Hybrid Cars Have Cost Advantage Over Diesel, Less Expensive Than EVs

Nearly two decades after the first Toyota Prius went on sale in Japan, the cost of hybrid technology is now less than diesel, according to the original Prius lead engineer, Satoshi Ogiso.

In an exclusive interview with Forbes’ contributor Bertel Schmitt, Ogiso said a cost advantage for the technology he was part of from the beginning.

“In Europe, the production cost of an automatic transmission hybrid system and diesel already have reached parity,” said Ogiso, observing an advantage over battery electric vehicle costs, as well.

Now, post dieselgate, European car manufactures are forced to install more costly emissions treatment to meet the 2020 stricter government-mandated emissions standards that lower CO2 levels, and in particular, NOx (nitrogen oxide) emissions.

SEE ALSO: What Volkswagen’s ‘Dieselgate’ Is, and Why it Matters

In Europe, diesels have enjoyed a nearly 50 percent market share because they were seen as the only answer to meet regulations that were lower in cost than hybrids.

With the higher cost of emission treatment systems, “the business case for diesel can only deteriorate further, industry leaders realize, as targets become stricter, while electric and hybrid car batteries get cheaper and more powerful,” Ogiso said.

That magnifies the business case for hybrids.

As for pure battery electric cars, Ogiso thinks their numbers will rise but won’t become the dominant form of transportation.

“For the next 10 or 20 years, and on a global level, our estimation is that more than 50 percent or 60 percent of the cars should be hybrid or fuel cell, with 30 percent of the volume going to battery electric,” Ogiso told Forbes.

The reason for his prediction is battery cost, and with access to global battery research, Ogiso doesn’t expect drastic changes at the moment.

“The cost of pure electric depends very much on range,” Ogiso said. “Up to a 155 mile (250km) range, battery-electric vehicles already can be built for less money than hybrids. However, the market generally wants more range. With a range above 186 miles (300km) a battery-electric vehicle will remain more expensive at least through 2025.”

China’s emissions standards are similar to the European Union, and the gasoline-electric Prius Hybrid already exceeds the EU’s new CO2 target.

SEE ALSO: Volkswagen Embraces EVs So You’ll Forget Dieselgate

European automakers are well aware of this, and to meet the 2020 CO2 deadline they are moving from diesels to plug-in electric hybrids (PHEVs).

Audi, BMW, Daimler and Volkswagen are quickly adding PHEV to their lineups.

A PHEV is essentially a regular hybrid with an extra large battery that can be recharged at home and operate in all-electric model for 20 to 50 miles. When the battery energy is depleted, the gasoline engine takes over and the vehicle operates as a hybrid.

The European plug-in vehicle costs are quite high, and even though they can’t match the Prius consumer price, they are gaining sales ground in several European countries.

Toyota will soon offer its Prius Prime plug-in model in the US and Europe, and while prices have not been published, it is expected to be competitive.

With gas prices at historic lows in the US, consumers are shunning hybrid vehicles and are switching from cars to crossover SUVs.

Until fuel prices rise, hybrid and plug-in hybrid vehicles will likely continue to play second fiddle in the marketplace.