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Anticipated Higher Costs for Hybrid Electric Vehicles Are Lowering Sales Expectations

October 27, 2003

Hybrid electric vehicle sales expectations are lowering due to changes in some automakers' plans, which is contributing to higher-than-expected vehicle costs, according to the J.D. Power and Associates 2003 Hybrid Electric Vehicle Outlook(SM), Third Quarter, released Oct. 27.Some automakers have revised their plans to produce hybrid electric vehicles, with many delaying the release of some hybrid vehicle models or dropping models from their hybrid program altogether. In addition, the price premium charged to consumers for a hybrid powertrain option is expected to be higher over the next several years than previously expected. With these two factors combined, J.D. Power and Associates expects U.S. consumers to purchase approximately 350,000 hybrid vehicles annually by 2008, down from previous expectations of 500,000."The hybrid-electric vehicle market has undergone some significant changes over the past several years, and those changes have caused many of the manufacturers to adopt a wait-and-see approach," said Walter McManus, executive director of global forecasting at J.D. Power and Associates. "Hybrid electric vehicles are still a growing portion of the market, but their share is rising at a slower rate than we previously expected. Higher-than-expected initial retail prices will slow sales growth, and slower sales growth will keep prices high."Hybrid sales are expected to reach 40,000 units in 2003 with only three hybrid electric models currently on the market. However, manufacturers are preparing to introduce a dozen new hybrid electric models over the next two years, and hybrid sales are expected to exceed 177,000 by 2005. A total of 28 models -- 18 truck and 10 car models-are expected to offer hybrid powertrain options in 2008."Sales should increase dramatically as more hybrid vehicles, especially in segments other than compact cars, become available," McManus said. "But we still don't expect hybrid-electric vehicles to become mainstream any time soon."The first hybrid electric model in the U.S. market was the Honda Insight in 1999. The Toyota Prius debuted the following year, and the Honda Civic Hybrid went on sale in 2002. The first full-size pickup hybrids-Chevrolet Silverado and Dodge Ram-hit commercial fleets this year and will reach retail dealers in early 2004. The first SUV hybrid, the Ford Escape, will also reach dealerships in 2004."Trucks should account for about 35 percent of hybrid sales by 2005 and 64 percent of hybrid sales by 2008," McManus said. "We know, based on J.D. Power and Associates studies, that consumers express interest in a hybrid powertrain option in the same segments as their current vehicles. Trucks generally are more popular than cars, and they will be more popular in the hybrid market as well."While hybrid vehicles are stirring up interest among consumers, these vehicles will only represent about 1 percent of the market by 2005 and reach 2 percent market share by 2008, according to J.D. Power and Associates. Honda should see its share of the hybrid market soar to 58 percent this year based on strong Civic Hybrid sales.As other manufacturers enter the hybrid market, Toyota's hybrid share is expected to drop from 39 percent in 2003 to 20 percent by 2008 -- about the same as Honda's projected share for 2008. General Motors is expected to see growth from less than 2 percent market share in 2003 to nearly 33 percent by 2008. DaimlerChrysler's share of the hybrid market should increase from slightly more than 1 percent in 2003 to nearly 15 percent by 2008, while Ford Motor Co.'s share should grow from zero percent in 2003 to 6 percent by 2008.The 2003 Hybrid Vehicle Outlook-Third Quarter is based on J.D. Power and Associates North American Automotive Forecasting data and the firm's consumer research data.About J.D. Power and AssociatesHeadquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction.The firm's quality and satisfaction measurements are based on responses from millions of consumers annually.For more information, visit www.jdpower.com.
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