Is Diesel the New Hybrid?

Much has been made of late about the rising sales and increasing prevalence of hybrid and alternative fuel vehicles on the roads.

If you listen to some reports, in a few years jobbers should see the orders for specialized hybrid parts rise rapidly. But is that really the case? Is hybrid technology to become the new norm, or are there real alternatives to this “alternative” technology?

A recent study by research firm Frost and Sullivan took a closer look at some of the finer (and oft-overlooked) points within the debate, specifically relating to the overall numbers within the alternative fuel game. As the study states, “Among alternative technologies, hybrids have emerged as the current winners. Toyota’s Prius took the market by surprise, selling over 50,000 units in 2004 and close to 100,000 in 2005, reaching 500,000 units worldwide to date. A symbol of environmentalism, it has been embraced by many, from Bay-area techies to Hollywood superstars.”

The study goes on to note that these trends, despite the drawbacks, will likely continue as hybrid technology proliferates further. However, the study pinpoints some glaring discrepancies between manufacturer rhetoric and consumer reality. While hybrids seem to be getting all of the celebrity buzz, they come with significant and not always obvious drawbacks; other options such as the new clean diesel could actually do more to convince consumers to make more economic and bio-friendly purchase decisions in the future. This is new territory for the diesel world, given its historically soot-laden image.

The Trouble With Hybrids

According to the study, hybrid vehicles, though undeniably more fuel-efficient, do come with some of their own unique problems when it comes to not only cost but the environment as well, given the unique parts associated with them.

If one breaks out all of the costs associated with the purchase of a hybrid, the first detractor becomes apparent after a small amount of number crunching. Now, it is entirely possible that the majority of hybrid owners today pay no attention to the reported cost savings of owning their vehicle, and have simply made the purchase out of some high-minded eco-consciousness, but it also remains possible that many have bought into the dollar-driven sales pitch of the manufacturers. Given the recent spike in oil costs, it is fair to assume that while the former group exists, the latter is growing.

The notion that hybrids will pay for themselves in fuel cost savings is a popular selling point among dealers, but the stats cited in multiple studies contradict this assertion. For example, the hybrid package costs an estimated $4,000 to $4,600 extra on average (all figures found in the report have been extrapolated by Jobber News for the Canadian market). A Toyota Highlander hybrid, for instance, posts a 14-km-per-litre rating, versus 8 km per litre for the regular version. At 20,000 km a year, with gasoline costing 80 cents per litre, this amounts to a net yearly savings of some $800; it would still require more than five years to recoup the added investment. However, most consumers miss the fact that an opportunity cost also is involved. That extra cost of $4,300 could be invested for a return of roughly $1,300 (assuming a 5% GIC return) over a six-year payback period. This opportunity cost adds two more years (still using the 80 cent-per-litre figure) to the recoup period, taking it to more than 7.5 years. This is longer than the average holding period of an automobile in the U.S. or Canada. Consequently, the argument for cost savings is a difficult one to make, unless gas prices jump significantly. On the environmental side of the coin, the Frost and Sullivan report points out several areas in which the hybrid could also pose eco-challenges. “Many analysts argue that the cost to the environment of creating batteries, motors, and other hardware for hybrid systems is greater than the environmental impact of making standard-technology powertrains. Nickel metal batteries need to be replaced, on average, at the 150,000 km mark, piling landfills with chemicals detrimental to the environment,” states the report.While this point is largely circumstantial, and perhaps even alarmist, it does give us reason for thought. It reminds us that we are currently only in the first few years of the new automotive hybrid reality, and are as of yet unaware of the unique economic and environmental costs that will surely come with the full-term operation, and then disposal, of each hybrid vehicle.

The Case for Diesel

For years, diesel has been dominant in Europe, where fuel prices have been significantly higher. As the study mentions, “[Diesel] has entered the North American market, with Volkswagen and Mercedes bringing turbo-diesels en masse. Diesels have become quieter, more powerful, and cleaner with time, and are a serious challenger to the traditional gasoline engine.” Not only are they a challenge to gasoline, but a separate Frost and Sullivan study commissioned in Europe found that “high-efficiency diesel vehicles have demonstrated fuel economies and C02 emission figures similar to those provided by gasoline [hybrids].”

While diesel has been slow to catch on in North America, significant changes in the fuel itself have led many producers to take a more serious look at this marketplace, specifically as it relates to competition with the hybrids on both economic and environmental grounds. As the study points out, “Diesels are believed to be noisy and dirty stateside, but this may no longer be the case.” The introduction of ultra-low sulphur diesel (ULSD) significantly reduces sulphur content and emissions, and allows advanced diesel engines and their accompanying emissions reductions technologies to be introduced in North America, replacing old-technology diesel engines running on high-sulphur fuel. Further, the strong torque characteristics of diesels, available at lower rpm, make them feel comparable to, if not quicker than, their standard gas counterparts.

In terms of cost, diesel engines are a mature product, which can be made relatively cheaply compared to the high development costs of a hybrid vehicle. Furthermore, as a European analyst for the researcher, Rajesh Kannan, mentions, “The possibility of government grants for the first hybrid vehicle owners are regarded as incentives. However, once pitted against improved diesel engines, vehicle manufacturers need to decrease the price of hybrid vehicles further to close the cost gap between hybrid and diesel powertrains.” In short, auto manufacturers are decidedly streamlined in the production of diesel powertrains, because they have been doing it for decades. Hybrids, however, require new tooling, new technology, and many more unknowns, making them unavoidably expensive, at least for the foreseeable future. If the new clean diesel is actually as eco-friendly as some reports would suggest, then the trendy hybrid will likely have some very keen competition.

Click here to view the Comparison of Alternative Fuels and Technologies chart