Japan's New Green Car Push

Since General Motors (GM) first showed its Chevrolet Volt plug-in hybrid (BusinessWeek.com, 1/7/07) concept car at the North American International Auto Show in January 2007, the industry hype has been unrelenting.

Any lingering concerns over the cost and reliability of lithium-ion batteries, a technology not yet used in any mass-production hybrid car but which will help power the Volt, are outweighed by the excitement that GM will finally have a vehicle capable of rivaling Toyota's (TM) Prius hybrid as the green car champion.

Yet when the Volt arrives in November 2010, assuming GM meets its challenging deadline, can the U.S. automaker make up for lost time in the race with Japan's automakers to produce cleaner, more fuel-efficient cars? Even if the Volt is as impressive as GM hopes, a slew of recent announcements by Japan's automakers suggest closing the gap will be tough.

A Lot More Hybrids to Come

From now through 2010 and beyond, they are pushing ahead with plans for hybrids, electric cars, cleaner diesels, and even, further down the road, fuel-cell vehicles (see "Japan's Green Drive"). The days when auto executives mocked the Prius as a loss-making fad seem long past. "Without focusing on measures to address global warming and energy issues, there can be no future for our auto business," Katsuaki Watanabe, Toyota's president, said at an environmental forum in Tokyo on June 11.

In the short term, that means many more hybrids. By the early 2010s, Toyota aims to more than double hybrid sales, to 1 million a year, far more than all other automakers' combined hybrid sales so far.

To meet its targets, Toyota will roll out several new models. Next year, Toyota is expected to add two new cars that it will sell only as hybrids, one badged as a Toyota, the other a Lexus. A new version of the Prius, which promises to be lighter and more fuel-efficient than the current generation, should also appear in 2009, and a plug-in version, which like the Volt will use lithium-ion batteries, is due to arrive a year later. By 2010, Toyota is also believed to be planning two more dedicated hybrid models, including a new hybrid minivan.

Toyota Takes a Long-Term View

Toyota will start production of Camry hybrids in Thailand next year and in Australia from 2010, and is already building a new factory in Japan for nickel-metal hydride batteries used in today's hybrids. "Toyota will continue to increase production of its current hybrid technology and should be selling over 800,000 units a year before we even see the first Chevy Volt," says Kurt Sanger, an analyst at Deutsche Bank (DB) in Tokyo.

Toyota is also looking beyond the next-generation lithium-ion battery: A special battery-research division it set up in June will start off with 100 engineers, but their numbers will double by 2010. The fruits of these researchers' labors may not emerge until 2030, according to some Japanese press reports (BusinessWeek.com, 6/12/08).

Japan's No. 2 automaker, Honda (HMC), is also turning up the heat. In hybrids, Honda will launch several new models, and expects to be cranking out 500,000 gas-electric cars not long after 2010 (BusinessWeek.com, 5/21/08).

The Electric Car Lives