THE EARLY MARKET OF HYBRID CARS Business English – Advanced LUISS MBA 11/07/2011 Ophélie Champeaux, Jihee Shin, Nataliya Gavryuk
THE EARLY MARKET OF HYBRID CARS
Business English – AdvancedLUISS MBA11/07/2011Ophélie Champeaux, Jihee Shin, Nataliya Gavryuk
INDEX
1. Market Analysis 2. Industry Concerns and Prospectives3. Pros and Cons4. Your Questions
07
/11
/11
2
LUIS
S M
BA
HYBRID MARKET ANALYSIS
1. Market size and growth rate2. Profitability3. Customers4. 5 Competitive Forces5. Competitors6. Key Success Factors
07
/11
/11
3
LUIS
S M
BA
MARKET SIZE AND GROWTH RATE
The largest hybrid car markets are U.S. and Japan
In U.S. since their inception in 1999 more than 2 million hybrid electric automobiles and SUVs have been sold until May 2011
The top selling hybrid car in the U.S. is the Toyota Prius, with 1,017,281 units sold until May 2011
The industry growth rate is in average14% per year
07
/11
/11
4
LUIS
S M
BA
MARKET SIZE AND GROWTH RATE
07
/11
/11
5
LUIS
S M
BA
Top national markets for hybrid electric vehiclesbetween 2007 and 2009
Rank Country
Number ofregistered
hybrids2009
Percent ofglobal hybrid
registrations
2009
Number of
registered
hybrids2008
Percent ofglobal hybrid
registrations
2008
Number of
registered
hybrids2007
Percent ofglobal hybrid
registrations
2007
1 Japan 334,000 45% 94,259 18% 69,015 14%
2 United States 290,271 39% 312,209 61% 350,289 70%
3 Canada 16,167(1) 2% 15,385 3% 14,828 3%
4 Netherlands 13,686(1) - 11,814 2% n.a.(2) -
5 United Kingdom
13,661(1) - 19,963 4% 15,968 3%
Top 5 - - 453,630 89% 457,615 91%
World 740,000 511,758 500,405
Notes: (1) Cumulative sales until November 2009 only. (2) For year 2007 Netherlands was not among the top 5 world markets. Germany, with 7,515 hybrids sold, was the fifth country in the rank.
MARKET SIZE AND GROWTH RATE0
7/1
1/1
1
6
LUIS
S M
BA
MARKET PROFITABILITYThe Average Price:
1. Affordable Vehicles are priced between $20,000 and
$30,000. The 2010 Toyota Prius has a starting price of
$22,000. 2. Upscale Because of its $40,000 price tag, Chevrolet Volt
is classified as an "Upscale Midsize Car."
3. Luxury The 2010 Lexus HS 250h shares the same
platform as the Toyota Prius but is 40% more powerful.
It offers luxury features associated with the Lexus brand and sells for about $34,000.
07
/11
/11
7
LUIS
S M
BA
WHO BUYS AND DRIVES HYBRID CARS?
The common misconception is that hybrid buyers are young and trendy. In reality, hybrid drivers are older than the average
car buyer.
07
/11
/11
8
LUIS
S M
BA
PROFILE OF HYBRID DRIVERS
Have higher income, much higher than the average car buyer.
Are a few years older than the average car buyer.
Twice as likely to claim to go skiing, hiking, or practice yoga than non-hybrid owners.
Consume more organic food, yogurt, and decaffeinated coffee than the general population.
Have above-average tech savvy skills.
07
/11
/11
9
LUIS
S M
BA
HYBRID AUTOMOTIVE INDUSTRY’S 5 COMPETITIVE FORCES
Threat of new entrants:
The hybrid industry requires high capital Switching costs to the buyer are high
because of:a) search costsb) financial risksc) research and educationd) negotiatione) efforts to sell pre-existing vehicles.
07
/11
/11
10
LUIS
S M
BA
HYBRID AUTOMOTIVE INDUSTRY’S 5 COMPETITIVE FORCES
Power of suppliers and buyers:
Have little power in the hybrid industry The volume of purchase is low - only 1.26%
of automobile sales. Hybrids are highly available and sold at
thousands of dealerships, online, or through independent sellers.
07
/11
/11
11
LUIS
S M
BA
HYBRID AUTOMOTIVE INDUSTRY’S 5 COMPETITIVE FORCES
Availability of substitutes:Hybrid vehicles are still new products and the
availability of substitutes is low.
Competitive rivalry:Is minimal because:a)product differentiation among hybrids is highb)switching costs for the customers are highc)there are only 5 competitors.
07
/11
/11
12
LUIS
S M
BA
COMPETITORS0
7/1
1/1
1
13
LUIS
S M
BA
Hybrid sales by manufacturer and model
KEY SUCCESS FACTORS
High industry growth rateLittle power of suppliers and buyersHigh availability of hybrids on the
marketLow competitive rivalryProducers could introduce hybrid
vehicle technology through already familiar products
07
/11
/11
14
LUIS
S M
BA
ON THE MANUFACTURERS' SIDETHE OUTPUTS
Different grades of hybridation...
Micro-hybrid (Citroen stop and start models)
Full-hybrid (Honda Insight, Toyota Prius)
Full electric Refillable (Chevrolet
Volt)
… For different positioning strategies
Different needs: city driving, major energy savings, « green » cars
Different levels of technological advance : BMW mild hybrid developed in Formula 1
07
/11
/11
15
LUIS
S M
BA
ON THE MANUFACTURERS' SIDEHOW TO BECOME A MARKET LEADER
Toyota Prius vs Honda Civic : Toyota's leadership in car industry The Prius supremacy 2 strategies :
a full lineup to settle in the emerging market of the hybrid cars
a focus on the small cars and the existing consumers
The technological advantage : Toyota vs Nissan Fiat helping Chrysler to compete on the US
market
07
/11
/11
16
LUIS
S M
BA
ON THE MANUFACTURERS' SIDETHE SPECIFIC COSTS OF THE HYBRID
MAKING
Technological costs often seen as a burden in an early market Competition State requirements
R&D, industrial shipments, marketing JPMorgan and Chase (2008) : cut in the cost of
gas-electric systems for carmakers : 2008 : $ 5.869 a piece 2018 : $ 1.919 a piece → -67%
An expected growth in the sales should definitely drive the hybrid cars business model towards economical success in the next 10 years
07
/11
/11
17
LUIS
S M
BA
ON THE MANUFACTURERS' SIDETHE SPECIFIC COSTS OF THE HYBRID
MAKING
Technological costs often seen as a burden Competition State requirements
R&D, industrial shipments, marketing JPMorgan and Chase (2008) : cut in the cost of
gas-electric systems for carmakers : 2008 : $ 5.869 a piece 2018 : $ 1.919 a piece → -67%
An expected growth in the sales should definitely drive the hybrid cars business model towards economical success in the next 10 years
07
/11
/11
18
LUIS
S M
BA
ON THE MANUFACTURERS' SIDEMAIN CHALLENGES ON THE ROAD TO
MATURITY Market growth
US : mass market and lower prices Europe : the diesel competitor and the import
taxes
The Green concern and the public incentives
The US C.A.F.E. Standards: a planning tool The EU's will to grow green
07
/11
/11
19
LUIS
S M
BA
WHAT MAKES HYBRID CAR STRONG
Better fuel efficiency than other similar size cars (up to 80% of fuel consumption reduction)
Comfortable and quiet ride, smooth acceleration and braking without gear changes
Spacious interior High scoring in safety tests Low pollution Good performance for normal use
07
/11
/11
20
LUIS
S M
BA
Front Impact
Toyota Camry Toyota Camry Hybrid
Toyota Camry Toyota Camry Hybrid
Passenger’s Side Driver ‘s Side
Safety Rating ***** ***** ***** *****Head Injury Criterion
522 HIC 522 HIC 505 HIC 505 HIC
Chest Deceleration 41 g 41 g 41 g 41 g
Left Femur Load 804 Ibs 804 Ibs 411 Ibs 411 Ibs
Right Femur Load 233 Ibs 233 Ibs 547 Ibs 547 Ibs
Side Impact
Rear Occupant Front Occupant
Thoracic Trauma Index
55 55 42 42
Pelvis Deceleration
51 51 57 57
Crash Test Result0
7/1
1/1
1
21
LUIS
S M
BA
HYBRID CAR DESIGN
07
/11
/11
22
LUIS
S M
BA
WHAT MAKES HYBRID CAR WEAK
Remain reliant on fossil fuel More expensive than other similar size car Fuel economy can be highly dependent on
season, climate, driving style Special attention requested for servicing,
repairs, etc Difficulties and inefficiencies to purchase
components Less exhilarating acceleration
07
/11
/11
23
LUIS
S M
BA
HYBRID SALES AND GAS PRICE: A DIRECT CONNECTION
07
/11
/11
24
LUIS
S M
BA
OPPORTUNITIES OF HYBRID CAR MARKET
Evolution into a "Plug-in Hybrid" with higher capacity batteries and designed to operate for extended periods in electric-only mode
Spread into other market sectors (as industrial power plant)
Increasing awareness of environmental issues likely to keep demand high.
Method to produce more fuel efficient, greater performance and less impact to the environment
Governments seeking to meet Kyoto targets etc. Additional incentives for cars such as that one with
lower emissions
07
/11
/11
25
LUIS
S M
BA
RISKS OF HYBRID CAR MARKET
Various rumors continually circulated attempting to undermine its credentials, particularly from "petrol-heads“ decrease credibility / consumer confidence
Risk to lose market share in case fuel prices fall significantly
07
/11
/11
26
LUIS
S M
BA
Would you buy a Hybrid Car?
If not sure, ask now!!!
07
/11
/11
27
LUIS
S M
BA