Honda hybrids may be nightmare for Detroit

updated 6:03 p.m. ET May 21, 2008

DETROIT - Honda Motor Co. is coming out with hybrid cars starting early next year that will cost about $1,900 more than comparable gas-only models. The cost for the Detroit Three, according to industry analysts, could be lower market share as U.S. consumers continue their rapid shift to smaller, more fuel-efficient vehicles.

Analysts say the new hybrids, including a gas-electric hybrid-only model to fight the popular Toyota Prius and a hybrid version of the subcompact Fit, will hit the market at the right time with gasoline prices continuing to rise.

"It's a game-changer for the short term if they can get the products in the marketplace in the next couple of years before the domestics can come up with a significant volume of products that get high mileage," said Jesse Toprak, chief industry analyst for the auto information site Edmunds.com.

Honda, which already has the most fuel-efficient lineup in the U.S., announced Wednesday that it will sell the new hybrid-only car in the U.S., Japan and Europe starting in early 2009. It has not determined yet where the Fit will be sold.

The new models are a key part of Honda's strategy for the next three years that President Takeo Fukui outlined at Honda's Tokyo headquarters.

The plan also included production innovations and expansion in Japan to cut costs so Honda can stay competitive amid soaring material and energy costs, he said.

In addition to the new model and the Fit, Honda will introduce several other hybrids: a Civic and a new sporty model based on the CR-Z, Fukui said.

Fukui refused to give the price for the new hybrid-only vehicle.

But he said the difference between hybrids and their comparable standard models should be kept within 200,000 yen ($1,900), although such price gaps can now reach as much as 500,000 yen ($4,800).

"The 200,000 yen difference is a must," Fukui said.

Hybrids deliver a cleaner, more efficient ride by switching between a gas engine and an electric motor at different speeds, and by recycling the energy the car produces as it moves.

Honda's hybrids compound a problem that Ford Motor Co., General Motors Corp. and Chrysler LLC already are scrambling to overcome — the U.S. market shift to small cars when they're known for making trucks and sport utility vehicles.

"It does put them a little bit on their back foot in the sense that small cars have not been a core market for them," said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville.

GM and Ford, Robinet said, can rely on their European and Asian operations for small car expertise to quickly catch up. Chrysler has few small vehicles of its own but has signed a deal for Nissan Motor Co. to make small Chrysler cars in 2010.

Honda's hybrids come as all automakers are rushing to make their models more fuel-efficient. GM largely has focused on hybrids in its larger vehicles and on the Chevrolet Volt, a plug-in electric car it hopes to bring to market in 2010. Ford is banking on its Ecoboost direct-injection turbocharged engines and has midsize hybrids due out next year, while Chrysler is developing efficient smaller diesels and has hybrids in some large SUVs.

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