Alternative Fuel Automobile Sector

1
Alternative Fuel Automobile Sector

• Tabitha Kastner
• Lester Mooney
• Nate Ramirez
• Peter Sitton
• Lea Ann Hart-Chambers
• Tyler Redden

2
Define Sector

• The sector focus is on alternative fuel
  automobiles
• Automobiles that do not solely depend on gasoline
  or diesel
• With in the sector of alternative fuel
  automobiles we will be focusing on the
  Gas/Electric Hybrid cars
• The Gas/Electric Hybrid cars are starting to
  become a new trend in automobiles and also
  becoming popular among consumer.

3
Major Competitors within the Sector
4
Toyota- Overview

• Toyota has been the best success story as far
  as hybrids are concerned. Their Prius was the
  first hybrid to go into mass production, and
  claimed well above half of the market share in
  2005. They offer a Highlander hybrid SUV and they
  have plans to introduce a Sienna hybrid minivan
  in 2007.

5
Toyota

• Strengths
• They hold most of the market share of hybrid cars
  and because they mass produce their hybrids they
  will be able to take better advantage of
  economies of scale
• The Prius has dominated the market and has almost
  become synonomous with the word hybrid giving
  Toyota brand name equity towards the hybrid market

6
Toyota

• Weaknesses
• There is such a high demand for the Prius that
  Toyota now has a waiting list close to six months
  before you would actually have the car in your
  possession
• As other companies are coming out with new hybrid
  models. Toyota has used the 2004 Prius to satisfy
  the 2005 model which may leave some customers
  unsatisfied with the options available from
  Toyota.

7
General Motors- Overview

• GM has launched a hybrid propulsion program that
  is targeting the highest fuel consuming vehicles
  first such as transit buses, full size trucks,
  and SUVs. They have delivered more than 345
  hybrid-power buses to 22 U.S. cities. If that
  number reached 1,000 than the annual savings for
  the U.S. would be more 1.5 million gallons of
  fuel. They will have a mid-size vehicle hybrid
  option available to consumers in 2007.

8
General Motors

• Strengths
• They have teamed up with cities to help reduce
  pollution, and therefore developed a relationship
  with the government which will help their market
  share as new fuel-efficient technologies come
  about
• They offered the worlds first full-size hybrid
  truck in 2004 when the Chevrolet Silverado hit
  the market with an estimated 10 improvement in
  fuel efficiency

9
General Motors

• Weaknesses
• They have fallen behind in offering a hybrid
  model car which may cost them market share when
  they attempt to launch the hybrid Chevrolet
  Malibu in 2007
• Even though they are the only company who offers
  a hybrid truck the technology can easily be
  imitated and it will not provide a sustainable
  competitive advantage

10
Honda - Overview

• Honda was the first automobile manufacturer to
  launch a gasoline / electric hybrid in the United
  States with the debut of the Insight. The Insight
  is still the most fuel efficient vehicle in the
  two seater class. Honda has also debuted hybrid
  versions of the Civic and Accord models.

11
Honda

• Strengths
• First to launch a gas electric hybrid in the
  United States.
• Maintain some of the highest fuel economy numbers
  in the market.
• Combine power, luxury, and fuel economy with the
  Accord Hybrid

12
Honda

• Weaknesses
• Do not offer a sport utility hybrid as of yet
• Honda Accord is one of the more expensive hybrids
  with the price starting above 30,000
• No plans to develop any other models of hybrids
  in the near future.

13
Ford-Overview

• Ford currently offers two hybrid vehicles, the
  Mercury Mariner and the Ford Escape. Both of
  these vehicles fall into the sport utility
  category, but plans are definitely in the works
  to debut a pickup with the Ranger Hybrid.

14
Ford

• Strengths
• First company to release a hybrid SUV in America
• Ford Escape has beaten the EPA estimates of fuel
  economy in testing situations
• Escape Hybrid was named the North American truck
  of the year in 2005

15
Ford

• Weaknesses
• Immobility of the hybrid SUV as seen with the
  Lexus and Toyota hybrid SUVs being released this
  year
• Do not offer a hybrid car, and this may cost them
  the market of buyers who do not need SUVs

16
Macroeconomic Impacts
17
Dominant Economic Traits

• Growing sector
• Global market
• High barriers to entry capital intensive
• Threat of rivalry Honda vs. Toyota
• Threat of substitutes other fuel efficient cars
  that cost less
• Threat of buyers lots of car choices

18
Market Size

• Hybrid cars are a growing sector, but still less
  than 1 of all vehicles in use.
• 88,000 hybrids sold in 2004
• 92,738 sold in first half of 2005

19
Market Growth

• U.S. car market 2 growth annually
• Hybrids 2000-2004111 growth annually
• Estimates
• Sales plateau at 3 in 2010
• OR
• 80 of car sales by 2015

20

• How fast are hybrids growing?

21
Competitive Rivalry

• Compacts Sedans
• Toyota vs. Honda
• SUVs
• Toyota vs. Ford

22
International Domestic Issues

• Gas Prices
• If we raise fuel efficiency standards in
  American cars by 7.6 mpg we would save enough to
  eliminate 100 of our gulf oil imports into this
  country.
• Tax Deduction for hybrids
• 2,000 in 2005 and 500 in 2006
• Pollution and the environment

23
Sector Health/Vitality
24
Porters Competitive Forces

• Threat of New Entrants
• Growth Niche many are entering
• Threat of Substitutes
• Regular Fuel Vehicles with MPG 30
• Other Alternative Fuels CNG, LNG, Bio-Diesel, EV
• Threat of Buyers
• Currently more buyers than vehicles driving the
  market
• Threat of Suppliers
• Not much price competition for special HEV
  components
• Threat of Industry Competition
• Overall in auto industry this is huge
• Toyota currently dominates hybrids others are
  chasing

25
HEV Appeal

• Hybrids are a growing niche in the auto market
  competition is gearing up based on demand factors
  and consumers have been so far willing to pay
  more for green vehicles
• Buyer demographics from JD Power Survey
• Innovator - Early Adopters (but a little older
  than avg.)
• Higher level of education
• Higher income avg.100,000
• Females are a bigger share of group
• Betting that fuel will continue upward trend
• Want to help environment
• Drive less and keep their cars longer

26
HEV Success Factors

• Differentiation Appeal to niche buying
  demographic then to mainstream
• Price of Oil/Gasoline - MPG
• Lower Emissions Green
• Mass Production - Price of Vehicles/
• Competition amongst automakers
• Quality Dependability Reliability on par with
  traditional vehicles

27
HEV Competition

• Current Players Recap
• Toyota
• Honda
• Ford
• Future Competitors Jumping in later this year
• GM (Now in California, Washington, Oregon,
  Nevada, Alaska and Florida. )
• Daimler- Chrysler
• 2005 - 2008

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Comparison of Firms
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Comparison of the Automakers
Global Sales of Light Vehicles (Cars and Light Trucks) Global Sales of Light Vehicles (Cars and Light Trucks) Global Sales of Light Vehicles (Cars and Light Trucks) Global Sales of Light Vehicles (Cars and Light Trucks)
Maker 2003 2004 Forecast 2005
GM 8654 8633 8409
Toyota 6770 7470 7646
Ford 6460 6570 6547
DaimlerChrysler 4053 4159 4244
Honda 2918 3189 3253
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Opportunities Issues

• Economies of Scale are not yet fully in effect in
  this market
• Tax incentives may continue or be curtailed
• Growth all lines dont have HEV options
• Minivans, Large Trucks, Vans, Luxury Cars
• Many hurrying into niche to compete
• Consumer prices should drop
• Continued growth forecast in U.S. expected to
  continue (J.D. Power)
• 0.5 sales in 2004 projected at 3.5 by 2012

31
Opportunities Issues

• Possible backlash from environmental groups
  against makers of those making hybrids only for
  the power boost could taint appeal
• Gas Prices driving market could plateau or drop
• Competition from Turbo-Diesel and Bio-Diesel
• J.D. Power estimates that this market will grow
  to 7.55 of U.S. by 2012
• Hydrogen fuel/fuel cell vehicle development could
  make for a short lived market
• Testing is already underway, but fueling and
  supply issues remain
• Buyers concern over special needs vehicle
  maintenance and higher cost may slow market
  adoption

32
Future Issues
33
Future Issues

• Drivers for change
• Decreasing amount of Oil available, Worldwide
• Non-renewable resource
• Increasing Gas Prices
• Global Exchange, in partnership with Rainforest
  Action Network, is asking Ford and its
  competitors to improve the efficiency of their
  vehicles to 50 mpg by 2010
• Jump Start Ford Campaign

34
Remote Environment

• Remote
• War in regions of the world that have majority of
  oil reserves
• New Oil Reserves discovered
• Driving a hybrid car is one way to take a real
  step toward reducing our dangerous addiction to
  oil.

35
Competitor Movements

• GM and DaimlerChrysler, reformed hybrid
  Naysayers, signed a strategic alliance December
  2004 to develop hybrid gasoline-electric engines
  together.
• Volkswagen, Down on hybrids We are not
  interested in making cars which dont make money.
• Toyotas commitment to minimizing the
  environmental impact and maximizing quality at
  every stage of the vehicle's lifecyclefrom
  production, through use, and disposalis viewed
  as an integral part of 'kaizen', (continuous
  improvement).

36
Future

• The number of hybrid electric models on the
  market is expected to increase from 10 in 2005 to
  44 by 2012
• The number of diesel models is expected to grow
  from 14 to 26.
• Saturate the market
• Economies of Scale
• Increasing Production of Hybrid Models
• Price and cost will go down.

37
Impacts of Change

• Will there be one superior technology
• (VHS vs. Beta)
• Hydrogen fuel cell
• Diesel or Diesel/Electric
• Gas/Electric Hybrid
• GM and Daimler-Chrysler Alliance
• Build an industry standard?
• full hybrid, mild hybrid, plug-in hybrid,
  parallel hybrid and serial hybrid...

38
Moving Forward -gtgt

• US Consumption spurred on industry change toward
  alternative fuel autos.
• Hybrid cars already exist as commercial products
  and are available to cut pollution now. On the
  other hand, fuel-cell cars are expected on the
  same schedule as NASA's manned trip to Marsand
  have about the same level of likelihood.

39
Sources

• Common Dreams News Center http//www.commondreams
  .org/
• The Detroit News
• http//www.detnews.com/2005/autosinsider/0507/25
  /0auto-258263.htm
• Fuel prices connection http//home.businesswire.c
  om/portal/site/google/index.jsp?ndmViewIdnews_vie
  wnewsId20050627005270newsLangen
• Hybrid Cars.com http//hybridcars.com/
• J.D. Power and Associates http//www.jdpower.com/
  news/releases/pressrelease.asp?ID2005086
• General auto industry good stuff Standard
  Poors http//www.netadvantage.standardandpoors.c
  om/NASApp/NetAdvantage/login.jsp?url/NASApp/NetAd
  vantage/showIndustrySurvey.do?codeaup
• Good hybrid information including current sales
  data and split http//www.greencarcongress.com/20
  05/07/hybrid_sales_in.html
• Growing competition market segmentation
  http//www.detnews.com/2005/specialreport/0501/09/
  B01-54328.htm
• Market growth hybrid effect on US market
  http//news.kypost.com/apps/pbcs.dll/article?AID/
  20050518/BIZ/505180398/1014/NEWS02

40
Sources Cont.

• Sales and future forecast of hybrid diesel
  sales http//www.cnn.com/2005/AUTOS/06/28/bc.auto
  s.hybrids.reut/
• Star Tribune Newspaper http//startribune.com
• Toyota already looking to differentiate
  http//www.aiada.org/article.asp?id44803
• Toyotas hybrid expansion strategy
  http//waw.wardsauto.com/ar/auto_hybrid_expansion/
  index.htm
• The Washington Post
• http//www.washingtonpost.com/ac2/wp-dyn/A9389-20
  04Dec17
• Wired Magazine http//www.wired.com/wired/archive
  /12.09/start.html?pg2