Toyota, PSA benefit from rising European demand for hybrids
European sales of hybrid vehicles increased more than 40 percent last year to 214,237 units as more people decided to reduce their fuel consumption with the help of the electrically assisted cars.
Analysts, however, say the market niche continues to struggle against diesel-powered cars that are often even more frugal than hybrids.
Last year's growth primarily was fueled by demand for updated versions of the gasoline-electric Toyota Auris compact and Yaris subcompact, which combined to account for 47 percent of Europe's total hybrid sales and 85 percent of the niche's growth.
Sales of the British-built Auris Hybrid hatchback and station wagon rose 131 percent to 53,426 last year while demand for the gasoline-electric version of the French-built Yaris increased 103 percent to 48,758, according to figures from JATO Dynamics.
The Auris Hybrid is so popular that it accounted for nearly half the compact line's overall sales in Europe last year, JATO's figures show. The Yaris Hybrid accounted for just under a third of the model line's European volume in 2013.
Strong demand for the Yaris Hybrid was one of the reasons that Toyota announced last month it would add a third shift at its plant in Valenciennes, northern France. Toyota expects Yaris Hybrid sales in Europe to grow by 20 percent this year, a company spokesman said in an e-mail reply to questions. That would result in a volume of about 60,000.
Toyota a unique case
But one market watcher says he doesn't expect other automakers to rush to join Toyota despite the niche's growth. "It's premature to say that this opens the floodgates," Al Bedwell, LMC Automotive's director for global powertrain, told Automotive News Europe. "We don't see too much evidence that other makers are developing hybrids for Europe."
Bedwell said that Toyota is a unique case. "They've had a strong track record in hybrids and they haven't had a strong diesel offering in Europe," he said. "If you want a car with better fuel economy than a petrol car, if you buy a VW Golf you buy diesel, if you buy a Toyota you buy a hybrid."
Bedwell said he feels Toyota has neglected development of European-focused diesels in favor of offering its hybrid powertrains globally because it can sell those models in high-volumes in markets such as the United States and Japan. The Prius was the No. 10-selling car in the United States last year with a volume of 234,228 units while in Japan Prius-based cars ranked No. 1 and No. 2.
"It makes sense for Toyota to work hard on hybrids for those countries because there's a ready-made market," Bedwell said. The hybridization also extends to Toyota's luxury brand, Lexus, which offers gasoline-electric versions of most of its cars in Europe, but no diesels. Toyota's continued refinement of its hybrid powertrains has paid off on the latest generation of the Auris Hybrid, which emits 84 grams of CO2 per kilometer compared with 109g/km for the much lower powered 1.4-liter diesel version of the compact. The Yaris Hybrid's CO2 output is just 79g/km, making it one of Europe's cleanest vehicles.
The success of the hybrid Auris and Yaris has far eclipsed that of the Prius. The compact model's European sales, which have always been sluggish, slumped 30 percent last year to 15,986 despite the addition of a plug-in version of the car. The Prius remains popular with taxi fleets because of its roominess and its impressive fuel economy in city traffic, but the new Auris wagon has more trunk space (530 liters vs. 446 liters) and in Germany the Auris' starting price is more than 2,000 euros less than the Prius'.
Toyota says the rise of the Auris and Yaris hybrids compared with the Prius is a "normalization" that was inevitable. "It's all part of the plan," a spokesman said. "Prius is the standard bearer of how far we can go." Along with the plug-in version, Toyota has shown a fuel cell concept vehicle with bodywork that updates the current Prius' design.
While Toyota is winning, fellow Japanese automaker Honda will stop selling its Insight and CR-Z gasoline-electric hybrids in Europe because of weak demand. It is a blow to Honda, which was the first automaker to sell a mass-production hybrid in Europe when it introduced the two-seat Insight in 1999, a year ahead of the Prius. Honda will sell off its remaining European stocks of the Insight five-door hatchback and CR-Z sports coupe, a company spokesperson told Automotive News Europe.
Since debuting its hybrids in Europe, Honda has sold a total of about 125,000, but recent sales have slumped badly. Honda sold 1,242 Insights last year, down 62 percent on the year before, while sales of the CR-Z hybrid fell 66 percent to just 695, according to JATO Dynamics.
"The economic climate meant that hybrids have not had the impact on Europe that they might have had," a Honda spokeswoman said.
The changes will leave Honda with one hybrid in Europe, the Jazz subcompact, and that car's future is unclear. Honda said no decision has been made on whether Europe will get the hybrid version of the new Jazz that is due in 2015.
"The focus is very much on diesel in Europe now," the spokeswoman said.
Diesel hybrids & plug-ins
Toyota has recently improved its own diesel lineup with a 1.6-liter engine sourced from BMW, but the Japanese automaker has no plans to join the growing market for diesel hybrids.
"We believe hybrid technologies have more benefit married with gasoline engines," Toyota Europe's engineering director, Gerald Killmann, told Automotive News Europe last year. "A diesel engine is on one hand highly efficient but also very expensive."
Europe's diesel-hybrid market is led by PSA/Peugeot-Citroen. The Peugeot 508 HYbrid4 was the top-selling diesel hybrid in Europe with a 2013 volume of 9,792, ahead of the Peugeot 3008 HYbrid4 and the Citroen DS5 HYbrid4.
Europe's premium makers fared poorly in the hybrid niche last year with little demand for cars such as the Mercedes-Benz S-class BlueHybrid and BMW's Active Hybrid versions of 3 series, 5 series and 7 series. One problem with the cars is that they provide little, if any, improvement in fuel economy compared with diesel equivalents. "The expectation was tiny and sales were even less than that," LMC's Bedwell said. "It's not the right technology for Europe. They're mainly developed for Japan and the U.S."
The one growth area will be plug-in hybrids, Bedwell predicts. The Mitsubishi Outlander PHEV gasoline plug-in was Europe's No. 7-selling hybrid in 2013, its first year of availability. Volvo's V60 plug-in diesel hybrid was ninth. "Some makers will skip conventional hybrids and go straight for plug-in," Bedwell said.
A plug-in hybrid's high price for increased battery-only performance is partially offset by government incentives in country's such as the UK, where vehicles with CO2 figures below 75g/km are eligible for up to 5,000 pounds (6,000 euros) off the list price. Current plug-in hybrids such as the V60 emit 48g/km of CO2.
The appeal for automakers is that plug-in hybrids also provide them supercredits under the EU's 2020 emissions regulations, off-setting high CO2 elsewhere in their fleets. Said Bedwell. "They're doing everything to make sure they've got the right capability to meet targets, so we'll see lots of downsizing, turbocharging and also electrification."
You can reach Nick Gibbs at email@example.com.