Numerous Benefits of Hybrid Cars as Compared to Gas Vehicles - Example

HYBRID CARS Name: Course: Instructor: Date: INTRODUCTION The concept of Hybrid cars and even electric cars is not a totally new concept to most auto manufactures. The idea for creation of hybrid cars was largely as a result to cut down on the level of emissions and hence environmental pollution from the auto manufacturing industry. Hence, this report intends to enlighten auto manufactures on the fundamental aspects of hybrid cars so as to encourage large scale production, especially by the manufacturers who are yet to embrace the technology. In this regard, the report is meant specifically for general Motors, one of the leading auto manufacturers in the United States of America. In the entire USA auto market, General Motors is currently the only automaker offering a complete line up of full-size, luxury hybrid sport utility vehicles. Each of the hybrid editions of its four popular SUVs provides a higher standard of equipment when compared against their gasoline counterparts, giving these trucks an edge on top of their improved fuel economy numbers. In addition, all four share essentially the same drivetrain and return the same fuel mileage rating without making any real sacrifices in terms of practicality or utility. This makes them strong contenders not just for fuel conscious SUV shoppers, but also for buyers looking for a rugged upscale people mover (Juettner, 2009). While there seems numerous profitable opportunities in the manufacture and sale of hybrid vehicles, general motors has not shown the zeal and open willingness to increase its current production capacity of such vehicles. The main reason behind the low number of hybrid vehicle produced by the company has been cited as an insignificant market (Anderson, 2010). Hence, this report will not only justify the existence of a large and untapped market segment for the hybrid vehicles but also elicit some of the selling ng points that can be used by the company to market its hybrid cars. At the end of it all, the manufacture and sell of hybrid vehicles by General Motors will no longer is a complementary venture but instead one of the pillars of the company’s business. WHO This report is meant for car manufacturers, especially those involved in the manufacture and supply of low cost passenger vehicles and subsequently target middle-class earners as their primary market. While battery powered cars are still not as popular especially in the Middle East, Latin America and Africa, it won’t be long before makers, retailers and of course consumers will understand the value of these vehicles. For instance, amidst the numerous calls for environmental conservation, some of the most viable alternative won’t only deal with reduction of fuel consumption but will also spread to hybrid and electrical cars. Since switching to electrical car5s might result into sudde3n pressure on existing grid supply, then hybrids will be the most suited alternative. For instance, hybrids will provide a balance between the fuel consumption and electricity usage. Hence, the hybrid cars are bound to change the fortunes of several other sectors. Assuming that these vehicles will in the future, share the roads with various other low-carbon options, bio fuel propelled cars and vehicles with internal-combustion engines that are a lot more fuel-efficient, then America would perhaps be the first country to significantly reduce the overall amount of emissions from the auto industry. Sales of these hybrid vehicles could dramatically restructure the fortunes of the utilities and especially automotive sectors and pave the path for the rise of a multibillion dollar industry. In this, once consumers get to understand the inherent benefits that come with hybrid cars, there is bound to be a significant shift in demand and preference for hybrid cars. As a result therefore, manufacturers who will have set the initial groundwork for production will stand to benefit more as compared to their counterparts who will be faced with the challenge of phasing out other models in favour of hybrid cars. Since the process of phasing out and switching to hybrid cars is not rapid but rather a slow and gradual change, initial manufacturers would have made numerous sales by the time their competitors eventually embark on production of hybrid cars (Blatt, 2011). The major of this report is thus to This report aims to try and change the mind-set of those car manufacturers who are not keen on taking the plunge into producing hybrid cars for several reasons among them, the high stakes in this particular industry. Studies on the marketability of hybrid cars indicate that incumbent automakers that are yet to enter the hybrid car market face intense competition from electrified vehicles. The studies were conducted by various researchers across America with an aim of establishing the market performance of hybrid cars amidst the presence of organic fuel vehicles and electric vehicles. Although the market forces are believed to have significantly changed, the findings of such studies are still relevant on the America auto market. Since outsourcing the making of many other subassemblies and components, the transmission and the internal-combustion engine are the core components that have focused on (Futuremarketinsights.com, 2017). In fact, the common trend on the car market in the United States of America is that most consumers show a higher demand for the traditional car models as opposed to hybrid and electric vehicles. Apparently, there is insufficient consumer education and therefore most stakeholders on the market are either not aware of the existence of hybrid cars or if they know, they do not understand the advantage of such cars over conventional vehicle models. Thus if they are to survive in a world where electrons and not hydrocarbons make a vehicle run, it is imperative that the automakers reinvent and reformat their businesses in order to survive. For instance, environmental conservation authorities worldwide have continuously threatened to either apply sanctions on the amount of emission from such industries or increase the cost of permits to such a level that it becomes uneconomical to engage in such business. Hence, by the year 2030, it is approximated that the levels of carbon emissions from the auto industry worldwide wold have reduced by more than 35% from the current levels. In other words, existing entrepreneurs have close to 12 years to either diversify their business or incorporate the suggestions to reinvent and reformat their business alongside the environmental conservation requirements. Having said that, incumbency can also turn out to be a point of strength in this area. There are quite a few entry barriers in place, which the incumbent auto makers can bypass which includes brand equity, channel relationships- for e.g. dealership networks, capital, manufacturing scale and customer management. Some of these obstacles require the intervention of the govern net while others can successfully be solved through the various market penetration and competition survival strategies. For instance, the government should come out in support of hybrid car ma manufacturers and offer subsidies on various parts used in the manufacture of the hybrid vehicles. Subsidies in this case will help the manufacturers overcome capital related challenges and thus compete on the same level with incumbents. Subsidies will also mean that the new entrants have ability to engage in mass production due to the reduced expenditure and hence affordable cost of production. On the same note, dealership networks, brand equity and customer management are inherent parts of any marketing mix of a given business entity. In fact, some of the aspects listed above such as customer management and channel relationship depend more on the quality of the products than they depend on the duration of stay in the industry. Hence, new entrants should first acknowledge the existent of strong competition from incumbents and thus come up with various competition survival techniques to guarantee them a favourable advantage against existing manufacturers. Source: https://en.wikipedia.org/wiki/Hybrid_electric_vehicles_in_the_United_States#/media/File:U.S_t op_selling_HEVs_by_market_share.png Two major points can be taken from the pie chart above. For instance, America has a quite promising market for hybrid cars. Hence the claims that venturing into the manufacture of hybrid cars is not profitable as the conventional fossil fuel cars are unfounded. In fact, the market allocation shows the distribution of different models implying that there is no preference for one model but instead, customers show almost equal preference and demand for different vehicles. The pie chart also sends out a powerful message to consumers outside the American market. For instance, people cannot show such preference for hybrid cars if they are performing poorly as compared to conventional models. The high number of sales made within a single year definitely shows that more people were encouraged to try out the different models after learning of the advantages of such cars. Hence, as more people discovered the improved performance of hybrid cars, the overall number of sales made significantly grew. To other markets around the globe, the pie chart simply implies that there is something unique associated with the performance of hybrid cars that caused such a high number of sales made within a year. WHY More importantly hybrid vehicles open up immense opportunities for existing auto makers. For instance, overall, the cost of production of hybrid cars is slightly lower as compared to other vehicle models. Existing auto makers will thus be able to save a significant amount of their capital and even channel such savings into other profitable ventures of alternatively increase their production capacity. Engaging into the production of hybrid cars will also open up other business of production and sale of new parts; parts which are currently missing on the market due to the small number of hybrid vehicles in use. Another profitable venture likely to come up will also open up new opportunities for dealers and suppliers in global markets with demand for hybrid cars. Hence, the entire switch to hybrid cars production will not only benefit the manufacturers but also other stakeholders in the supply chain. Increasingly strict emission laws and subsequent fines can be avoided to a large extent by using these Electric motors (Epa.gov, 2017). Electric motors have a low-end torque which enables cars to accelerate more quietly, quickly and smoothly. This will definitely provide distinctive selling point to prospective consumers. Besides, electric vehicles are also the Kings of limited mileage range and maintenance costs. Compared to conventional gasoline powered vehicles, electric vehicles require higher insurance premiums, frequent maintenance and require subsequent powering if they should go for longer distances. Although they have been perceived as direct market competitors for hybrid cars, an analysis of the performance visavis the cost of mainatnce indicates thet are quite expensive and costly even more that gasoline powered engines. Incumbent auto manufacturers could also beat the newcomers in the market competition by tapping into existing assets such as dealership networks in order to introduce new business models. For instance, for such dealers, there would no need to engage in dealers but will instead maintain their middlemen and dealers, only that the product will change. General motors, as a leading auto maker in America, must have an effective plan in place which includes a clear knowledge of how the company will make Research & Development a priority. Research in this case does not only touch on the technical aspects of the hybrid cars but also include aspects to do with the available market segment, competition on the market and prospects of expansion for the current market. However, much research should concentrate more on further improving the performance of hybrid cars to present them as the most suitable and preferred alternative for gasoline powered vehicles. This has to be a cross-vehicle portfolio and should include all cars from battery-electric models, hybrids, cars powered by internal-combustion engines as well as plug-in hybrids. With time, other companies are likely to come in and partner with General motors, especially after realization of the great potential that exists in the manufacture of hybrid cars. WHEN Already the global trend is slowly but surely moving away from gasoline and diesel cars toward the eco-friendly hybrid models. This might still take quite a few more years to achieve fruition. The national level transition from regular cars to the hybrid and electric models is not going to be a smooth journey. Initial research studies on the process of reducing the production with an aim of phasing out gasoline powered vehicles show that this transition might take some 20 years or even. For instance, certain factors are likely to drag the process of replacing hybrid engines with gasoline powered engines. For instance issue to do with lack of sufficient charging stations and rebuilding U.S roads and highways to accommodate this new technology are likely to take longer. Such transitions are also likely to be delayed due to conflicting priorities set by the government. For instance, phasing out or reducing the overall production of gasoline powered engines will not only affect the auto makers alone but instead the entire auto industry in America. The country also stands a chance of losing out on significant revenue; revenue that is collected from the exportation of such vehicles and the various levies charged by local authorise. While technology continues to advance at an impressive pace, the fruits of these technological improvements might not be felt within 10-20 years. (Futuremarketinsights.com, 2017). WHERE The effects of the advantages of a hybrid vehicle are multi-faceted in nature. The impact should be felt at all levels- starting from within the company itself, to locally, nationally and finally globally. The global impact is what the hybrid cars should ultimately be looking at. According to Elon Musk of Tesla, research has shown that the global CO2 levels (at 403.5 parts per million) are at an alarming high and is rapidly increasing ("Globally Averaged CO2 Levels Reach 400 parts per million in 2015", 2017). Musk has been a great critic of the America environment management and conservation authorities for their laxity and indecisiveness when it comes to passing important legislations perceived to directly affect major economic generators. The above estimates were obtained from the National Environmental Management Authority amidst public outcry for implementation of legislation to curb Co2 emissions. In the report released by the same authority, the auto manufacturing industry as well as the industrial sector were cited as the major sources of environmental emissions and hence air pollution. Nevertheless, major attention will be paid to the impact of hybrid vehicles locally, within the U.S market. This will be intentionally done so as to ensure that there are no issues of call backs due to increased emissions or failure of hybrid cars to perform as per the design specifications. LOCAL IMPACT Since their introduction in 2000, in the U.S market, hybrid vehicles have been in strong demand. Available statistics indicate that the demand has steadily risen from 2% in 2000 to the current 12%. It has been however argued that the low demand is due to the fact that some mild hybrid cars do not save as much fuel as perceived despite their low cost. However, the performance of typical hybrid cars has been found to consume low amounts of fuels as compared to gasoline powered engines. Since hybrid cars deliver more effective fuel economy, the U.S views these vehicles as a by-product of reducing CO2 emissions, to control air pollution and strengthen energy security. If a large percentage of the society is encourage d to swap their gasoline engines for hybrids, there overall amount of emissions is bound to significantly reduce below the current levels. Following the guidelines of the National Energy Policy Report in 2001, the U.S government has been encouraging the purchase of hybrid vehicles in the form of handing out federal income tax credits against their purchase. For instance, recent purchases of hybrid cars attracted a tax exemption of up to 2% from the federal government (Plunkett, 2008). According to a report written by the National Energy Policy Development (NEPD) Group, motor vehicles contribute to about 20 percent of annual emissions of CO2 in the U.S., which is the main thing contributing to global warming. To address this, policies have been proposed like increasing the federal gasoline on tax, enforcing stricter Corporate Average Fuel Economy standards and promoting the purchase of fuel efficient technologies like the fuel cell technology and the hybrid technology (Beresteanu, 2017). Another interpretation of the above policies and legislations is basically to reduce the purchase of gasoline engines while encouraging the purchase of hybrid engines. Even increasing price of diesel and petroleum also make hybrid cars an economically viable option in the long run. Statistics on the trends in the price of diesel against its increasing usage show that the retail price of diesel has risen from $2 per gallon in 2016 to $2.57 in 2017, a price increase of almost 28.5 percent in just a year’s time (Eia.gov, 2017). In this report, it is assumed that the price gap between hybrid and IC remains at 13%. As such, this report will focus on premium where the price is not so sensitive to consumer choices. For instance, hybrid cars as of now still cost more than regular cars. They are still marketed as status symbols rather than eco-friendly vehicles created to ensure fuel economy (Westbrook, & Institution of Electrical Engineers, 2001). Hence, this report aims at pitching on the pricing strategy as an incentive to encourage mass purchases of hybrid cars. If the prices are lowered, more consumers will be willing to buy such vehicles. However, the sales are bound to stay low despite the various discussed anticipated benefits in case nothing is done on the cost. Outside the premium segment, the biggest problem with this price increase has to do with the time it takes to adjust the difference in cost between a hybrid model and its equivalent compact model (Boschert, 2006). BOUNDS Hybrids cars weigh more than their regular counterparts, due to the fact that a battery pack, regenerative braking system, associated cooling systems, an electric motor, are all an intrinsic part of the hybrid design. Unfortunately for a better performance a hybrid’s battery pack needs to be big. This explains why hybrid vehicles accelerate faster than regular cars from a stop due to the extra weight on the rear. There has been some issue regarding battery packs failing but they are unwarranted. The initial analysis, conducted with older Prius models, proves fuel mileage remains almost the same even a decade. But the Prius is only one car, and automakers make use of multiple software management systems, battery suppliers and charging systems. But since not much has yet been experienced by the industry with respect to these cars, it is difficult to predict future reliability. Nevertheless, the report will not consider the quality or warranty implications of hybrids. Hybrids are not very cold weather friendly and will perfectly fit into the weather of the American market. This is due to some reasons, primarily since in winter batteries discharge more quickly. In fact, during such weather conditions, the batteries perform heating functions besides the normal supply of power to the car’s electrical system. Also, the basic requirement of heating up the interior of the car eats up the fuel mileage and decreases efficiency overall. This is also since hybrids use an internal combustion engine. CONCLUSION Basing on the bear facts laid out in this report, hybrid cars present numerous benefits as compared gas vehicles. There is an evident ready market in the United States of America as well as in other parts of the globe. In fact, there are higher chances that the government may either implement subsidies or offer tax relive for new entrants in the industry. Similarly, the environmentally friendly nature of the technology serves as another significant selling point. Most existing gasoline powered engine manufacturers face a risk of increasing cost of doing business in the near future. Once the various legislations aimed at conserving the environment are enacted, the cost of producing a single gasoline powered engine might be sufficient to produce almost three hybrid cars. It is thus expected that General Motors and other manufacturers will be motivated by the information contained in this report and subsequently embrace the Hybrid car manufacturing technologies. References ANDERSON, C. D., & ANDERSON, J. (2010). Electric and hybrid cars: a history. Jefferson, N.C., McFarland. http://public.eblib.com/choice/publicfullrecord.aspx?p=510234. Beresteanu, A. (2017). Gasoline Prices, Government Support, and the Demand for Hybrid BLATT, H. (2011). America's environmental report card: are we making the grade? Cambridge, Mass, MIT Press. BOSCHERT, S. (2006). Plug-in hybrids: the cars that will recharge America. Gabriola Island, B.C., New Society Publishers. http://www.deslibris.ca/ID/432011. Eia.gov. (2017). Gasoline and Diesel Fuel Update - Energy Information Administration. [online] Available at: https://www.eia.gov/petroleum/gasdiesel/ Epa.gov. (2017). Vehicle and Fuel Emissions Testing | US EPA. [online] Available at: https://www.epa.gov/vehicle-and-fuel-emissions-testing. Forecast, 2016 to2026. [online] Available at: http://www.futuremarketinsights.com/reports/global-hybrid-vehicles-market. Futuremarketinsights.com. (2017). Hybrid Vehicles Market - Global Industry Analysis, Size and JUETTNER, B. (2009). Hybrid cars. Chicago, Ill, Norwood House Press. https://www.overdrive.com/search?q=989F283A-205C-4187-B478-4E2664990FDD. PLUNKETT, J. W. (2008). Plunkett's automobile industry almanac 2009: the only comprehensive guide to automotive companies and trends. Houston, Tex, Plunkett Research Ltd Vehicles in the U.S. 1st ed. [ebook] Available at: http://public.econ.duke.edu/Papers//PDF/hybrid.pdf Westbrook, M. H., & Institution of Electrical Engineers. (2001). The electric car: Development and future of battery, hybrid and fuel-cell cars. London: Institution of Electrical Engineers. Wikipedia, (2014), Hybrid electric vehicles in the United States [ONLINE], Available at: https://en.wikipedia.org/wiki/Hybrid_electric_vehicles_in_the_United_States#/media/Fil e:U.S_top_selling_HEVs_by_market_share.png [Accessed 29 April 2017], Read More