Hybrid production costs may drop two-thirds within 10 years 3

Bloomberg reports:

Toyota Motor Corp., Honda Motor Co. and other carmakers may cut production costs for hybrid systems by 67 percent over the next decade as shipments rise and companies gain experience, according to JPMorgan Chase & Co.

Gasoline-electric systems on average will cost $1,919 each in 2018, compared with an estimated $5,869 this year as the global market grows 16-fold to 9.6 million units over the same period, the bank said in a report released yesterday.

This is remarkable news, especially when you consider that gasoline prices are all but certain to rise to $5 a gallon and higher over the next decade (see "Will we see $3 gasoline before $5?").

If hybrids drop in price and gasoline resumes its peak-oil driven upward trend, then by, say 2015, it would simply not make sense to bother producing a non-hybrid version of any vehicle. At the same time, this drop in the price of key hybrid components will mean a drop in the price of key plug-in hybrid components, further accelerating the time at which that core climate solution becomes cost-effective:

Hybrid vehicle sales will grow to 10.2 percent of the overall market, with North America being the biggest and strong growth expected in Europe and China after 2013, JPMorgan auto analyst Takaki Nakanishi said. Higher gasoline prices and tightening emission standards are boosting demand for fuel- efficient and alternate-energy cars worldwide.

Hybrid systems consist of a vehicle's battery, electric motor, control unit and other electronic components.

Toyota aims to more than double sales of hybrid vehicles to a million a year by early next decade. Japan's largest carmaker will introduce plug-in hybrids by the end of 2009, and will start to mass-produce electric cars in the early 2010s.

Honda plans to raise sales of hybrid vehicles by ninefold by 2010 to 500,000 units. The company re-introduced its Insight hybrid at the Paris Motor Show on Oct. 2. The Tokyo-based company aims to sell the model for about 2 million yen ($19,685). That would undercut Toyota's Prius, currently the world's most popular hybrid, selling at 2.33 million yen.

The Insight is the first of four new or revamped hybrids Honda plans to introduce by the early part of the next decade to reduce Toyota's lead in the segment.

Let's hope that Honda gives serious chase to Toyota's leadership in hybrids -- and that other automakers follow suit.

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.

• Comments