Importance of Vehicle Costs, Fuel Prices, and Fuel Efficiency in Hybrid Electric Vehicle Market Success

Toyota’s introduction of a hybrid electric vehicle (HEV) named “Prius” in Japan and Honda’s proposed introduction of an HEV in the United States have generated considerable interest in the long-term viability of such fuel-efficient vehicles. A performance and cost projection model developed entirely at Argonne National Laboratory (ANL) is used to estimate costs. ANL staff developed fuel economy estimates by extending conventional vehicle modeling done primarily under the National Cooperative Highway Research Program. Together, these estimates are employed to analyze dollar costs versus benefits of two of many possible HEV technologies. Incremental costs and fuel savings are projected for a Prius-type low-performance hybrid (14.3-s 0 to 60 mph acceleration, Z60 time) and a higher-performance “mild” hybrid vehicle (11-s Z60 time). Each HEV is compared with a U.S. Toyota Corolla with automatic transmission (11-s Z60 time). The base incremental retail price range, projected a decade hence, is $3,200–$3,750, before considering battery replacement cost. Historical data are analyzed to evaluate the effect of fuel price on consumer preferences for vehicle fuel economy, performance, and size. The relationship among fuel price, the level of change in fuel price, and consumer attitude toward higher fuel efficiency also is evaluated. A recent survey on the value of higher fuel efficiency is presented and U.S. commercial viability of the hybrids is evaluated using discount rates of 20 percent and 8 percent. The analysis, with its current HEV cost estimates and current fuel savings estimates, implies that the U.S. market for such HEVs would be quite limited.