Honda to sell new gas-electric hybrid next year, outlines strategy for plant cost cuts

Honda will sell a new, improved and affordable gas-electric hybrid in the U.S., Japan and Europe starting in early 2009, underlining the Japanese automaker's commitment to "green" technology, the company president said Wednesday.

The new model _ to be sold solely as a hybrid, and not as a traditional, gasoline-powered car _ is a key part of Honda Motor Co.'s strategy for the next three years that President Takeo Fukui outlined at Tokyo headquarters.

The plan also included production innovations and expansion in Japan to cut costs so Honda can stay competitive amid soaring material and energy costs, he said.

In addition to the new hybrid, Honda will introduce several other hybrids: a Civic, a new sporty model based on the CR-Z and a Fit subcompact, sold as the Jazz in Europe, Fukui said.

"Hybrids have drawn attention for their image, but time has come to go to the next step," he said, stressing that Honda was serious about selling hybrids in numbers.

Fukui refused to give the price for the new vehicle, which would be offered solely as a hybrid.

But he said the difference between hybrids and their comparable standard models should be kept within 200,000 yen (US$1,900; euro1,200), although such price gaps can now reach as much as 500,000 yen (US$4,800; euro3,000).

"The 200,000 yen difference is a must," said Fukui.

The new hybrid's name was not yet disclosed. It will be a five-door sedan seating five passengers, and feature new technology that reduced the size and weight of the hybrid system to increase fuel efficiency, according to Honda, Japan's second-biggest automaker.

Although Honda already has developed hybrids, it has fallen behind Japanese rival Toyota Motor Corp. in this segment.

Last year, Honda discontinued the gas-and-electric version of its Accord sedan _ sold only in North American _ which sold just 25,000 units since going on sale in 2004. In 2006, it pulled the plug on the slow-selling Insight hybrid.

Over the past decade, Toyota has sold more than a million Prius gas-electric hybrid cars worldwide. When including other hybrid models, cumulative overall sales of gas-electric vehicles total 1.46 million, according to Toyota, which also makes the Camry sedan and Lexus luxury cars.

Honda has sold nearly 262,000 hybrid vehicles worldwide since it started selling them in 1999. Hybrids deliver a cleaner, more efficient ride by switching between a gas engine and an electric motor at different speeds, and by recycling the energy the car produces as it moves.

Honda said Wednesday that it plans to sell 500,000 hybrids a year sometime after 2010, half the number that Toyota has already announced it seeks to sell a year by the same time period.

Fukui said he didn't consider that as a defeat to Toyota. But he acknowledged the Prius was a smart success, partly because it's only offered as a hybrid.

"It's very clear to see the Prius is a hybrid," he said.

At the end of this year, the production line for the hybrid motor will be raised to 250,000 units annual capacity from the current 70,000, Honda said.

Honda said it's also pushing its fuel-cell technology to ease environmental concerns.

A fuel cell vehicle has no emissions because it runs on the power created when hydrogen, stored as fuel in the vehicle, combines with oxygen in the air to emit water.

Honda said it expects to lease several dozen of its new fuel cell vehicle, FCX Clarity, a year, mostly in California, reaching 200 vehicles in the first three years. The leasing is set to start in July 2008 in the U.S., and a few months later in Japan.

Under the plans for production cost cuts, Fukui said a new car plant will reduce energy needs by 30 percent compared with an existing Honda plant. A new engine plant will have flexible lines that can produce different engines, including diesels.

Honda will invest 158 billion yen (US$1.5 billion; euro960 million) for the two "next-generation plants," which will be able to trace components for better quality control, it said.

Fukui said such production finesse will be expanded to Honda's global operations but must first begin at home in Japan.

"The power of Japan is needed," he said.

Its booming motorcycle business is a key strength that helps makes Honda unique among the world's major automakers, the company said.

Honda motorcycles are hugely popular in developing economies such as Vietnam and Thailand, and Honda is beefing up its motorcycle production methods so that it can withstand a potential drop in the dollar to 90 yen levels.

A weak dollar, now trading at about 103 yen, down about 10 percent from the previous year, hurts the earnings of Japanese automakers by eroding their overseas income when converted to yen.