Alternative Fuel Automobile Alternative Fuel Automobile SectorSector

Tabitha Kastner Tabitha Kastner

Lester MooneyLester Mooney

Nate RamirezNate Ramirez

Peter SittonPeter Sitton

Lea Ann Hart-ChambersLea Ann Hart-Chambers

Tyler ReddenTyler Redden

Define SectorDefine Sector The sector focus is on alternative fuel automobilesThe sector focus is on alternative fuel automobiles Automobiles that do not solely depend on gasoline Automobiles that do not solely depend on gasoline

or diesel or diesel With in the sector of alternative fuel automobiles we With in the sector of alternative fuel automobiles we

will be focusing on the Gas/Electric Hybrid carswill be focusing on the Gas/Electric Hybrid cars The Gas/Electric Hybrid cars are starting to become The Gas/Electric Hybrid cars are starting to become

a new trend in automobiles and also becoming a new trend in automobiles and also becoming popular among consumer. popular among consumer.

Major Competitors within the Major Competitors within the SectorSector

Toyota- OverviewToyota- Overview

Toyota has been the best success story as Toyota has been the best success story as far as hybrids are concerned. Their Prius was far as hybrids are concerned. Their Prius was the first hybrid to go into mass production, and the first hybrid to go into mass production, and claimed well above half of the market share in claimed well above half of the market share in 2005. They offer a Highlander hybrid SUV 2005. They offer a Highlander hybrid SUV and they have plans to introduce a Sienna and they have plans to introduce a Sienna hybrid minivan in 2007. hybrid minivan in 2007.

ToyotaToyota

StrengthsStrengths

They hold most of the market share of hybrid cars and They hold most of the market share of hybrid cars and because they mass produce their hybrids they will be because they mass produce their hybrids they will be able to take better advantage of economies of scaleable to take better advantage of economies of scale

The Prius has dominated the market and has almost The Prius has dominated the market and has almost become synonomous with the word “hybrid” giving become synonomous with the word “hybrid” giving Toyota brand name equity towards the hybrid marketToyota brand name equity towards the hybrid market

ToyotaToyota

WeaknessesWeaknesses

There is such a high demand for the Prius that Toyota now There is such a high demand for the Prius that Toyota now has a waiting list close to six months before you would has a waiting list close to six months before you would actually have the car in your possessionactually have the car in your possession

As other companies are coming out with new hybrid As other companies are coming out with new hybrid models. Toyota has used the 2004 Prius to satisfy the 2005 models. Toyota has used the 2004 Prius to satisfy the 2005 model which may leave some customers unsatisfied with model which may leave some customers unsatisfied with the options available from Toyota.the options available from Toyota.

General Motors- OverviewGeneral Motors- OverviewGM has launched a hybrid propulsion program GM has launched a hybrid propulsion program

that is targeting the highest fuel consuming vehicles first that is targeting the highest fuel consuming vehicles first such as transit buses, full size trucks, and SUVs. They such as transit buses, full size trucks, and SUVs. They have delivered more than 345 hybrid-power buses to 22 have delivered more than 345 hybrid-power buses to 22 U.S. cities. If that number reached 1,000 than the annual U.S. cities. If that number reached 1,000 than the annual savings for the U.S. would be more 1.5 million gallons of savings for the U.S. would be more 1.5 million gallons of fuel. They will have a mid-size vehicle hybrid option fuel. They will have a mid-size vehicle hybrid option

available to consumers in 2007.available to consumers in 2007.

General MotorsGeneral Motors

StrengthsStrengths

They have teamed up with cities to help reduce pollution, They have teamed up with cities to help reduce pollution, and therefore developed a relationship with the government and therefore developed a relationship with the government which will help their market share as new fuel-efficient which will help their market share as new fuel-efficient technologies come abouttechnologies come about

They offered the worlds first full-size hybrid truck in 2004 They offered the worlds first full-size hybrid truck in 2004 when the Chevrolet Silverado hit the market with an when the Chevrolet Silverado hit the market with an estimated 10% improvement in fuel efficiencyestimated 10% improvement in fuel efficiency

General MotorsGeneral Motors

WeaknessesWeaknesses

They have fallen behind in offering a hybrid model car They have fallen behind in offering a hybrid model car which may cost them market share when they attempt to which may cost them market share when they attempt to launch the hybrid Chevrolet Malibu in 2007launch the hybrid Chevrolet Malibu in 2007

Even though they are the only company who offers a Even though they are the only company who offers a hybrid truck the technology can easily be imitated and it hybrid truck the technology can easily be imitated and it will not provide a sustainable competitive advantagewill not provide a sustainable competitive advantage

Honda - OverviewHonda - Overview

Honda was the first automobile manufacturer Honda was the first automobile manufacturer to launch a gasoline / electric hybrid in the to launch a gasoline / electric hybrid in the United States with the debut of the Insight. United States with the debut of the Insight. The Insight is still the most fuel efficient The Insight is still the most fuel efficient vehicle in the two seater class. Honda has also vehicle in the two seater class. Honda has also debuted hybrid versions of the Civic and debuted hybrid versions of the Civic and Accord models. Accord models.

HondaHonda

StrengthsStrengths

First to launch a gas electric hybrid in the United First to launch a gas electric hybrid in the United States.States.

Maintain some of the highest fuel economy numbers Maintain some of the highest fuel economy numbers in the market.in the market.

Combine power, luxury, and fuel economy with the Combine power, luxury, and fuel economy with the Accord HybridAccord Hybrid

HondaHonda

WeaknessesWeaknesses

Do not offer a sport utility hybrid as of yetDo not offer a sport utility hybrid as of yet

Honda Accord is one of the more expensive hybrids Honda Accord is one of the more expensive hybrids with the price starting above $30,000with the price starting above $30,000

No plans to develop any other models of hybrids in No plans to develop any other models of hybrids in the near future.the near future.

Ford-OverviewFord-Overview

Ford currently offers two hybrid vehicles, the Ford currently offers two hybrid vehicles, the Mercury Mariner and the Ford Escape. Both of Mercury Mariner and the Ford Escape. Both of these vehicles fall into the sport utility these vehicles fall into the sport utility category, but plans are definitely in the works category, but plans are definitely in the works to debut a pickup with the Ranger Hybrid. to debut a pickup with the Ranger Hybrid.

FordFordStrengthsStrengths

First company to release a hybrid SUV in AmericaFirst company to release a hybrid SUV in America

Ford Escape has beaten the EPA estimates of fuel Ford Escape has beaten the EPA estimates of fuel economy in testing situationseconomy in testing situations

Escape Hybrid was named the North American truck Escape Hybrid was named the North American truck of the year in 2005of the year in 2005

FordFord

WeaknessesWeaknesses

Immobility of the hybrid SUV as seen with the Immobility of the hybrid SUV as seen with the Lexus and Toyota hybrid SUV’s being released Lexus and Toyota hybrid SUV’s being released this yearthis year

Do not offer a hybrid car, and this may cost them Do not offer a hybrid car, and this may cost them the market of buyers who do not need SUV’sthe market of buyers who do not need SUV’s

Macroeconomic ImpactsMacroeconomic Impacts

Dominant Economic TraitsDominant Economic Traits

Growing sectorGrowing sector Global marketGlobal market High barriers to entry – capital intensiveHigh barriers to entry – capital intensive Threat of rivalry – Honda vs. ToyotaThreat of rivalry – Honda vs. Toyota Threat of substitutes – other fuel efficient cars Threat of substitutes – other fuel efficient cars

that cost lessthat cost less Threat of buyers – lots of car choicesThreat of buyers – lots of car choices

Market SizeMarket Size

Hybrid cars are a growing sector, but still less Hybrid cars are a growing sector, but still less than 1% of all vehicles in use.than 1% of all vehicles in use.

88,000 hybrids sold in 200488,000 hybrids sold in 2004

92,738 sold in first half of 200592,738 sold in first half of 2005

Market GrowthMarket Growth

U.S. car market: 2% growth annuallyU.S. car market: 2% growth annually Hybrids 2000-2004:111% growth annuallyHybrids 2000-2004:111% growth annually Estimates: Estimates:

Sales plateau at 3% in 2010Sales plateau at 3% in 2010

OROR

80% of car sales by 201580% of car sales by 2015

How fast are hybrids growing?How fast are hybrids growing?

Competitive RivalryCompetitive Rivalry

Compacts & SedansCompacts & Sedans

Toyota vs. HondaToyota vs. Honda

SUVsSUVs

Toyota vs. FordToyota vs. Ford

International & Domestic IssuesInternational & Domestic Issues

Gas PricesGas Prices

If we raise fuel efficiency standards in If we raise fuel efficiency standards in American cars by 7.6 mpg we would save American cars by 7.6 mpg we would save enough to eliminate 100% of our gulf oil enough to eliminate 100% of our gulf oil imports into this country.imports into this country.

Tax Deduction for hybridsTax Deduction for hybrids

$2,000 in 2005 and $500 in 2006$2,000 in 2005 and $500 in 2006 Pollution and the environmentPollution and the environment

Sector Health/VitalitySector Health/Vitality

Porter’s Competitive ForcesPorter’s Competitive Forces Threat of New EntrantsThreat of New Entrants

Growth Niche; many are Growth Niche; many are enteringentering

Threat of SubstitutesThreat of Substitutes Regular Fuel Vehicles with Regular Fuel Vehicles with

MPG +30MPG +30 Other Alternative Fuels: Other Alternative Fuels:

CNG, LNG, Bio-Diesel, EVCNG, LNG, Bio-Diesel, EV Threat of BuyersThreat of Buyers

Currently more buyers than Currently more buyers than vehicles driving the marketvehicles driving the market

Threat of Suppliers Threat of Suppliers Not much price competition Not much price competition

for special HEV componentsfor special HEV components Threat of Industry CompetitionThreat of Industry Competition

Overall in auto industry this Overall in auto industry this is hugeis huge

Toyota currently dominates Toyota currently dominates hybrids – others are chasinghybrids – others are chasing

HEV AppealHEV Appeal

Hybrids are a growing niche in the auto market – Hybrids are a growing niche in the auto market – competition is gearing up based on demand factors competition is gearing up based on demand factors and and consumers have been so far willing to pay more consumers have been so far willing to pay more for green vehiclesfor green vehicles

Buyer demographics from JD Power SurveyBuyer demographics from JD Power Survey Innovator - Early Adopters (but a little older than avg.)Innovator - Early Adopters (but a little older than avg.) Higher level of educationHigher level of education Higher income avg.$100,000Higher income avg.$100,000 Females are a bigger share of groupFemales are a bigger share of group Betting that fuel will continue upward trendBetting that fuel will continue upward trend Want to help environmentWant to help environment Drive less and keep their cars longerDrive less and keep their cars longer

HEV Success FactorsHEV Success Factors

Differentiation – Appeal to niche buying Differentiation – Appeal to niche buying demographic; then to mainstreamdemographic; then to mainstream

Price of Oil/Gasoline - MPGPrice of Oil/Gasoline - MPG Lower Emissions – GreenLower Emissions – Green Mass Production - Price of Vehicles/Mass Production - Price of Vehicles/

Competition amongst automakersCompetition amongst automakers Quality – Dependability – Reliability on par Quality – Dependability – Reliability on par

with traditional vehicleswith traditional vehicles

HEV CompetitionHEV Competition

Current Players RecapCurrent Players Recap ToyotaToyota HondaHonda FordFord

Future Competitors – Jumping Future Competitors – Jumping in later this year in later this year GM (Now in California, GM (Now in California,

Washington, Oregon, Washington, Oregon, Nevada, Alaska and Nevada, Alaska and Florida. )Florida. )

Daimler- Chrysler Daimler- Chrysler 2005 - 20082005 - 2008

Comparison of FirmsComparison of Firms

Comparison of the AutomakersComparison of the AutomakersMarket Share of U.S. Car Sales

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5

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15

20

25

30

35

2001 2002 2003 2004

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Per

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GM

Ford

DaimlerChrysler

Honda

Toyota

All Other

Market Share of U.S. Light Truck Sales

0

5

10

15

20

25

30

35

2001 2002 2003 2004

Year

Per

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GM

Ford

DaimlerChrysler

Honda

Toyota

All Other

Global Sales of Light Vehicles (Cars and Light Global Sales of Light Vehicles (Cars and Light Trucks)Trucks)

MakerMaker 20032003 20042004 Forecast 2005Forecast 2005

GMGM 86548654 86338633 84098409

ToyotaToyota 67706770 74707470 76467646

FordFord 64606460 65706570 65476547

DaimlerChryslerDaimlerChrysler 40534053 41594159 42444244

HondaHonda 29182918 31893189 32533253

Opportunities & IssuesOpportunities & Issues

Economies of Scale are not yet fully in effect in this marketEconomies of Scale are not yet fully in effect in this market Tax incentives may continue or be curtailedTax incentives may continue or be curtailed

Growth – all lines don’t have HEV optionsGrowth – all lines don’t have HEV options Minivans, Large Trucks, Vans, Luxury CarsMinivans, Large Trucks, Vans, Luxury Cars Many hurrying into niche to competeMany hurrying into niche to compete

Consumer prices should dropConsumer prices should drop Continued growth forecast in U.S. expected to continue Continued growth forecast in U.S. expected to continue

(J.D. Power)(J.D. Power) 0.5% sales in 2004 – projected at 3.5% by 20120.5% sales in 2004 – projected at 3.5% by 2012

Opportunities & IssuesOpportunities & Issues

Possible backlash from environmental groups against makers Possible backlash from environmental groups against makers of those making hybrids only for the power boost could taint of those making hybrids only for the power boost could taint appealappeal

Gas Prices driving market could plateau or dropGas Prices driving market could plateau or drop Competition from Turbo-Diesel and Bio-Diesel Competition from Turbo-Diesel and Bio-Diesel

J.D. Power estimates that this market will grow to 7.55 of J.D. Power estimates that this market will grow to 7.55 of U.S. by 2012U.S. by 2012

Hydrogen fuel/fuel cell vehicle development could make for a Hydrogen fuel/fuel cell vehicle development could make for a short lived marketshort lived market Testing is already underway, but fueling and supply issues Testing is already underway, but fueling and supply issues

remainremain Buyers concern over “special needs” vehicle maintenance and Buyers concern over “special needs” vehicle maintenance and

higher cost may slow market adoptionhigher cost may slow market adoption

Future IssuesFuture Issues

Future IssuesFuture Issues

Drivers for change:Drivers for change: Decreasing amount of Oil available, WorldwideDecreasing amount of Oil available, Worldwide

Non-renewable resourceNon-renewable resource Increasing Gas PricesIncreasing Gas Prices Global Exchange, in partnership with Global Exchange, in partnership with

Rainforest Action Network, is asking Ford and Rainforest Action Network, is asking Ford and its competitors to improve the efficiency of its competitors to improve the efficiency of their vehicles to 50 mpg by 2010their vehicles to 50 mpg by 2010

Jump Start Jump Start Ford Campaign Ford Campaign

Remote EnvironmentRemote Environment RemoteRemote

War in regions of the world that have majority of oil War in regions of the world that have majority of oil reservesreserves

New Oil Reserves discoveredNew Oil Reserves discovered Driving a hybrid car is one way to take a real step Driving a hybrid car is one way to take a real step

toward reducing our dangerous addiction to oil.toward reducing our dangerous addiction to oil.

Competitor MovementsCompetitor Movements

GM and DaimlerChrysler, reformed hybrid “Naysayers,” GM and DaimlerChrysler, reformed hybrid “Naysayers,” signed a strategic alliance December 2004 to develop signed a strategic alliance December 2004 to develop hybrid gasoline-electric engines together.hybrid gasoline-electric engines together.

Volkswagen, Down on hybrids: “We are not interested in Volkswagen, Down on hybrids: “We are not interested in making cars which don’t make money.making cars which don’t make money.

Toyota’s commitment to minimizing the environmental Toyota’s commitment to minimizing the environmental impact and maximizing quality at every stage of the impact and maximizing quality at every stage of the vehicle's lifecycle—from production, through use, and vehicle's lifecycle—from production, through use, and disposal—is viewed as an integral part of 'kaizen', disposal—is viewed as an integral part of 'kaizen', (continuous improvement).(continuous improvement).

Future…Future… The number of hybrid electric models on the market is The number of hybrid electric models on the market is

expected to increase from 10 in 2005 to 44 by 2012expected to increase from 10 in 2005 to 44 by 2012 The number of diesel models is expected to grow from 14 The number of diesel models is expected to grow from 14

to 26.to 26. Saturate the market Saturate the market

Economies of ScaleEconomies of Scale Increasing Production of Hybrid ModelsIncreasing Production of Hybrid Models Price and cost will go down.Price and cost will go down.

Impacts of ChangeImpacts of Change Will there be one superior technology Will there be one superior technology

(VHS vs. Beta)(VHS vs. Beta) Hydrogen fuel cellHydrogen fuel cell Diesel or Diesel/ElectricDiesel or Diesel/Electric Gas/Electric HybridGas/Electric Hybrid

GM and Daimler-Chrysler Alliance GM and Daimler-Chrysler Alliance Build an industry standard?Build an industry standard? full hybrid, mild hybrid, plug-in hybrid, parallel hybrid full hybrid, mild hybrid, plug-in hybrid, parallel hybrid

and serial hybrid...and serial hybrid...

Moving Forward ->>Moving Forward ->>

US Consumption spurred on industry US Consumption spurred on industry change toward alternative fuel autos.change toward alternative fuel autos.

““Hybrid cars already exist as commercial Hybrid cars already exist as commercial products and are available to cut pollution products and are available to cut pollution now. On the other hand, fuel-cell cars are now. On the other hand, fuel-cell cars are expected on the same schedule as NASA's expected on the same schedule as NASA's manned trip to Mars—and have about the manned trip to Mars—and have about the same level of likelihood.”same level of likelihood.”

SourcesSources Common Dreams News Center: http://www.commondreams.org/Common Dreams News Center: http://www.commondreams.org/ The Detroit News:The Detroit News:

http://www.detnews.com/2005/autosinsider/0507/25/0auto-258263.htmhttp://www.detnews.com/2005/autosinsider/0507/25/0auto-258263.htm Fuel prices connection: http://home.businesswire.com/portal/site/google/index.jsp?Fuel prices connection: http://home.businesswire.com/portal/site/google/index.jsp?

ndmViewId=news_view&newsId=20050627005270&newsLang=enndmViewId=news_view&newsId=20050627005270&newsLang=en Hybrid Cars.com: Hybrid Cars.com: http://hybridcars.com/http://hybridcars.com/ J.D. Power and Associates: J.D. Power and Associates:

http://www.jdpower.com/news/releases/pressrelease.asp?ID=2005086http://www.jdpower.com/news/releases/pressrelease.asp?ID=2005086 General auto industry good stuff Standard & Poor’s: General auto industry good stuff Standard & Poor’s:

http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/login.jsp?http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/login.jsp?url=/NASApp/NetAdvantage/showIndustrySurvey.do?code=aupurl=/NASApp/NetAdvantage/showIndustrySurvey.do?code=aup

Good hybrid information including current sales data and split: Good hybrid information including current sales data and split: http://www.greencarcongress.com/2005/07/hybrid_sales_in.htmlhttp://www.greencarcongress.com/2005/07/hybrid_sales_in.html

Growing competition & market segmentation: Growing competition & market segmentation: http://www.detnews.com/2005/specialreport/0501/09/B01-54328.htmhttp://www.detnews.com/2005/specialreport/0501/09/B01-54328.htm

Market growth – hybrid effect on US market: Market growth – hybrid effect on US market: http://news.kypost.com/apps/pbcs.dll/article?AID=/20050518/BIZ/505180398/1014http://news.kypost.com/apps/pbcs.dll/article?AID=/20050518/BIZ/505180398/1014/NEWS02/NEWS02

Sources Cont.Sources Cont. Sales and future forecast of hybrid & diesel sales: Sales and future forecast of hybrid & diesel sales:

http://www.cnn.com/2005/AUTOS/06/28/bc.autos.hybrids.reut/http://www.cnn.com/2005/AUTOS/06/28/bc.autos.hybrids.reut/ Star Tribune Newspaper: http://startribune.comStar Tribune Newspaper: http://startribune.com Toyota already looking to differentiate: Toyota already looking to differentiate: http://www.aiada.org/article.asp?id=44803http://www.aiada.org/article.asp?id=44803

Toyota’s hybridToyota’s hybrid expansion strategy expansion strategy: :

http://waw.wardsauto.com/ar/auto_hybrid_expansion/index.htmhttp://waw.wardsauto.com/ar/auto_hybrid_expansion/index.htm The Washington Post: The Washington Post:

http://www.washingtonpost.com/ac2/wp-dyn/A9389-2004Dec17http://www.washingtonpost.com/ac2/wp-dyn/A9389-2004Dec17 Wired Magazine: http://www.wired.com/wired/archive/12.09/start.html?pg=2Wired Magazine: http://www.wired.com/wired/archive/12.09/start.html?pg=2