that’s the target vehicle they’re interested in. The best you can hope for with marketing is to get them to switch brands. A lot of folks don’t understand how limited your ability to influence the buying decision with marketing actually is. BB: How do you explain the desire for SUVs? DH: People want vehicles that sit high. They feel safer in them. It’s an illusion, but it’s a commonly held perception. Back to the marketing question: If we were as powerful in marketing as some folks believe us to be, we’d never have products that fail to sell. We’d just advertise them more, and they would sell. A classic example of that is a product Toyota launched in the early 90s called the T-100. Toyota decided that customers didn’t really need them big honking pickup trucks. They needed a three-quarter-scale pickup truck. And we built that vehicle, which by the way had the highest J.D. Power quality rating, and customers ignored them in droves. We pulled the product from the market. If we had been as powerful with marketing as Dave W. Hermance

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folks seem to believe, that product would have not been a market failure. The reality is that it was a failure, because the market just didn’t want it. BB: Maybe it requires a different kind of ad or marketing campaign. I don’t know, public advocacy… DH: Oh yeah. That’s where John was going with his market statement in the presentation. He criticized some of his fellow NGOs for not seeing that the market is what drives the behavior of these big manufacturers. We (NGOs) need to spend some of our effort, instead of just pounding on automakers, going out to shape the market. And I agree with that. It’s not something that we’re likely to be successful at doing alone. Maybe together, we could all get there. And Finally, the Future …. BB: Let’s talk about the future. Where do you see Toyota R&D dollars going now? What looks bright in the future? DH: We’re going to continue to expand the product horizon for hybrid vehicles. We’ve already introduced some gasoline direct-injection vehicles, and you’ll see more of those. In markets where exhaust emission standards are less rigorous than the U.S., you’ll see a growing percentage of clean diesels. Clean diesel is bit of an oxymoron though, because clean diesel is not nearly as clean as gasoline, even in its cleanest state. BB: I just read a report today about how bad particulate matter is. DH: If you don’t care about the stuff getting stuck in your lungs, then particulates don’t count, but I’m a little concerned about that personally. By the same token, the new TDI diesels are a hoot to drive. They’re great fun. They are really great performing little vehicles. They have a great torque and very good response. We may be able to get them as clean as the average car. That’s the hope, but hybrid technology can be way cleaner, 90 percent cleaner than the average new car. So clean diesel competing with hybrid vehicles on an absolute emissions basis just isn’t going to happen. BB: Talking about things that aren’t going to happen, hydrogen fuel cells? DH: They’re going to happen eventually. I just don’t know when. They’re not going to come to market during my career, let’s put it that way. I think we’ll solve the engineering challenges on the vehicle side: getting the cost under control, and the power, and the cold weather operation, and the durability. Those are engineering challenges. We’ll figure out how to do those. It’ll take us six, eight, ten years, but we’ll get it done.

Dave W. Hermance

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What I don’t see today, in my crystal ball anyway, is a solution to storing enough hydrogen on the vehicle to give you sufficient range. On the vehicle side, the breakthrough problem is storage. But, even if we get that breakthrough, there’s this other minor problem called infrastructure. Infrastructure has many facets to it, one of which is storage because they don’t know how to store the stuff either. Another one is what are you going to make the hydrogen out of. You can’t just go out and grab free hydrogen. And if you can’t figure out how to make it renewably, at a competitive cost, then you’ll have to wait until oil gets a lot more scarce, in order to be cost-competitive with the accelerating cost of oil. Hydrogen is a viable energy carrier. Fuel cells are great energy-conversion devices because they’re very efficient, but are we two days or five years away from it? I don’t think so. I think the DOE’s timeline, where they say in 2015, we’re going to make a decision whether we need the infrastructure by 2020 is probably pretty rational. There’s a fair probability that they’ll make the decision in 2015 that they’re not ready yet. By the way, that’s not the corporate opinion. That’s my opinion. BB: What car do you drive? DH: I’ve got a Prius. And I have a Highlander Hybrid on order. I’m not bashful about it. My wife is currently driving a Matrix. She’s beating on me, on a daily basis, to give her the Prius. I told her she can’t have it until I get the Highlander. BB: The Highlander’s worth waiting for? DH: I’ve driven the Lexus. I’ve not yet driven the Highlander, although I expect it to be much the same. They’re very quick vehicles. If you need an SUV’s utility, and you don’t like performance particularly, then I’d be interested in the Escape—although I wouldn’t buy one since I work for Toyota. I don’t think the Highlander and the Escape will compete with each other head to head. The Escape is probably going to have class-average performance. The Highlander’s going to be way quicker than the class. The class average is about 10.1, zero to sixty. The Highlander, we’ve already said, is going to be below eight, and probably well below eight. It’s going to be a quick vehicle. For more information: Visit Toyota’s Website regarding the Prius at http://www.toyota.com/prius/. NOTES 1 "Hemi" refers to Chrysler’s V8 engine with hemispherical combustion chambers, whose shape promotes better combustion of the air-fuel mixture. First introduced in the Fifties, the hemi has recently been revived by Chrysler in sport-utility vehicles and large sedans. Dave W. Hermance

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Therese Langer

Transportation Program Director, American Council for an Energy Efficient Economy Therese Langer is the Transportation Program Director for the American Council for an Energy Efficient Economy (ACEEE) in Washington, DC. She works to improve both vehicle and system efficiencies in the passenger and freight sectors. Her current activities include research and advocacy for stronger fuel economy standards; assessment of diesel-vehicle prospects in the U.S. market; improving consumer information about environmentally preferable vehicles; and development of an approach to stabilizing transportation energy use in the U.S. that integrates technological and demand reduction strategies. Therese provides guidance and analytical support on transportation energy policy issues to environmental groups and Congressional offices, among others. Before joining ACEEE in 2001,Therese spent 10 years as Staff Scientist for the Rutgers University Environmental Law Clinic. Understanding the CLEAR Act BB: Help me understand the distinction between the CLEAR Act and the Energy Bill. First, what is the content of the CLEAR Act? TL: The CLEAR Act is a bi-partisan bill introduced in 2001 by Senators Orrin Hatch (R-Utah), Jim Jeffords (I-VT) and John Rockefeller (D-WV). It gives tax incentives to a range of advanced-technology vehicles, including fuel-cell vehicles, alternativefuel vehicles, electric vehicles, and hybrids. It was originally inserted into the Senate Energy Bill—and it contained credits up to $4,000 for light-duty hybrids, and even higher credits for heavy-duty hybrids. There’s been a lot of discussion as the Energy Bill has moved from the Senate to the House, and so forth. At the end of 2003, when the Energy Bill went to conference, the bill that emerged included much of the CLEAR Act, but was rather different from the original. For hybrids, there were a number of changes: the amount of money was reduced, and consequently, the $4,000 cap for a light-duty vehicle was reduced and the number of vehicles that can receive full credit was capped at 80,000 per manufacturer. Credits for light-duty diesels were added. Under the conference bill, a Prius, which would get the highest credit among existing light-duty vehicles, would get about $3,000.

Therese Langer

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BB: Are we talking tax credit or tax deduction? TL: We’re talking credits here—so, a huge difference from what we now have. The current $1,500 hybrid deduction translates into maybe a $450 savings for the consumer. Whereas the credit you see on paper is the credit you get – actually putting up to $4,000, in the case of the CLEAR Act or somewhat less in the case of the conference bill, right back into your pocket. Credits are money you don’t have to pay on your tax bill.

.............. [New hybrid car tax] credits could make a very significant difference, especially in getting U.S. manufacturers to produce hybrids. ..............

To finish up with the Energy Bill, the conference version did not make it to a vote last year. In an attempt to resuscitate the Energy Bill earlier this year, the Senate has re-passed its own version, which again includes the CLEAR Act—not the somewhat different set of tax incentives from the conference bill.

Trying to Make Sense of the Legislative Landscape BB: Let me see if I understand. Is the CLEAR Act not going to go through unless the Energy Bill goes through? TL: No, that’s not necessarily the case. First of all, the same hybrid tax incentives— from the CLEAR Act—are now being proposed as a part of the Jobs Bill (the FSC/ETI Bill to respond to EU retaliatory tariffs on US products). That would be a different means to move the CLEAR Act, without the Energy Bill. BB: Okay, I see. The CLEAR Act is a module, if you will, that can be attached to any bill. It was previously attached to the Energy Bill, which had a lot of problems late last year. Now, it’s being attached to the Jobs Bill. Does that have a chance of getting through? TL: The bill will get through in one way or another—the question is whether the credits will be in it. The House version doesn’t contain the credits. The CLEAR Act is certainly something that could be a freestanding bill, though there are reasons why a lot of people were reluctant to move it separately. BB: What’s the status of current tax policy regarding hybrid cars? TL: The current federal tax deduction is going to be phased out if nothing intervenes to stop that. BB: There’s a barrier to entry for many consumers to use this hybrid car technology, a premium they need to pay to get into a hybrid version of the Therese Langer

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same car they could have cheaper in a conventional version. Is there hope for a tax incentive so more people can drive these cars? TL: First of all, I do not mean to give the impression that we’re giving up hope on the CLEAR Act. It’s very tricky because, at the macro level—because of all these other things that have been thrown in with it. Even the tax credit itself is quite tricky. Look at the dynamics just among the manufacturers—the U.S. manufacturers versus the Japanese who have a big head start. I do not mean to say it won’t happen, because it may. I think that those credits could make a very significant difference, especially in getting U.S. manufacturers to produce hybrids.

.............. The success of the Escape Hybrid would have very significant consequences for the view that American manufacturers take of the hybrid market. ..............

Of course, there are other things going on. Various activities at the state level could also provide a pretty substantial incentive to consumers. Then, there’s the interesting fact that hybrid sales seem to be climbing at a pretty impressive rate, even with rather limited incentives in place, namely the federal deduction, and some existing state incentives. Ford and the Coalition Supporting the CLEAR Act BB: You mentioned the Japanese having a head start over the domestic makers. Did you see recently that Bill Ford, essentially concurrently with the release of the Ford Escape Hybrid, is now advocating for a tax credit?

TL: Yeah. Ford has actually been a very active member of the coalition that has formed around the CLEAR Act. Just to digress for a minute on those dynamics, that is a coalition of a bunch of different interests that usually don’t often work together, including some environmental organizations, efficiency organizations (including the ACEEE), three automakers (Ford, Toyota, and Honda), and alternative-fuel interests. BB: How many organizations, roughly? TL: Maybe 20. And these are all groups that have worked for close to three years on making some progress with the CLEAR Act. As I say, Ford has been very active from Day One there. And they are not in an easy position because they have to straddle the line between this coalition, which includes the foreign manufacturers and environmentalists, and their membership in the trade organization for U.S. manufacturers. 1 It has been difficult for them. Therese Langer

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So, I didn’t take Bill Ford’s announcement to be a change in their policy. Everyone is watching very closely the release of the Escape, and of course this is a very big deal in many respects. One being that it will be the first release of what we regard as a very serious hybrid by a U.S. manufacturer, and the other, it’s the first hybrid SUV. The success of the Escape Hybrid would have very significant consequences for the view that American manufacturers take of the hybrid market. BB: It doesn’t make sense for Ford to promote the CLEAR Act until they have a car close to market—to promote it out publicly in the marketplace. TL: The Escape has been in the works for a long time. You can say the amount that Ford put into the coalition around tax credits was based largely on the anticipated release of the Escape. I think they made an announcement of another vehicle as well. BB: They announced another SUV—the Mercury Mariner SUV Hybrid—which is a variant of the Escape platform. They also announced a future mid-size sedan. TL: To me, that was the news in the piece, not their support for tax incentives. BB: He’s calling for tax credits or rebates of $3,000 per vehicle, and he mentioned his past support of an additional 50-cent-per-gallon tax on gas. TL: Right. Governmental Role in Gas Prices BB: So it seems like the future of the CLEAR Act is, ironically, unclear. There are two other places where the government could play a role in promoting the sales of hybrids. One is gas prices; the other one is HOV lanes, which is more of a convenience. Let’s talk about gas prices first. What piece of the price at the pump are tax-based? TL: Taxes are on the order of 40 cents on the gallon. Of that, the federal portion is in the vicinity of 20 cents now. State taxes vary quite a bit, but let’s say they are in the range of 20 cents. There you have it. It’s less than a quarter of the total price per gallon at Therese Langer

.............. I regard the broad issue of gas price as potentially much more significant for hybrid sales than the federal gas tax, which has been off the table for a long time. ..............

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this point, and it’s getting down to 20 percent. But I’m not sure that the gas tax is the most relevant question about gas prices, given A, the volatility of the prices over the past several years, and B, the trend towards what looks like sustained high prices of gas. And the variation that you see, a hike of up to let’s say 40 percent over a couple-of-month period, is much more significant than anything we could possible expect to see in terms of federal tax. That’s to say, I regard the broad issue of gas price as potentially much more significant for hybrid sales than the federal gas tax, which has been off the table for a long time. And it’s not getting any closer.

.............. Hybrids have not to date played in a big way into the fuel economy debate because people have taken the view that they’re either too expensive or they’re just available in these little cars. ..............

BB: And consumers don’t seem to stop buying gas because the prices go up, or change their decision about what kind of car to buy. TL: We’ll see about that though, if things get worse. There does come a point where it makes a big difference—and that we haven’t seen in two decades now, but we did see it. It’s of course possible we’ll get to that stage again. Today, the point would be between $2 and $3 a gallon, but it might be closer to $3 in terms of something dramatic. BB: I was recently in California. I paid $2.40 a gallon, and no one’s stopping. TL: Confirming my suspicions that $3 is more like it. We’re talking about not only changes in driving behavior, but changes in purchase decisions—although, it’s interesting to look back to the 1970s crises. I recall that what really set people off was not so much the price as the long waits at the pump. Whether we’ll see a repeat of that is another question. Hybrids Driving Solo in Carpool Lanes BB: A number of states petitioned the Federal Highway Administration to allow hybrid-car drivers to drive solo in carpool lanes. Virginia seems not to be waiting; hybrid drivers using HOV lanes there are not suffering any consequences. What’s your take on it?

Therese Langer

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TL: As you probably know, there are efforts at the federal level to have a legislative decision to permit states to allow solo-driving hybrids in any federally funded HOV lane. I see that California is getting closer and closer to taking that step. 2 BB: You seem more optimistic about that than perhaps the tax-credit issue. TL: Yes, I regard HOV-lane use as less contentious from a legislative point of view. I’m assuming that they’ll deal with the jurisdiction issue if they have to. Or if there’s some other way of doing it administratively, that it will come to pass. But I think people need to be a little careful about this business of the HOV lanes. And there are other proposals to incentivize the use of hybrids. We have seen this all before in the Alternative Fuel Vehicle efforts/proposals. In many cases, alt-fuel vehicles have been permitted to use HOV lanes as well, and to get preferred parking, and so forth. People should ask: Are you offering the right kind of incentive for a hybrid? Are the benefits of hybrid closely enough related to the benefits you’re offering for them?

.............. The existence of the [SUV Tax] credit could completely outweigh any of the benefits that the hybrids provide. ..............

In the case of the HOV, and for preferred parking, the idea was to encourage people to put more than one person in a car. One reason for wanting people to carpool was to reduce pollution and, in some cases to reduce fuel consumption, but that was not the only reason. It was part of an effort to reduce the number of vehicle-miles traveled, to manage demand for transportation, as part of a broader agenda. I think it’s not a good idea to put these two agendas in conflict, namely advancing the hybrid technology and reducing vehicle miles traveled. BB: I agree. Somebody who is currently making a decision to spend more money to buy green does so because they care about the environment. Why not simply carpool in their hybrids? Wouldn’t that ultimately be the best thing? TL: Yes. To put it a slightly different way, some people view the construction of HOV lanes as a stealth approach to putting in new lanes. If you build up pressure to put in new HOV lanes on the basis of hybrid-vehicle users, then again, you’ve got a conflict between two constituencies that need to be working together.

Therese Langer

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Defining "Hybrid" in Legislation BB: It does lead to questions about how you define what a hybrid car is. Some manufacturers are planning to put certain batteries and electric components on large fuel-inefficient trucks so that they could be called hybrids and sold that way—or to get some very modest improvement, using idle-stop. In other cases, hybridizing is being done purely to improve performance. TL: Not to make this sound like a sinister plot, it’s also being done to provide auxiliary power on board. This is legitimate but should not be considered a hybrid in the sense we’re talking about. BB: Exactly. Are you aware, in current pending legislation, how a hybrid is being defined? What’s the litmus test for inclusion into these benefits? TL: For light duty vehicles in the CLEAR Act, and these other competing versions of the vehicle tax credits, the credit is tied to performance measures. Those metrics, which determine how much credit you get, are broken into two pieces. One is your incremental fuel economy, relative to a conventional version of the same vehicle—or I should say more precisely, your fuel economy relative to the average for your weight class. Of the $4,000 you can get as a light-duty hybrid, $3,000 is potentially from the fueleconomy increment. That’s one way to test if a car is a serious hybrid. The other piece in the CLEAR Act, up to $1,000, once again done on a sliding scale, is based on the maximum power from the electric component of your drive train. You get $250, $500, or $1,000 based on that power as a percentage the total power of the vehicle. BB: You’re saying that there’s a matrix or table. Based on what percentage of your car’s power comes from electric, and the EPA fuel economy numbers, you can get anywhere from a little bit of a tax credit to a lot of tax credit. Are emissions in the equation? TL: Emissions is there as a backstop. You have to reach a certain cleanness, and once you do, emissions don’t enter into the equation. That’s also been a controversial point. For a car in the CLEAR Act, you have to be at least Tier II, Bin 5. You have to be reasonably clean by the new standards, but beyond that, it doesn’t enter into your credit. That’s a partial answer to your question about how you determine whether a car deserves to be called a hybrid. I think that’s handled in a satisfactory way in the CLEAR Act.

Therese Langer

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California’s ZEV Mandate BB: What’s the current status of the California ZEV standards? Why are they important? TL: The original ZEV mandate would have required 10% zero-emission vehicles— battery-electric cars—to be sold in California by 2004, I believe. When it became apparent that the tens or hundreds of thousands of battery-electrics that were required were unlikely to materialize, an adjustment was proposed. It would allow vehicles that were not battery-electric to get some credit for manufacturers under the ZEV mandate by being PZEV, Partial ZEV. That was contested in court, but fairly recently, in the past several months, there was a resolution on that, which will allow the changes to the ZEV mandate to go forward. Among the vehicles that will get partial credit for being ZEV’s will be hybrids. It’s thought that this will incentivize a very large number of hybrids. Now, I don’t exactly know the numbers of that, because we haven’t been working in California. This is something that’s happening that will make a big difference. But it’s a requirement on the manufacturers, not an incentive for consumers. BB: Even a version of Ford’s Focus is considered a PZEV. It’s not just hybrids. TL: That’s right. Aside from the PZEV category that the Focus and other cars have gotten into, there is the so-called AT-PZEV, the Advanced Technology PZEV category. That’s the one that the hybrids would fall into. You don’t get a one-for-one ZEV credit. A certain number of these vehicles are needed to offset your requirement for a single ZEV. I believe that the AT-PZEV gets a significantly greater credit than a plain PZEV. BB: That means that more hybrids would be showing up in showrooms, which I guess would mean—if you follow supply and demand—maybe the prices would go down? TL: Yes, although it goes both ways. It’s also likely that this will affect how the manufacturers price the hybrid vehicles that they have. As you know, the pricing of those vehicles is a rather complicated affair. It does not simply reflect cost to them. But, it works the other way as well. California is about 12 percent of the whole U.S. vehicle market. So, we are talking about volumes that are large enough to perhaps really get close to economies of scale, and bring those prices down. We’re talking about not only California, but a broader group that includes some of the New England states. And their number is growing, by the way. Connecticut is on the way now—that is, there’s a bill moving forward in Connecticut to join the Therese Langer

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group—and I think there are at least two other states that are considering. BB: Take a step back and explain this a bit more. TL: The ZEV mandate was part of the much broader picture of California’s response to, first, the air pollution problem in California generally, and, secondly, the federal air pollution legislation, the Clean Air Act Amendments of 1990. California’s view was that they needed to institute standards that were stricter than the federal standards. The result of this was, first of all, that California did get to set its own standards. And secondly that any other state would then have the choice of either going with the federal standards or buying into the California standards. A state that opts into California standards, sort of buys the whole package. So, that would of course typically be a state that has a serious air quality problem, and wants to do something about it. Those states are saying that they’re not going to pick and chose among the various things that California is doing differently from the federal government. They are going to adopt all of the California tailpipe standards, and in particular, that means adopting the ZEV mandate and any changes that are made to that. [FOOTNOTE 3] Four states are signed up and have been in the program for some time now. And these other states (Connecticut, New Jersey, and Rhode Island) have been moving in that direction. BB: Could we be at a point that a lot more states buy in—say, half the states? TL: I don’t get that feeling. The states that I’m aware of are in the Northeast. One of the main reasons that states decided to move in California’s direction is that California was perceived as moving much faster than the federal government. That’s still the case, although in a sense, the gap is closing. The federal standards that have come on line, just this year in 2004, the Tier II standards, are really quite stringent and quite similar to the California standards. However, this business about the ZEV mandate is not part of the federal program. And hybrids’ eligibility for credits under the program could become a strong force for hybrid sales. BB: How does that work? If a restriction is placed on the manufacturer that mandates them to put more these cars into the market… TL: Right. They have to sell vehicles that get a certain number of ZEV credits. They have to figure out how they’re going to do it through a combination of PZEV, ATPZEV and ZEV vehicle sales.

Therese Langer

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BB: They could potentially do the same thing again they did in 2003: They could join forces and say, "I’m sorry. There’s not the market demand for it." And this is something that I saw in my conversation with Toyota. I asked why you don’t make more hybrids? Why don’t you raise the standards across the board? The makers will say there’s not the market demand for it. TL: Well, California, at least to a certain degree, is proving that not to be the case. Hybrid sales have increased rather sharply. As for the manufacturers, GM in particular—which was involved in litigation for some time with the Air Resources Board—backed off. With this last revision to the ZEV Mandate, they essentially dropped their challenge to it. I think that’s some indication that, by one means or the other, they thought this was something achievable. In another regard on the state level, I just want to mention very briefly that one of the reasons that Maryland has sold a lot of hybrids is a tax credit provision, which essentially exempts a hybrid from the sales tax up to $1,500. That’s the cap. That would mean a $1,000 savings on a $20,000 hybrid. BB: It’s confusing to follow the varied landscape [in terms of legislation] across so many states. TL. Yes, it is. In fact, I think the Maryland hybrid credits sunset quite soon. And various other states have some sort of an incentive, in many cases a tax incentive and in other cases something related to parking, or an exemption from vehicle inspection either designed especially to promote hybrids or expanded from an existing provision for alternative fuel vehicles. It is interesting to see the range of programs that people are using to incentivize these vehicles. The inspection program is in sense raises the same concern that I raised about the HOV lanes, that it may not be the right tool for the purpose. But the fact is that these vehicles are quite clean, so it may not come into conflict with the air-quality intent of that program. Corporate Average Fuel Efficiency (CAFE) Standards BB: How do hybrids factor in to possible increases in CAFE standards? TL: Hybrids have not to date played in a big way into the fuel economy debate because people have taken the view that they’re either too expensive to be regarded as a generally-available technology, or they’re just available in these little cars, and this doesn’t address the problem of people driving gas-guzzling SUVs and so forth. Both of those things are changing. The hybrids are really blossoming. The number of vehicles being announced is mind-boggling, going into most segments of the market. As a parenthetical remark, Therese Langer

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the pickup market has not been cracked yet. You have these mild hybrids, like the Silverado. It may be Toyota that first comes up with a real hybrid pickup—but that’s a couple of years off. Anyway, so far as cost goes, if the price creeps down, it will be harder to make the case that hybrids should not be regarded as part of the menu of cost-effective alternatives. In the past, when DOT did their analysis of the maximum feasible level for CAFE standards, they put hybrids off to the side. That’s going to have to change. BB: Meaning that they can be more aggressive with the CAFE standards? TL: Yes. They’re going to have to acknowledge that these technologies are, in fact, mainstream technologies. And the consequence of that is clear: They’re mandated to set the maximum feasible standard, and they’re going to have to raise it. BB: Does raising it require a new bill that may suffer the same fate as some of these other bills? TL: DOT is allowed to set light truck standards, and may not be allowed—this is a contentious legal point—to set the car standard. It’s their position that the car standard has to be changed legislatively. But they’re actually in the rule-making process now for light trucks, and they can set that standard where they want. SUV Incentives Eclipse Hybrid Incentives BB: What about SUV legislation? Tax credits for small businesses, and all that. That’s the other end of the spectrum and maybe could have much larger impact. 4 TL: You’re going to make me cry. BB: Why? TL: The existence of this credit could completely outweigh any of the benefits that the hybrids provide. BB: It’s true. Isn’t it? TL: Sure it’s true. That’s, after all, small businesses and not the general public. But still, [laughs] the magnitude of that credit and the amount of gas these vehicles consume could certainly offset a pretty significant credit in the other direction. There is a provision in the Transportation Funding Bill on the Senate side to cut the credit way back, down to $25,000, which is where it used to be. The Transportation Bill is a bill that has to pass. There is no choice there, but the fate of that particular Therese Langer

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provision is hard to predict. I believe that the House version of the bill does not contain the reduction. I don’t know what else to say about that. I regard this as something really egregious and not working in favor of sound energy policy, to put it mildly. BB: It does raise questions about how lobbyists affect these kinds of rules. I don’t know enough about the power structures that produce this. Is there anything to be said about that? TL: No. I don’t think so. It speaks for itself, in terms of how decisions are made on these issues. BB: It’s overwhelming. Change is going to take a long time. TL: We’ll see. The gas price issue could end up having quicker and greater effects than a lot of stuff that people have been working a long time to achieve. At the same time, it’s hard to regard the jump in gas prices as a positive, given the effect on our economy. I do think the volatility of gas prices should be regarded as one of the main arguments in favor of policy to dramatically improve the fuel economy of vehicles— to protect us from shocks in prices that are, without question, coming. Well, they’re already here, but they will continue to come for the foreseeable future.

NOTES 1 Toyota belongs to the same trade organization. 2 On Tuesday June 15, 2004, the California Senate Transportation Committee passed AB2628, Representative Pavley's bill allowing some hybrids to use the HOV lanes without passengers and AJR74 the bill asking the US Congress to pass enabling legislation. The votes were both 101 in favor. Both bills were sent to the Senate Appropriations Comittee for the next step. 3 Maine, a state that has adopted California tailpipe standards, has decided against adopting the ZEV mandate. 4 The so-called "SUV credit" is a provision of the tax code that gives small-business owners a credit up to $100,000 on the purchase cost of a variety of heavy equipment—originally intended for agricultural vehicles. Auto dealers now promote the credit to qualifying business owners for some of the largest, heaviest, least efficient SUVs sold as passenger vehicles, letting those buyers remove the entire purchase price of the SUV from their taxes.

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