Hybrid cars cost less to build as demand grows

March 27 2007: 11:10 AM EDT


LONDON (Reuters) -- Battery makers and suppliers of other key parts for hybrid, energy-saving vehicles have one overriding question: when will the market be big enough to justify their costs?

A hybrid vehicle, which combines an internal combustion engine and an electric motor powered by batteries that can recapture energy normally lost, costs $4,500 to $6,000 more to build than a conventional vehicle, a recent report by the Sanford C. Bernstein investment management firm said.
The upfront cost and load capacity are the main challenges for hybrids due to the expensive electrical motor and battery.

"It is a chicken-and-egg problem - the car makers say to us we want an aggressive price from the beginning and we say to them we can give them an aggressive price when we have the volume," Franck Cecchi, chief operation officer of battery maker Johnson Controls-Saft, said.

Demand for hybrids was booming and the world's top producer of hybrids, Toyota Motor Corp. (down $1.99 to $130.71, Charts) forecast global sales of hybrids reaching 1 million in 2010, equaling the number of all new cars and small trucks purchased between 1997 and 2006.

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