Tuesday, March 4, 2008

Do you think that hybrid car levels will ever meet or exceed the number of gas-powered ones?

Kids are getting smarter and doing research reports earlier and earlier.
From the 7th grade, I received the following question about hybrids:

Q) Do you think that hybrid car levels will ever meet or exceed the number of gas-powered ones?

First of all, let's discuss the UNITED STATES market for NEW automobiles.


Globally, NEW car and light truck sales usually run about 60 million units,

with 16 to 20 in the U.S. with the rest almost equally divided between

Asia and Europe. Because U.S. consumers (customers) are the most

high profile in the world, the U.S. market is the world's most important.


There are many things that have changed the U.S. consumer recently.

2008 is forecasted to be one of the worst years in a long time due to

several factors including problems on Wall St, gasoline prices and

of course, a looming recession. These are huge factors that have

nothing to do with the kind of automotive technologies avail,

and according to February data, almost every automaker except

Honda had a drop in sales. Almost all large vehicles were down,

and only the sub-compacts like the Honda Fit spiked upward.


There is one variable that appears to be more correlated with

hybrid sales than the others: gasoline prices. Now remember

that the rest of the world uses liters and we use gallons.

So MPG is the consumer side of the equation and U.S. hybrids tend

to look very strong compared to miles per liter or liters per 100km.


Toyota dominates hybrid sales and over the past 10 years

hybrids have followed the typical bell curve upwards.

From 1999 to 2007 hybrids sales grew from 17 to about 350,000.

In my 174 page master's thesis researched from 2004 to 2007,

I identified 100s of hybrids being prepared for showrooms

and forecasted the hybrid market. Experts ranged from

20% to 80% of the overal NEW car market by 2012 to 2020.


My forecast was based on plotting the first several years of U.S. hybrid sales

against Geoffrey Moore's Technology Adoption Life Cycle in Crossing the Chasm.

It's a bell curve and what really drives a technology from something new to

the mainstream is the average buyers. Those that may not understand the

details of how hybrids work and just want a car that gets better mileage.

Under the assumption that the first nine years made up 16% of the area under

Moore's curve, I forecasted that there was 84% of the curve left for Prius and

current generation hybrids. Simple math resulted in a 2.5 million unit market

and at $20,000 per car, it's a $50 billion or $50,000,000,000.00 opportunity.


To forecast "car levels" we need to look at more than just new car sales

and the current generation of hybrids. How do we count electric cars,

plug-in hybrids, alternative fuel vehicles, etc? If you define "gas-powered ones"

as all the cars like diesel, biodiesel, E85, gasoline-hybrids, flex-hybrids, hydrogen hybrids,

then I would say that hybrids cannot exceed the number of "gas-powered ones."

There are millions of older cars on the road and when and how they are recycled

is up to other factors, usually smog laws driven by politics that has nothing to

do with hybrids being 90% cleaner than most cars.

What I can say for sure is that digital car levels

WILL exceed gas-powered cars in the longer term future.

In the short-term, fuel efficient cars will increase the most

and in the mid-term, hybrids, plug-ins and alternatives

and in the long-term vehicle that have powertrains

controlled by computers. Gas-powered cars have

computer controlled engines, but not

digital transmissions for hybrids, plug-ins and electrics.


The future will converge towards digital just like

the LP became the digital CD that died for the iPod

the tube became the digital transistor that enabled personal computers and flat screens, etc.

According to Jim Press who ran Toyota America to the top,

the automobile industry is the world's biggest and buys

more computers than the computer industry.

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