Honda to Unveil Hybrid-Only Model Next Year; Outlines FCX Fuel-Cell Launch

Honda will unveil its planned gasoline (petrol)-electric hybrid-only model in the United States, Japan, and Europe starting in early 2009, according to President Takeo Fukui. Addressing shareholders and the press in his 2008 mid-year speech. Fukui said: "It is important to move hybrid vehicles from the current image-oriented stage to the new stage toward full-scale penetration…The new dedicated hybrid vehicle…in addition to its environmental performance… and an exterior design that employs the concept of the FCX Clarity…will achieve unique and highly innovative characteristics as a dedicated hybrid model." Fukui declined to offer a guide price for the new model, but added that the difference between a hybrid and the comparable standard model should be kept within ¥200,000 (US$1,900) in order for the model to be effective, although he admitted that the price gap is currently as much as ¥500,000.

Fukui also said that the new model will focus on efficiency and cost, saying that it will rely on a variation of its IMA (Integrated Motor Assist) system. The new car will feature a newly developed platform that positions the control unit and battery underneath the cargo space, and various technologies, including a function to assist more fuel-efficient driving, are being installed to achieve a further improvement in practical fuel efficiency. Fukui also said that: "Weight reduction [and] significant cost reduction was achieved through various measures including making key components of the system such as the control unit and battery more compact, creating a thinner motor, and further advancing the equipment and processes used to produce the motor." The new thinner, lighter electric motor will be made on a new production line at Honda's Suzuka Factory, which will more than double the company's current capacity.

The hybrid motor production line will become operational at the end of 2008, expanding total annual production capacity to 250,000 units, including 70,000 units from the existing line. Further expansion of production capacity is possible to accommodate growth in demand in the future. The new dedicated hybrid vehicle will go on sale in Japan, North America, and Europe in early 2009, with expected annual global sales of 200,000 units, and it will be joined by further hybrids targeted at small segments, such as the CR-Z coupé, Civic Hybrid, and a Fit Hybrid model. Fukui said that the combination of these models should mean that Honda's annual sales of hybrid models will reach approximately 500,000 units in the long term.

Fukui also outlined details of Honda’s ”new value creation” system to supplement its vaunted new manufacturing system (NMS), to be developed in the coming year at its new and existing Japanese plants. Honda will invest ¥158 billion in the two "next-generation plants", which will be able to trace components for better quality control. The plan will see manufacturing and production innovations beginning in Japan and then rolled out to its plants across the world, in order to cut costs and stay competitive amid soaring material and energy costs, Fukui said. Specifically, engine production will be refined at its new plant in Ogawa (Japan), which will have flexible lines that can produce different engines, including diesels, while its new minivehicle venture at Yorii will be the test bed for its vehicle manufacturing systems. The new plants will also reduce energy needs by 30% compared with existing Honda plants.

Furthermore, Fukui also outlined plans to lease the FCX Clarity hydrogen fuel-cell vehicle, which will become available in the U.S. market in July 2008 and in Japan in late 2008. Honda intends to lease ”several dozen FCX Clarity models” per year, reaching a total of approximately 200 units in the first three years. The company is also planning to provide the FCX Clarity for the Hokkaido Toyako Summit, where advanced environmental technologies will be showcased. Honda has received over 50,000 inquiries from potential clients for the FCX, and they will be subject to a practical criteria assessment and drawn from the remainder of these qualifiers.

Outlook and Implications

Takeo Fukui's comments regarding hybrid models are rather ambiguous, given that Honda is basically replicating the successful business model laid down by Toyota with the hybrid-only Prius. Far from moving ”hybrid vehicles from the current image-oriented stage to the new stage toward full-scale penetration“, Honda is in fact creating a uniquely styled, hybrid-only model that will fill the same image-orientated niche that the Prius has created, one from which Honda has been absent since the demise of the Insight in 2006. Nevertheless, ambiguities notwithstanding, Honda's ambitious hybrid development plans do differ markedly from Toyota's inasmuch that Honda will concentrate the technology in the smaller segments, where the technology’s ideological intentions are best served, as opposed to Toyota's focus on the larger segments, for example with Lexus and its “performance hybrids”. Honda's decision to target smaller segments is typical of the company's overall global segment strategy and in the current climate should ensure a healthy start to its new hybrid programme, especially if Honda can keep to its intended price differential.

Furthermore, Honda is also developing highly advanced diesel engines alongside its hybrid programme, from which similar advances in carbon dioxide (CO2) and fuel efficiency can be achieved without the unnecessary technical complications and weight of hybrid propulsion systems. Although much is made of Honda lagging behind Toyota in the field of hybrid technology, in the area of advanced diesel Honda is significantly ahead of its rival, and although only time will tell which will endure over the long term, the simplicity and durability of diesel gives it a significant head-start.

Meanwhile, the introduction of the FCX Clarity will provide plenty of headlines for Honda, and also help bolster the Japanese carmaker’s image for environmental friendliness, now an important prerequisite for any automaker’s marketing strategy. Although mass-produced hydrogen fuel-cell technology is still a very long way away from becoming a commercial reality, the introduction of the FCX is a small step forward, although the real issues still to be overcome are huge, and quite possibly insurmountable.