Batteries, Parts Delay Hybrid Car Production

Dec. 3, 2004 — -- The good news: The rising price of gasoline in the United States has made American car shoppers sit up and take notice of fuel-efficient hybrid gas-electric autos. The bad news: Carmakers still can't keep up with the demand.

For example, Toyota recently announced that it would double production of its Prius hybrid to meet the rapid spike in U.S. consumer demand. But even with approximately 50,000 more Priuses headed for American shores next year, Toyota admits that shoppers will still need a lot of patience.

"We've got a wait list of about 21,000 to 22,000 Prius buyers," says Sam Butto, a spokesman for Toyota's U.S. sales division. "The wait times are running about six months on average, so if you were to order a Prius now, you won't get it until April or May -- perhaps a little sooner than that as the increased production comes on line."

But it isn't just Prius shoppers who are waiting in line.

Ford began selling its long awaited Escape Hybrid SUV in November. And while company officials have noted tens of thousands of consumers have expressed interest in the fuel-efficient sport utility vehicle, it will still be a few months before most U.S. dealerships get even a single demonstration model. What's more, while conventionally powered Escape SUVs are one of Ford's more popular vehicle models, the company expects it will be able to produce only 20,000 hybrid versions by the end of next year.

Parts of the Problem

With demand and interest so high among fuel-conscious consumers, why can't carmakers produce enough to meet demand? One of the chief reasons is a limited supply of hybrid parts such as the rechargeable batteries and the computers that control the cars' dual electric and gas-powered motors.

"Just a certain few companies have that capability to produce hybrid car technology," says Charlie Vogelheim, executive editor of the Kelley Blue Book auto price directory. "It all depends on those components and the lead time suppliers have to produce them."

For example, one concern expressed by Ford has been the supply of the rechargeable nickel-metal hydride batteries needed to power the hybrid Escape's electric motor. The batteries' basic components are similar to those used by consumers, but for a light truck like the Escape they are produced and packaged in a unique manner.

"The batteries aren't something you and I would consider exotic, but it's a custom battery designed for performance," says Vogelheim. "Looking at it from a production standpoint, [manufacturers are] not geared up for wide demand of that kind of battery. The complexity of auto making is that it takes planning [for such issues] years in advance."

Stalling SUVs to Step Up Sedan Seekers

And that juggling act between long-range planning and immediate production demands is one where hybrid carmakers have fumbled a bit -- for now.

Toyota, for example, is currently on its third generation hybrid technology, which it calls the Hybrid Synergy Drive. The new system produces more power and gives its current Prius improved performance and fuel efficiency over previous models. The system is also ideal for hybrid SUVs where performance counts more than fuel efficiency.

But to meet the rising production demands for the Prius, Toyota has had to delay the release of its hybrid SUVs. Production of its Highlander Hybrid SUV and Lexus RX 400h luxury SUV -- both designed to use the Synergy Drive system -- has been pushed back from this year to next.

"[Toyota] wanted to make sure that the production ramped up so they could hit the ground running," says Toyota's Butto.

Even with increased capacity, the company may already have quite the race to run. Butto says that while the RX 400h and Highlander Hybrid aren't due out until next April and May, respectively, the company has already received 9,000 prepaid orders for the RX 400h.

And while Toyota is confident it can make 40,000 to 45,000 of those hybrid SUVs next year, Vogelheim isn't so sure that the company will rush their production.

"That [hybrid drive] component, bless Toyota's heart, is basically technology and it's constantly changing just like any computer technology," says Vogelheim. "Lexus demands high reliability before putting something in the market."

Light at the End of the Tunnel?

Still, not all the news about hybrids is bad. Carmakers and hybrid enthusiasts are optimistic that the situation will improve over the next year.

Honda, for example, believes the recently introduced hybrid version of its Accord sedan will help satisfy pent-up demand for fuel-sipping cars. The company says it is confident it can produce about 20,000 Accord Hybrids by next year and will even be able to supply one model to each of its approximately 1,000 dealerships by the end of this month.

While that might not seem like much, company spokesman Chris Naughton says the volume matches with Honda's past sales experience with its Civic Hybrid.

"We haven't had extreme waiting times for the Civic Hybrid. There were 20,000 to 24,000 buyers and our [production] volume has been pretty much right on," says Naughton. "So, 20,000 Accord Hybrids seems to be a pretty reasonable estimate and we don't anticipate a huge shortage."

And as more automakers express interest in producing hybrids of their own, Vogelheim says the global car industry is ramping up to meet the growing need for hybrid parts.

"Demand exceeded expectations and suppliers were just not prepared because the original production contracts didn't call for components beyond the projected volumes," he says. "As additional assembly lines kick in, product trickles in and it could be a bust through the backlog. It's not like it's uranium where the issue is there's only so much and they can't make any more."