Thursday, March 18, 2010

Honda�"s Low-Cost Hybrid Strategy: Lithium Ion Batteries

2010 Honda Civic Hybrid

In about two years, the Honda Civic Hybrid could start using lithium ion batteries. Despite views to the contrary, the move to lithium from nickel batteries could reduce the price premium for Honda hybrids.

While the high cost of next generation lithium ion batteries is viewed as an obstacle to adoption of pure electric cars, lithium might be the key to making conventional hybrids more affordable. Bloomberg reported today that Honda�which has focused its hybrid marketing strategy on making hybrids nearly as affordable as gas-powered cars�is swiftly moving to put lithium batteries in the Civic Hybrid and its other hybrids.

Honda hopes that shifting its hybrid battery technology to lithium ion�which packs more power in a smaller space�will help the company gain an advantage over Toyota. In addition to moving to lithium batteries, Honda is planning to increase hybrid production in small and large cars and to introduce Acura luxury hybrids.

Toyota�"s recent safety troubles have created an opportunity for other producers of hybrid cars. Honda hybrid sales have been lagging in recent years. Yet, February 2010 sales of the Honda Insight and Civic Hybrid increased by 54 percent and 37 percent respectively, compared to the previous month. Sales of the Toyota Prius dropped by 6 percent in February�although the model still dominates the US and Japanese hybrid markets. Koichi Kondo, Honda executive vice president, told Bloomberg that Honda could put lithium ion batteries in the Civic Hybrid �Swithin the next two to three years.⬝

By contrast, Toyota believes that lithium batteries do not justify the higher cost, and that current hybrid battery technology�nickel metal hydride�is best suited for conventional hybrids. The company came to that conclusion last fall after conducting three years of �Ssecret tests⬝ on 126 Toyota Priuses equipped with lithium ion batteries.

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