The Green Motorcar company is producing a new car. It is a flex-fuel p

QUESTION

The Green Motorcar company is producing a new car. It is a flex-fuel plug-in hybrid. A flex-fuel vehicle has an engine that runs on various combinations of ethanol, methanol, and gasoline. The engine drives a generator that charges the battery, which then drives the car. Its also possible to ¦
For the purpose of this assignment, I will choose hybrid automobiles that run on gasoline as well as alternative fuel, i.e., Electricity. The rising fuel prices and increasing air pollution along with depleting resources of fossil fuels is forcing more and more automobile companies to manufacture hybrid vehicles. Moreover, people are increasingly buying these environment friendly and cost effective hybrid vehicles in many countries around the world. According to (Hybridcar.com, p.1), Hybrid-electric vehicles (HEV) combine the benefits of gasoline engines and electric motors to provide improved fuel economy. The engine provides most of the vehicles power, and the electric motor provides additional power when needed, such as for accelerating and passing; this allows a smaller, more-efficient engine to be used. The current hybrids on the market do not have to be œplugged in to an electrical outlet to recharge. The Hybrid Car Market The market for the hybrid car is slowly growing primarily led by the U.S. and Japanese Markets. In the past five years, sales for the hybrid in the U.S. increase from 9,500 in 2000 to 100,000 in 2004. By the end of 2005, the number of hybrid cars in the U.S. increased to 212,000, accounting for 1.3 percent of the total U.S. light-vehicle market. J.D. Power estimate the hybrid car market will account for 3.5% of the U.S. market by the year 2010, whereas, other researchers such as ABI Research & Automotive Technology Research Group give a more¦

ptimistic projection for the market. These researchers estimated the hybrid market penetration between 5-6% of the overall U.S. light-vehicle market. According to a forecast by J.D. Power-LMC Automotive Forecasting Services, by the year 2012 hybrids that accounted for 0.5 percent of the U.S. market in 2005 are expected to gain 3.5 percent of the U.S. market. The JD Power reports say that the price premium associated with alternative power train vehicles continues to be a barring factor that will restrict the potential for both hybrid vehicles. The report notes that manufacturers will have to reduce this premium to attract buyers who are not currently motivated to purchase these vehicles as a means to improve the environment, or as a means to save money by consuming less fuel. Existing Product Research The Prius, Insight, and Civic were the first set of hybrids. These vehicles utilized the core strategy of a smaller engine which provides on demand power from the electric motor and batteries. A smaller engine is one of key attributes of hybrids to gaining better fuel economy. The newer hybridsthe Accord, Lexus SUV, and Highlandermaintain the size of the gas engine, and add power by way of the electric components which does little to boost fuel efficiency. According to (Larson, 2005), while the hybrids claim to fame is reduced fuel consumption, there are various factors that will reduce the performance levels of these vehicles. Such factors include acceleration, idle time, air conditioning, temperature, and driving speed. Competitive Scenario It has been noted that Honda and Toyota are the pioneers in the hybrid car market now. According to JD Power, However, they are becoming more commonplace due to licensing of their technologies by other Japanese and American companies, and the new trend towards hybrid SUVs. The Toyota Prius, considered a midsize sedan, is the number-one selling hybrid vehicle. Toyota has sold more Priuses than all other hybrids combinedand for good reason. Since the second model of the Prius was introduced in 2003 (as a 2004 model), this midsize sedan has received numerous awards. Today, it continues to be a top seller. The success and tremendous rise in Toyota hybrid sales can be partly attributed to the companys marketing campaigns. Most hybrids recognized increasing gains each year, with the exceptions of the Accord Hybrid and the Lexus RX400h. Sales of both models have decreased during the past year, proof perhaps that todays hybrid buyers demand a noticeable improvement in fuel economy when buying a hybrid model (Hybridcar.com). Typical profile of hybrid car buyers Hybrid car drivers have a level of education higher than any group of car drivers that Ive ever seen, says Walter McManus, director of the Office for the Study of Automotive Transportation at the University of Michigan. McManus further describes these drivers: They have higher income, than the average car buyer at approximately $100,000 a year versus $85,000 a year for the average buyer. They are more likely to be female. Hybrid drivers are a few years older than the average car buyercloser to fifty rather than the average age of forty. California strongly outpaces all other states for new hybrid vehicle registrations. Beyond these demographics, McManus describes the profile of hybrid car drivers in terms of their behavior and attitudes: They drive on average fewer miles than the average car buyer Hybrid car drivers plan to keep their car longer than the average person They are willing to pay more for an environmentally friendly product. They personally want to do something to help reduce vehicle pollution. They expect fuel prices to grow a lot faster than other people do. McManus adds, It doesnt mean that theyre right. It does not mean that the other people are right. But theyre much more pessimistic about the future of fuel prices than the average person. Price According to research, Hybrid cars and SUVs prices range from an estimated $19,000 to nearly $55,000 for the basic models. The lowest price range for this type of car is the manual transmission 2006 Insight at an MSRP of $19,330, whereas the Lexus hybrid sport sedan, the GS 450h is the highest at $54,900. The following table summarizes average prices of the hybrid cars: Hybrid City mpg Hwy mpg MSRP Honda Insight -Manual 60 66 $19,530 Honda Insight -CVT 57 56 $21,530 Toyota Prius 60 51 $21,725 Honda Civic Hybrid 49 51 $21,850 Honda Accord Hybrid 29 37 $30,140 Toyota Camry Hybrid 40 38 $25,900 Ford Escape Hybrid 2WD 36 31 $27,515 Ford Escape Hybrid 4WD 33 29 $29,140 Mercury Mariner Hybrid 33 29 $29,225 Toyota Highlander Hybrid 2WD 33 28 $33,030 Toyota Highlander Hybrid 4WD 31 27 $34,430 Lexus RX 400h 31 27 $49,060 Source: Hybridcars.com Thus, the strategy to introduce an affordable hybrid vehicle which will also be much more fuel efficient than its existing peers is bound to expand the market size of hybrid cars as it will make hybrid vehicles within the reach of many more customers and will appeal due to its lower operating costs and environment friendly features.

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