Hybrid Vehicle Demand Expected to Exceed Supply

From Bloomberg News

Toyota Motor Corp. and Honda Motor Co., the first automakers to sell hybrid cars, say they probably can't build enough of the fuel-saving autos to meet demand this year as rising gasoline prices spark consumer interest.

So far in 2003, sales of their three gasoline-electric models, Toyota's Prius and Honda's Insight and Civic Hybrid, are up 50%. Still, a Prius model change late this year and a production ceiling at Honda mean sales may be limited to about 50,000 cars in 2003, the companies and analysts say.

"Given expected availability and product-release schedules, hybrid sales could be 50,000 to 55,000 this year, no higher," said Walter McManus, a global forecasting director for J.D. Power & Associates.

Automakers are spending billions to design cleaner, more efficient cars and trucks such as hybrids, which combine gasoline engines and electric motors to cut tailpipe exhaust and fuel use. Hybrid sales remain at niche levels because retail prices are as much as $4,000 more than those of equivalent gasoline-engine cars and consumers remain wary of new technology, analysts say.

Toyota and Honda had combined sales of about 36,000 hybrids in the U.S. last year, just 0.2% of 16.8 million new cars and trucks purchased. U.S. sales operations for both Japanese companies are based in Torrance.

Toyota has said it may sell as many as 21,000 Prius sedans in 2003, compared with 20,119 last year, as supplies of the current version dwindle ahead of the transition to a redesigned 2004 model.

"Demand for Prius is going to continue to outstrip supply," spokesman John Hanson said. "The plan right now is to continue to cycle down inventories in preparation for the next generation."

Honda plans to sell as many as 24,000 Civic Hybrids in 2003, compared with fewer than 15,000 last year, spokesman Andy Boyd said. Should demand grow beyond that, the Tokyo-based company could lift output 25% to about 30,000 a year, he said.

Demand for the Insight coupe may fall below the 2,216 sold last year, Boyd said. He would not confirm whether this would be the last year for the model, the first U.S. hybrid when it went on sale in 1999.

U.S. market leaders General Motors Corp. and Ford Motor Co. plan to enter the hybrid market late this year with three light trucks limited to fleet sales. Sales to consumers through U.S. dealerships would begin in mid-2004, the companies said, though neither would offer sales estimates for 2003 or 2004.

GM will sell a small number of Silverado and Sierra pickups with a "mild" hybrid system that raises fuel economy as much as 12%, spokesman Joe Lawrence said. Ford is readying a hybrid version of its Escape sport utility vehicle for late this year that travels as far as 40 miles on a gallon of gasoline, spokeswoman Sarah Tatchio said.

Retail gasoline prices, which remain at record highs in California and near a two-year high elsewhere in the country, might have to stay at current levels or higher for at least four more months before larger numbers of consumers would consider buying such vehicles, McManus of J.D. Power said.

The number of consumers researching and pricing Priuses and Civic Hybrids on CarsDirect.com doubled in January and February from a year earlier, said Wendy Barbour, a spokeswoman for the Web-based retailer in Culver City. She declined to give a specific number.

Said AutoPacific Inc. analyst Jim Hossack: "There's an underlying interest in these vehicles, but it's been suppressed by the inability of consumers to justify the higher costs, which they aren't likely to make back in fuel savings. There's a strong resistance by American buyers to anything that's perceived as making vehicles more complex."

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