By Jeremy Cato

2006 Toyota Highlander Hybrid
2006 Toyota Highlander Hybrid. Photos: Toyota. Click image to enlarge

The surging cost of a fill-up is figuring into the car-buying decisions of Canadians, but it is not the only reason why Toyota is expanding its fuel-conscious fleet of gasoline-electric hybrid vehicles with the introduction of the station wagon-like 2006 Toyota Highlander Hybrid sport utility vehicle (SUV).

There is also the environment weighing on the minds of many consumers who want to drive a larger vehicle but also want to be socially responsible. Still, the impact of higher fuel prices is having an impact, though some argue not a major one.

A recent Decima Research poll found 68 per cent of Canadians admit they obsess over gas prices to the point of monitoring pump prices on a daily basis. In fact, 85 per cent remember the exact price per litre they paid at their last fill-up.

However, if fuel prices are your main concern, gasoline-electric hybrid vehicles deliver a relatively puny savings in the overall scheme of what it costs to own and operate a vehicle (see chart). Dennis DesRosiers of DesRosiers Automotive Consultants points out that insurance costs, depreciation, taxes and regulatory charges all cost Canadians much more than fuel in the final tally of vehicle operating costs — even with gas at $1 or more a litre.

Says DesRosiers: “A typical mid-size vehicle costs about $1,200–$1,500 per year for fuel. These higher gas prices have pushed that up by about $100 to $200 per year. Will a consumer change their vehicle purchasing buying decision for $200 per year?

“Remember the average transaction price of a vehicle in Canada is over $30,000, so an extra $200 per year may not be enough to change buying behaviour… Thus when you look at the market changes over time you find that consumers, at least in the short term, do not adjust their vehicle buying habits because of higher gas prices.”

The environment is another matter. In a nutshell, gasoline-electric hybrids pollute less than comparably-sized non-hybrids. The Highlander Hybrid, for instance, meets Environment Canada’s stringent Tier 2 Bin 3 standard and it also is certified for the tough California Air Resources Board (CARB) Super Ultra Low Emission Vehicle (SULEV) tailpipe standard.

Obviously fuel economy plays a big role here. Toyota Canada claims fuel consumption for the Highlander Hybrid is half that of conventionally-powered SUVs at 7.5 city, 8.1 highway and 7.8 combined (litres/100 km). A seven-passenger, purely gas-powered V-6 Highlander gets fuel economy of 12.7 city/9.0 hwy.

Clearly, though, there is a “feel-good factor” that is coming into play for many hybrid buyers who are willing to pay a stiff premium to be early adopters of the latest “green” automotive technology. According to Lonnie Miller, director of analytical solutions for Southfield-based Polk Inc., there is a growing pool of people buying into the idea that driving a hybrid is the socially responsible thing to do.

2005 Toyota Prius
2005 Toyota Prius

2006 Lexus RX 400h and 2006 Toyota Highlander Hybrid
2006 Lexus RX 400h and 2006 Toyota Highlander Hybrid

2005 Honda Insight
2005 Honda Insight

2006 Honda Civic Hybrid
2006 Honda Civic Hybrid

2005 Honda Accord Hybrid
2005 Honda Accord Hybrid

2005 Ford Escape Hybrid
2005 Ford Escape Hybrid

2006 GMC Sierra Hybrid
2006 GMC Sierra Hybrid
Click images to enlarge

“What’s different about this than other types of vehicles is that hybrids are about what people want to give back and what they want to feel they’re doing with their vehicles,” Miller told the Associated Press.

For a manufacturer such as Toyota, which has invested more heavily in its hybrid effort than any other automaker in the world, there is a significant marketing benefit in being seen as the leader in offering environmentally sensitive vehicles – even if the fuel economy and environmental gains, not to mention the fuel pump savings, are marginal compared to other vehicle ownership costs.

But not all automakers have seen hybrids in this way. Earlier this year at Detroit’s auto show, General Motors vice-chairman Bob Lutz, who heads all product development for the giant automaker, admitted that his company overlooked the marketing and public relations benefits of selling a growing fleet of hybrid vehicles to the public.

In analyzing the “business case” for hybrids, GM did a rigid cost-benefit analysis and found that purely in terms of dollars and cents, the right decision was to delay the technology until it was ready for wholesale application to large fleets of fuel-swilling pickups and sport-utility vehicles.

GM, in fact, took a rigid and narrow analytic approach to assessing costs and benefits. By doing so, GM overlooked the value of hybrids to automakers interested in creating a positive image in terms of public perception. “We forgot the emotional impact and the fact that a lot of people out there want to make an environmental statement,” said Lutz.

Toyota has not made that mistake. According to J.D. Power and Associates, by 2011 the number of hybrid models will expand to 38 — 17 cars and 21 trucks and SUVs – and Toyota can be expected to dominate the market with the greatest variety of vehicles from any automaker. The J.D. Power study found that Toyota currently holds more than 60 per cent of the North American hybrid market, and though the Japanese automaker’s share is expected to shrink to 40 per cent by 2011, Toyota will remain the market leader in hybrids.

Indeed, Dave Hermance, executive engineer of Environmental Engineering at Toyota’s Technical Centre in the U.S., says the automaker is on track to hit its sales goal of 100,000 gasoline-electric hybrid vehicles in 2005. In addition to the Highlander Hybrid and the Lexus RX 400h launched in the last few months, Toyota also plans to introduce hybrid versions of the Lexus GS and Toyota Camry in the 2007 model year. They come on the heels of the highly successful Toyota Prius five-door hatchback launched earlier.

That’s quite a line-up of hybrids. In fact, no other automaker even approaches the depth and scope of Toyota’s hybrid effort. By comparison, the Power study projects that Honda’s current 31 per cent of the hybrid market will slip to 20 per cent by 2011. GM’s Chevrolet brand is forecast to be the largest domestic brand in the hybrid market, growing its share to nearly 15 per cent by decade’s end. Ford, which last year launched the Escape Hybrid SUV and has plans to sell at least three other hybrids by next year, will be eclipsed by GM.

In the meantime, current hybrid sellers Toyota, Honda and Ford will soon be joined by not only GM but also Nissan, DaimlerChrysler, Hyundai and even Kia. They are all reacting to growing consumer demand.

While there’s no question hybrid sales today remain miniscule in terms of the overall new vehicle marketplace, sales are picking up dramatically. According to DesRosiers Automotive Consultants, thanks to the arrival of the new Prius, hybrid sales in Canada increased more than six-fold from 2003 to 2004 and more than doubled in the United States during the same period.

True, the real numbers are less impressive: 1,960 hybrids sold in Canada in 2004 and 54,574 sold in the U.S., not including sales figures for the Honda Civic Hybrid. But in a recent study, R.L. Polk & Company in the U.S. noted that sales of hybrids have risen by 960 per cent since 2000, thus while hybrids now account for only one per cent of the 17 million-plus new vehicles sold in Canada and the U.S. today, the trend is clearly toward booming sales of gas-electric vehicles in the medium term.

Automakers are making this move for a host of reasons, not the least of which is that gas-electric vehicles represent a transitional technology leading to hydrogen-powered fuel cells – even though mass-production hydrogen vehicles for public consumption are at least a decade or perhaps even two away. Toyota’s Hermance, though, expects Toyota to be on the leading edge of fuel cell technology whenever it comes.

“Our fuel cell vehicle uses the same battery that’s in the Prius,” he says. “All the learning you do today, all the parts you develop today, except for the gasoline engine, will be directly used on future fuel cell vehicles.

“Hybrids are a very valuable transition. The manufacturer that knows how to do hybrids — at this future point in time, whenever it is, that fuel cells are ready — will have a significant cost and learning advantage over manufacturers that have been working on fuel cells only.”

How much will you save by driving a Hybrid?

By Jeremy Cato

Owners of gasoline-electric hybrids have been disappointed by the real-world fuel economy benefits, finding their savings are less than promised. According to Consumer Reports, hybrid cars get less than 60 per cent of official government fuel economy estimates while navigating city streets, but perform much closer to highway estimates. Moreover, the price premium automakers charge for hybrids is not completely offset by gas savings and government tax credits over a typical five-year lifecycle of ownership.

According to an analysis by, an owner would have to drive a hybrid an extra tens of thousands kilometres a year, or gas prices would have to spike to stratospheric levels for a hybrid to pay for itself.

The so-called fuel economy gap has created quite a buzz among hybrid owners who expected massive fuel economy gains with their more expensive cars. In frustration, many owners have turned to online chat room forums and the like to vent their displeasure.

“If people go in with the idea they are saving money, they are mistaken,” Jesse Toprak, pricing director for told USA Today, which commissioned the study.

As Robert Duronio, an analyst with PricewaterhouseCoopers’ Autofacts division in Detroit put it earlier this year, “By the time you start to save money from the fuel economy, you’re really six years into it.”

Nonetheless, it is hard to put a price tag on the “feel-good factor” that comes from driving a low-emission, somewhat fuel-sipping gasoline-electric hybrid. But that did not deter us from calculating what you might save at the pump. Let’s look at the numbers using the same method employed by Natural Resources Canada to calculate annual fuel costs.

Government officials estimate annual fuel consumption and fuel cost based on 20,000 km driven annually, with a mix of 55 per cent in the city and 45 per cent on the highway driving. So we’ll go with fuel price of $1.10/litre.

For the Toyota Highlander Hybrid:

  • 20,000 km a year getting fuel economy of 7.5 city/8.1 hwy (litres/100 km) comes to an annual fuel usage of 1,554 litres.

  • At $1.10/litre, the annual fuel bill comes to $1,709.40.

For the regular Highlander V6 AWD:

  • 20,000 km a year getting fuel economy of 12.7 city/9.0 hwy (litres/100 km) comes to an annual fuel usage of 2,207 litres.

  • At $1.10/litre, the annual fuel bill comes to $2427.70.

With gas at $1.10/litre, the annual fuel savings for the Highlander Hybrid versus the Highlander V-6 comes to $718.30.

That’s a substantial annual fuel cost savings, but it would still take 10.2 years to pay for the $7,305 premium you are charged for hybrid technology in a five-passenger Highlander Hybrid ($44,205) versus the five-passenger V-6 (36,900). A tax rebate of $2,000 reduces the payback period to 7.4 years. Of course, the numbers will vary depending on whether gas prices go up or down.

Despite the future promise of a transition to clean hydrogen-powered vehicles, the painful truth today is that the lower emissions and better fuel economy of hybrids come at a very steep price – and don’t forget that hybrids typically fall well short of their fuel-economy ratings. So the sad reality is not only do most people fail to save enough on fuel to offset the higher initial price, today’s hybrid also costs $5,000-$8,000 or more than the same non-hybrid vehicle.

Some of that extra cost is now being offset by a variety of tax-rebate schemes put in place by several provincial governments, including Ontario and British Columbia. They can provide tax relief equaling up to several thousand dollars on the purchase of a hybrid and are worth exploring with local dealers.

However, before tax deals come into play, buyers face some pretty fat hybrid sticker prices. In the case of the Highlander Hybrid, the base model comes in at a hefty $44,205 for the five-passenger version and prices range all the way up to $53,145 for the luxurious seven-passenger model, with leather interior, automatic climate control, anti-theft system, and premium audio.

Compare those numbers to what a regular V6 Highlander with five-passenger seating goes for: $36,900. The seven-passenger model starts at $37,950.

All those thousands of extra dollars go to pay for a lot of technology. A hybrid vehicle is powered primarily by an internal combustion engine, but is also equipped with batteries that are recharged while driving and an electric motor to assist with power. A very sophisticated computer control system orchestrates the gas and electric systems so they work together or separately, as need arises.

In addition, and like other typical hybrids on the market today, the Highlander Hybrid also uses a “regenerative braking system” to further boost system efficiency. When coasting, or when the brakes are applied, the electric motor functions as a generator. Thus, it captures heat or kinetic energy normally wasted through braking and converts it to electricity for recharging the battery pack.

To soften the blow of a fat sticker price, Toyota packs the Highlander Hybrid with such premium features as standard air conditioning, cruise control, keyless entry and an advanced stability control system in the five-passenger version, adding seats for seven, a leather interior, automatic climate control, an anti-theft system and premium audio to help justify the $9,000 jump to the uplevel Highlander Hybrid.

Then there is the performance hook. Like its sister vehicle the Lexus RX 400h launched in late spring, the Highlander Hybrid does not play so much on its fuel-efficient econo-model credentials as it does the raciness of the two SUVs. The all-wheel-drive (AWD) Highlander Hybrid (268 horsepower) launches from 0-100 km/hour in about 7.5 seconds, about half a second faster than the AWD V6 gas model (230 hp). And the Hybrid does it with the fuel economy of a smallish car.

Some of that fuel efficiency has nothing to do with the fancy hybrid system, but instead comes from the continuously variable automatic transmission (CVT) — a common feature on hybrids. The CVT keeps the gas engine revving where the computer brain thinks it should to achieve the best combination of power and economy. But as always with CVTs, I found the lack of gears shifting hard to get used to and at times the engine revved randomly, apparently searching for what that computer thinks is the sweet spot in performance.

Of course at times the gas motor doesn’t work at all. Instead, electric motors power the vehicle at low speeds and when stopped, the gas engine coming into play as speed and power demands rise. The electric motors which produce their full torque the instant they begin to turn make this Hybrid very snappy off the line and quite quick in passing mode.

Now because the gas engine shuts down whenever possible in stop-and-go driving, fuel economy in the city is excellent. On the other hand, highway fuel economy is completely unremarkable. With no gas engine shutdowns on long, high-speed runs, the hybrid gizmos offer almost no fuel economy benefit at all.

There are also limitations on the AWD system. It is meant primarily to help out when the roads are covered in snow or ice. Any really serious off-roading is likely to overheat the rear electric motor.

In a nutshell, then, the Highlander Hybrid is a poster child for this future onslaught of hybrid vehicles. It is practical, sips fuel like a car in city traffic, can tow up to 1,587 kg and looks completely normal, aside its very nice wheels and hybrid badges. Best of all for Toyota, it gives buyers the option of driving an SUV with “green” credentials.

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