GM's hybrid premium

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.

 

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.

 

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 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.

 

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.

 

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...

 

To be a little more accurate. I've done a very detailed comparo of GM's 2-Mode pricing and the premium is nowhere near the $10000 figure quoted in the press. In general the press is horribly incompetent in assessing these issues. They have consistently gotten the Toyota numbers wrong and now they get the GM numbers wrong....along with the Toyotas still.

It's all about comparing equal vehicles as much as possible.

Roughly the new 2-Mode Tahoe is a very very well-appointed vehicle which, equipment-sise, is somewhere above the LT trim which lists for about $45000 but below the LTZ trim which lists for $50-$53K. Let's say if the vehicle wasn't a hybrid it should list for about $47000. As a hybrid it lists for $51000 ( 2WD ) to $55000 ( 4WD ). The premium is about $5000-$6000.

The Toyota hybrid premiums are all over the place.
The Prius pckg #2 is now about $3700 above the Matrix with similar features.
The TCH is about $2700 higher than the Camry 4c XLE trim with similar features.
The HH @ $37000 is about $4500 higher than the gasser version.

What is the real 'premium' for Toyota? I'd guess about $2000 tops.

 

Again there is a little bit of smoke and mirrors here on GM's part, intentionally. Let's apply some known factors.

The Tahoe 2-M ( T2M ) is an SUV with certain equipment. If it wasn't a hybrid it would list for about $47000 ( 2WD ).

It has two small motors inside its transmission... Cost? $400?
It has a NiMH battery pack............................ Cost? $2500 OEM cost?
It has some extra wiring................................ Minimal
It has some significant R&D to be amortized ( see below )
It is being built on an existing SUV line in an existing plant... Minimal
Anything I've left out?

Outside of the R&D amortization the 'extra costs' are about $3000 which is right in line with Toyota and Honda and Ford, why shouldn't they be? So the key difference is the R&D amortization.

In it's press announcement GM already stated that the development of the 2-Modes was about $1.0 Billion. But that cost was shared with Daimler and BMW. Lets say GM was the lead and took the most cost.
$500 million GM
$250 million MB
$250 million BMW

So GM has spent already $500 million on R&D. That's gone spent already. Thus the out-of-pocket cost to build one of these T2M's actually is about $3000. But as good business practices they should look to recoup their R&D moneys spent over the past 5 yrs or so. To recoup these funds you need to present your case to smart buyers. People spending $50000+ on a vehicle usually know how business works and they understand figures. Many own or operate their own businesses.

First year's production is estimated at 10,000 units
$500,000,000 / 10,000 units = $50,000 amortization.. Nope that won't fly.

Let's say like most businesses they decide to amortize over 5 years with slightly increasing volumes such as 10000, 15000, 20000, 25000, 30000 units for a total 5 -yr production of 100,000 units.
$500,000,000 / 100,000 units = $5000 amortization

Now this begins to make sense. $3000 actual extra costs per unit plus $5000 amortization on the first 100,000 units is just about an $8000 'premium'. But when unit No 100,001 is reached the R&D is fully paid back and that $5000 'cost' now becomes a $5000 profit....Cha Ching!!!!

But it gets better... The 2-Mode technology is going to be added to the Escalade, Silverado, Sierra, Vue, Aura, Malibu and lambda triplets. That 100,000 unit schedule is likely to be reached well before 5 yrs.

However all bets are off if fuel ends up going to $6 a gallon such that no amount of gas savings can rescue the big V8 SUVs and trucks. They will have to rely entirely on the crossovers and cars...not surprisingly just as Ford and Toyota are doing.

 

With the Camry, that statement may have been perfectly valid a few months ago, but today, I think part of it also has to do with demand outpacing supply. (like with the Prius)

DOES ANYONE HAVE ANY FIGURES FROM HONDA?

In the luxury market, I don't think gas prices are much of an issue. Someone who buys a $150,000 SL65 AMG is buying it for the same reason they bought one two years ago - because they want power. Those people live in fancy houses, buy $200 shoes, and they want to extend their luxurious power to the road also. Someone that buys a Cadillac CTS-V (the Corvette engine) probably has the same mindset. They don't want a Prius. They are loaded and they want power over other drivers!

I think there will ALWAYS be a separation there. The mass public may move to hybrids (I hope they do, and it appears the public does also), but the luxury market is a whole different customer. Sure, yes, there are some wealthy people that want to be ecofriendly, and there are also some that save their pennies so they can make big purchases - that segment of the market will opt for hybrid luxury vehicles. But the mainstream luxury market is a whole different customer from your hybrid customer. For starters, those people are paying $80 grand for a car in the first place, when they could buy five Yarises for the same amount. It's a whole different customer.

Did you know that the Porsche Boxter is EPA rated hwy at 29mpg? I applaud Porsche for never using a V8 in their cars. A turbocharged six is significantly more effiecient, and when you are not 'racing,' you get great everyday fuel economy.

 

Actually, I think the sales numbers are the most significant influence, and therefore the customers are the ones they listen to. If a certain model of vehicle does not sell, it will be discontinued. Another factor that auto dealers pay attention to is the average number of days a vehicle sits on the lot before it is sold. This reflects the demand for the vehicle. When a vehicle has more demand than supply (what the Prius is currently experiencing), you better bet every single automaker is taking notice.

 

Porsche mileage and CAFE

No, I didn't realize it was that high and it's actually respectable compared to other sports cars... however, it's actually not that great if you compare it what say the Honda Accord V6 sedan gets. Per Side-by-Side Comparison, it seems the only 08 Boxster that gets 29 highway mpg is the 2.7L w/5 speed manual at 20/29, 23 combined. The auto is rated at 19/26, 21 combined. Those are only 245 hp and weigh a pretty light 2877 and 3009 lbs. respectively.

The 08 Honda Accord V6 w/an automatic w/268 hp weighing in at 3657 to 3600 lbs. manages 19/29, 22 combined.

FWIW, Porsche went with a V10 for the super exotic and rare Carrera GT.

I wouldn't be surprised if Porsche has seemingly shied away from 8 cylinder engines or above for cars to keep down weight and to keep from paying even more in CAFE fines (http://www.nhtsa.dot.gov/portal/nht...king/Articles/Associated Files/CAFE_Fines.pdf).

 

You have a short memory or you aren't very old.


Porsche 928 - Wikipedia, the free encyclopedia

 

Porsche also puts a V8 in their current SUV.