Hybrids advance, but payback still an issue

  • 01-Apr-2009 06:40 EDT
Government subsidies are helping Eaton sell hybrids now while a return on investment is challenging for vehicle owners.

Hybrid trucks are inching into the marketplace, but there are still plenty of questions about their viability. Despite these questions, the market is evolving as customers buy a few test vehicles and truck developers gear up for the future.

Many trucks, especially those used in urban areas, have heavy start/stop duty cycles that could see strong benefits from hybrid power. However, presenters at the Green Truck Summit during the Work Truck Show questioned whether the fuel savings provide enough return on investment (ROI) to justify the additional cost of hybrid technologies.

“Hybrid systems can be a third the cost of the truck. That’s a huge cost many companies can’t overcome,” said Bill Gooden, Vehicle & Equipment Specialist at Cox Enterprises, which has a large fleet for its cable TV systems and other operations.

That has not stopped many companies from buying a few hybrids. Many buy them to test viability in their application; some want to meet corporate emissions promises, while others want to understand maintenance and other issues. But ROI will be a factor when they look at expanding their fleets.

“Using hybrid vehicles amounts to good stewardship,” said Dan Gabel, Fleet Services Manager at Commonwealth Edison. “We were much closer to payback when fuel was at $4/gal.”

Though oil is currently far cheaper than its $100-per-barrel peak, vehicle and system designers must plan for the future. Many prognosticators feel that current prices below $50 per barrel are a temporary dip.

“Five years from now, it wouldn’t be a surprise to see a barrel of oil priced at $200,” said Stephen Latin-Kasper, Market Research Director for the National Truck Equipment Association.

Vehicle suppliers want to have hybrids and electric vehicles in place for that possibility. Many have already announced hybrids or plans/partnerships in this area. Some are even developing full electric options.

Ford plans to roll out an electric version of its Transit Connect van later this year, planning production in 2010. Gasoline-powered vehicles are migrating to the U.S. after successful production in Europe. The electric version will use a plug-in system designed by Smith Electric Vehicles.

“It will have a 75-mi range, with top speeds of 100 mph and strong enough torque to get onto the freeway. Recharging time will be about eight hours,” said Bryan Hansel, CEO of Smith’s U.S. operation. The electric drive delivers 55 kW.

Hybrids are further along in development, with a number already shipping. But many presenters agreed that high prices are holding the market back.

“Hybrid trucks are at a tipping point; prices are still too high. But as volumes go up, prices will go down,” said Richard Parish, Senior Program Manager at CALSTART, a consortium with more than 130 members.

Pricing declines fueled by volume may be augmented by technical improvements. System designs are evolving, and battery technologies are expected to offer more capabilities, adding another weapon in developers’ arsenals.  

“When we look out a couple years, we see impressive improvements in energy and power density,” said Scott Davis, Business Leader at Eaton’s Hybrid Business Unit. “Lithium-ion batteries are starting to emerge as a contender.”

Until technical advances and rising volumes help bring prices down, government subsidies are helping. Federal agencies and some states offer incentives, and proponents are pushing for further support to help jump-start the field.

“Tax incentives will help us get through the early days and help us gain skills to drive the costs down and drive up volumes so we can continue without government assistance,” Davis said. “Return on investment is critical; these aren’t science projects.”

Observers also note that the vehicl­e makers themselves are struggling with ROI. “Around 3000 to 5000 units per year per manufacturer is where they can be profitable,” Parish said. “We only see the capability for 1000 to 2000 trucks per year now.”

Some suppliers are refocusing their efforts, moving away from urban delivery vehicles. Instead, they are looking at vehicles that are often idling, using batteries to power air-conditioning and other functions.

“When you look at ROI right now, the payback is challenging, especially for city deliveries,” Davis said. “That’s one reason to go after work sites where there’s a lot of idling. Eliminating idling helps bring the payback down.”

That refocusing comes as hybrid proponents adjust the way vehicle owners determine their payback. Reduced fuel consumption is not the only savings hybrids can provide.

“You need to consider all costs, like reduced maintenance with regenerative braking and engine maintenance costs that are reduced because you’re not idling as much,” said Cox's Gooden.

However, those maintenance costs could be a negative for hybrids, at least in the short term. Before fleet owners can deploy many hybrids, they have to teach their mechanics how to repair them.

"Getting the dealer network ready for repairs is a massive issue,” Davis said.

Warranties will push the need for this training off a while. But panelists noted that after warranties expire, having an inexperienced staff attempt to fix hybrids could create huge problems.

“These are high value systems that the average technician doesn’t understand,” said Ken McKenney, Fleet Operations Technical Support Specialist at Verizon Communications.

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