GM's hybrid premium

[JackDodge]

We have all heard the Detroit 3's counter to buying a hybrid as "costing you thousands of dollars more" and that it will take you years to make it back. BusinessWeek recently detailed GM's entry in to the hybrid market as possibly being too late even though necessary. GM's Lutz, long a V8, nothing can guzzle too much gas fanatic, has seen the light, even though GM's engineers and designers still insist that their customers only want gas hogs. In the article "GM's Challenge: Live Green or Die", Lutz is quoted as berating them with "You people don't understand. Everything has changed." GM's marketers tell Lutz that the Cadillac that he wants them to shrink and get 37 mpg isn't what buyers want. That bigger and more powerful is what they want. The great quote from Lutz counters "It is now, but it won't be in 2011"

So Mr. V-8 gets it at last. But the real meat of the article is GM's hybrid premium in stark contrast to Toyota's and Honda's. Currently, the bare minimum premium for a GM hybrid stands at a whopping $10,000. That's in sharp contrast to Toyota's premium which is now around $4,000. Perhaps the Detroit 3 crowd shouldn't have been shouting their "thousands of dollars more" mantra for the past few years since GM's premium is, in fact, thousands of dollars more than their Asian competitors, eh?

[joe1347]

Originally Posted by JackDodge

We have all heard the Detroit 3's counter to buying a hybrid as "costing you thousands of dollars more" and that it will take you years to make it back. BusinessWeek recently detailed GM's entry in to the hybrid market as possibly being too late even though necessary. GM's Lutz, long a V8, nothing can guzzle too much gas fanatic, has seen the light, even though GM's engineers and designers still insist that their customers only want gas hogs. In the article "GM's Challenge: Live Green or Die", Lutz is quoted as berating them with "You people don't understand. Everything has changed." GM's marketers tell Lutz that the Cadillac that he wants them to shrink and get 37 mpg isn't what buyers want. That bigger and more powerful is what they want. The great quote from Lutz counters "It is now, but it won't be in 2011"

So Mr. V-8 gets it at last. But the real meat of the article is GM's hybrid premium in stark contrast to Toyota's and Honda's. Currently, the bare minimum premium for a GM hybrid stands at a whopping $10,000. That's in sharp contrast to Toyota's premium which is now around $4,000. Perhaps the Detroit 3 crowd shouldn't have been shouting their "thousands of dollars more" mantra for the past few years since GM's premium is, in fact, thousands of dollars more than their Asian competitors, eh?

Do you have a recent source (link) for the quoted $4000 price premium for the addition of hybrid technology to a Toyota? The $4000 premium may have been valid in the first few model years (of the Prius), but after 10 years of production, I'd be surprised if the cost is still that high.

[Tideland Prius]

Originally Posted by joe1347

Do you have a recent source (link) for the quoted $4000 price premium for the addition of hybrid technology to a Toyota? The $4000 premium may have been valid in the first few model years (of the Prius), but after 10 years of production, I'd be surprised if the cost is still that high.

The cost may have lowered but the "premium" is still there so that they can make a profit. That way, they'll have more money (assuming they're not like the gov't and they spend money wisely) for R&D for the next gen and then pass the savings of lower cost to the consumer just because they've recovered some profit for the current generation.

[JackDodge]

Originally Posted by joe1347

Do you have a recent source (link) for the quoted $4000 price premium for the addition of hybrid technology to a Toyota? The $4000 premium may have been valid in the first few model years (of the Prius), but after 10 years of production, I'd be surprised if the cost is still that high.

Just the article itself. If that's not good enough, then you're free to do more research on your own.

"Getting the product mix right isn't the only worry weighing on Wagoner and Lutz. GM also has a long way to go before it can make its new technology cheaply enough. Toyota has cut the cost of its hybrid system to nearly $4,000 a car, says consulting firm 2953 Analytics. Lutz figures GM will be lucky to get the cost down to $10,000 per vehicle by 2010. Translation: GM will have to charge consumers a lot more for hybrids. "GM, like everyone else, is serious about this because they have to be," says a Honda executive. "But how many of their hybrids and how many Volts will they sell? Their technology is very expensive." Then there is the marketing challenge. Even Ford has been selling a hybrid SUV for several years. GM, best known for the Hummer, will have a hard time persuading consumers its cars are green."

[hampdenwireless]

I was at a Chevy dealer lot on Saturday. They had no less then five hybrid Tahoes. All of them had a price over $55,000. The standard Tahoe is $35000 but in reality $5000 off MSRP is quite easy to achive. Even though they are not flying off the lot GM dealers tend not to offer ANY discounts off of MSRP on GM hybrids. So the premium is actually much higher then stated.

I would say that it is more like $15,000 but if you were looking for a base Tahoe the premium could be said to be $25,000.

Toyota does the same with the Camry. Discounts are more available on the non hybrid Camrys at dealers, and less so on the Hybrids. Of course that Premium is much less and Toyota is selling the Camry hybrids quickly.

[jhinton]

Originally Posted by JackDodge

..... even though GM's engineers and designers still insist that their customers only want gas hogs.....

As an degreed engineer that now works as a product manager, I would have to disagree. Engineers build what they are told to build. Spec, cost, and lifespan are set by others. It is the engineers job to make it happen though often all are not possible in the timeframe allowed.

[JackDodge]

Originally Posted by jhinton

As an degreed engineer that now works as a product manager, I would have to disagree. Engineers build what they are told to build. Spec, cost, and lifespan are set by others. It is the engineers job to make it happen though often all are not possible in the timeframe allowed.

I took that from the BusinessWeek article. You'll have to take your disagreements up with them. You might want to actually read the article too, by the way.

[jhinton]

Originally Posted by JackDodge

I took that from the BusinessWeek article. You'll have to take your disagreements up with them. You might want to actually read the article too, by the way.

I did read the article. I'm just tired of people dumping on the engineers at GM because their management team has set bad corporate objectives.

[joe1347]

Originally Posted by JackDodge

Just the article itself. If that's not good enough, then you're free to do more research on your own.

"Getting the product mix right isn't the only worry weighing on Wagoner and Lutz. GM also has a long way to go before it can make its new technology cheaply enough. Toyota has cut the cost of its hybrid system to nearly $4,000 a car, says consulting firm 2953 Analytics. Lutz figures GM will be lucky to get the cost down to $10,000 per vehicle by 2010. Translation: GM will have to charge consumers a lot more for hybrids. "GM, like everyone else, is serious about this because they have to be," says a Honda executive. "But how many of their hybrids and how many Volts will they sell? Their technology is very expensive." Then there is the marketing challenge. Even Ford has been selling a hybrid SUV for several years. GM, best known for the Hummer, will have a hard time persuading consumers its cars are green."

Thanks for the article. $4000 (variable cost?) does seem a little higher than I would have guessed when you consider how suprisingly few additional components that Prius HSD drive requires beyond a conventional drivetrain. Possibly, the NiMH battery pack from Panasonic is still expensive. Although if you do a simple price comparison between a Toyota Prius and the somewhat similar 'conventional' Toyota Matrix. A similarly equipped Prius is around $3000 more. So the quoted $4000 premium may not be unreasonable. Then again, given current gas prices which have resulted in high demand (for the Prius), the $4000 price premium may have more to do with profit than additional unit (variable) cost.

Either way, GM is in big trouble.

[hiremichaelreid]

Originally Posted by JackDodge

GM's Lutz, long a V8, nothing can guzzle too much gas fanatic, has seen the light, even though GM's engineers and designers still insist that their customers only want gas hogs.

I RTFA'd and can't find this exact quote in the article, nor some of the other alleged quotes. I presume this is part of a summary someone else wrote about the Business Week article, and IMO it somewhat misrepresents some things.

Summary makes it sound like Lutz is battling engineers and designers.

Closest similar quote from article was:

"Not all of Lutz's staff agree with his thinking. He wants to shrink cars like the midsize Cadillac, but some engineers and designers say doing so will make the cars less appealing to luxury buyers and families."

So, SOME engineers and designers say SOME people don't want smaller cars. If the get good FE, I don't think people will say "I want a gas hog" !

Summary makes it sound like Lutz is a greenie who is "fighting the good fight" against his evil engineers and designers. IMO, truth is they are in a panic and want to spread the word that they will soon have great vehicles with 10 years of engineering crammed into 2-3 years.

Yeah, right... good luck with that Lutz...