Pace accelerates in the battle for hybrid market

The Honda CR-Z is being fast-tracked to showrooms as part of the Japanese brand's plans to tackle Toyota's dominance of the growing hybrid car market. It initially sold the car at a loss to establish its base and has recently clocked up its millionth sale. Still, it is way behind in its plan to put a million new hybrids on the road every year from 2010.

But that is not worrying Honda, which revealed its CR-Z concept at the Tokyo Motor Show as part of a plan that will give it more than just the Civic Hybrid to draw green buyers into showrooms. It also showed off the Small Hybrid Sport Concept at the Geneva motor show and unveiled its FCX Clarity fuel-cell vehicle which is due for production in the US this year.

Honda says it intends to have hybrids as 10 per cent of its fleet by 2010, after confirming the CR-Z and hinting strongly about a smaller city car in the Jazz size range. The Global Hybrid has not been revealed but is key to the plan, announced by Honda president Takeo Fukui last week.

“The competition in hybrids has just begun,” Fukui says.

The target is to sell 200,000 Jazz hybrids a year, with a price not much more than $2000 beyond the regular petrol model. The car is expected to be seen for the first time towards the middle of this year.

Honda claims its hybrid system, a so-called “mild” hybrid that uses an electric engine mostly as a booster for a small-capacity petrol motor, has advantages over Toyota's in that it is simpler and cheaper.

Even so, Honda will certainly have to get cracking on hybrid versions of its other mainstream models, the Accord and Accord Euro, after retreating from an early hybrid push in the US with the Accord.

Fukui says Honda will spend more than $500 million on a new Japanese research centre which will be focused on future cars, from its hybrids to the fuel-cell models, that will follow its FCX concept into production probably within the next six months.

The technical centre should be open by early 2009 and fully operational from the following year.

Toyota has sold about 900,000 of the Prius worldwide since December 1997, and its popularity hasn't waned that much despite being on sale for a decade. Toyota offers several other hybrid models, including the hybrid Camry and hybrid Lexus models, although Prius is the better seller.

It made up more than 40per cent of hybrid sales in the US in 2006.

While Honda has the Civic sedan hybrid it acknowledges its error in not offering a hybrid-only model like the Prius, as well as not realising that hybrids tend to be more popular with smaller models because mileage improvements tend to be more pronounced. Hybrids, once dismissed by Nissan chief executive Carlos Ghosn and other auto executives, have become hot sellers. Their popularity comes amid rising petrol prices and greater environmental concerns.

Fukui says Honda's hybrid system is better in some ways than Toyota's, and because it costs less, it will allow Honda to offer its planned hybrid at a competitive price. He declined to give a price.

Honda expects sales to keep growing in nearly all regions around the world in 2008, including North America, Europe, China and even in Japan.

Honda's sales in Japan, a stagnant market, declined 12 per cent to 620,000 vehicles in the last year.

Four new models will be introduced in Japan in the next 12 months to woo buyers and sales are expected to grow here, Fukui says.

Honda did not give an overall global sales forecast for 2008. But Fukui projected North American sales to rise 3 per cent to 1.59 million, adding to an expected 3 per cent growth in 2007 to 1.55 million vehicles.

Throughout 2007, demand for the new Accord was robust in the US, while in Japan the Fit (called Jazz in Australia) subcompact was a hit, the company says.

Even in Europe, where Japanese carmakers have been relative latecomers, Honda was posting good results with a projected 23 per cent rise in 2007 to a record 380,000 vehicles. The company forecasts sales will rise another 11 per cent in 2008 to some 420,000 units.

With production expansions in Brazil and Argentina, Honda's sales are booming in South America, expected to jump 30 per cent to 118,000 in 2007. In And sales in China are projected to climb 29 per cent next year to 420,000 vehicles, Honda says.