Carmakers see future in hybrids, diesels - Yahoo! News

DETROIT (Reuters) - Sustained consumer interest in cars that use alternative energy sources, such as hybrid and diesel engines, will largely depend on U.S. gasoline prices remaining high, auto industry executives said this week.
"If gasoline falls significantly below $3 a gallon and stays down below $3 a gallon, you undercut the economic viability of all these alternatives," Mike Jackson, chief executive officer of top U.S. car retailer AutoNation Inc., said at the Reuters Autos Summit in Detroit.
The average U.S. price of gasoline -- which accounts for about 40 percent of U.S. daily oil demand -- hit a record near $3.03 per gallon this summer, but has since eased to $2.66.
Hybrids, particularly Toyota Motor Corp.'s iconic Prius, have gained a reputation for hipness among environmentally conscious Americans, in part fueled by celebrity hybrid owners such as Leonardo DiCaprio and Cameron Diaz. Accounting for about 1 percent of new car sales in the United States, a hybrid couples a traditional combustion engine with a battery to allow for lower gasoline consumption.
Diesel engines can use 20 percent to 40 percent less fuel than gasoline models and are popular in Europe, but remain uncommon in consumer vehicles in the United States, where they are sometimes perceived as dirty and unreliable. Diesel fuel is also often priced higher than gasoline in the United States.
JOCKEYING FOR POSITION
For much of the next decade, gasoline-powered hybrids, diesel engines and cars that can run on blends of gasoline and ethanol will jockey for market position, executives said.
"With hybrid technology focused more on small cars, we believe diesel offers an advantage on larger vehicles," said Dan Bonawitz, vice president of corporate planning and logistics at Honda Motor Co. Ltd.. "There's a diminished return on hybrids when you start getting larger frontal areas and more weight and mass."
Both technologies can add several thousand dollars to the retail cost of a vehicle, with some purchasers aiming to claw back that money by spending less on fuel.
"I don't know that everybody actually does the math when they say 'I'm going to invest in a hybrid engine,' and that is going to pay back," said Pete Hastings, a vice president in corporate fixed-income research at Morgan Keegan. "There's a bit more emotion in buying these things."
Gregg Sherrill, group vice president and general manager of power solutions at Johnson Controls Inc., forecast that over the next decade hybrid engines would be a feature on 5 to 8 percent of new cars built worldwide.
Several executives at the summit said diesel engines have gotten short shrift from the American public.
"The technology that is a winner is diesel engines, which already exist in Europe," said Earl Hesterberg, president and CEO of Group 1 Automotive Inc.. "There's also a different perception of emissions."
FUEL CELLS THE HOLY GRAIL
Perhaps the holy grail of alternative fuel sources for cars is the hydrogen fuel cell, which produces electricity by combining hydrogen and oxygen, producing water as its primary byproduct. While fuel cells hold the promise of readily available fuel and lower emissions, auto makers have estimated that they are about 10 years away from being commercially realistic on consumer automobiles.
"We need to take the vehicle out of the energy debate once and for all," said Brent Dewar, vice president of field sales, service and parts at General Motors Corp.. "So we see the ultimate being in the hydrogen fuel cell technology."
Several executives said one of the key hybrid-related developments was that by integrating electric motors into cars, they provide a stepping stone toward the power train that will be needed for hydrogen fuel cells.
"The hybrid is the basis," said Robert Stempel, chairman and CEO of Energy Conversion Devices Inc., which develops batteries used in hybrid cars. "It gets the electric drive on the vehicle. Once you have the electric drive there, then you really don't care if you have the gasoline engine or diesel or fuel cells. The key is that electric drive."