Honda Motor Co announced this week that it would sell its Fit subcompact’s hybrid version for 1.59 million yen in Japan.  Honda claims that its Fit hybrid is going to be the cheapest car in gasoline-electric segment in the domestic market.  This is approximately 170,000 yen more than the conventional Honda Fit and 340,000 yen less than the Honda Insight.

Honda Motors has taken this step to meet the huge demand for fuel-efficient cars all over the world and to compete with the hybrid segment car leader Toyota which would produce a small hybrid car from 2012 at its factory in France.

Honda Insight was the top-selling model in Japan last year, but now domestic car rankings of Insight is below 20th place,  in spite of the generous tax breaks on hybrids.  Hence, Honda needs the Fit to succeed after the Insight, its last gasoline-electric model in domestic hybrid market.  The demand for the Insight by Honda plunged 69 percent as compared to fall in deliveries of Toyota Prius which is top-selling car in Japan.

The Honda Fit hybrid gets 30 km per liter as per Japanese testing methods which compares with the mileage of Honda Insight.  Again the signature spacious cabin of the Fit has made its gasoline version a constant top seller.  The rear suspension layout and the fuel tank in the Fit hybrid allows a multiple-mode seating system.  The Fit could be the Honda’s first possibility to get it all right for the fuel efficiency, technology, design, and price.  As per claims made by Honda, the Fit hybrid’s 1.3-liter engine assisted by an electric motor delivers performance equivalent to a 1.5-liter car.

According to auto experts, the car sales in Japan may fall by 23 % in the next six months due to the end of incentives given to hybrid cars in the country.  However, according to Honda, 10,000 orders have been placed for the Fit hybrid.  As the Fit is currently the cheapest hybrid car in the Japanese market, it is expected to boost the sales of hybrid cars even after the subsidy for fuel- efficient cars ends.

Honda has no plans about launching Fit Hybrid in the United States; however, Honda plans to launch the model for sale in Europe as the Honda Jazz Hybrid in early 2011.  The standard gasoline-powered Honda Fit is manufactured in the United Kingdom.  However Honda needs to get the batteries locally so as to make their European manufacturing of the hybrid version possible.  Currently Osaka-based Sanyo Electric Co makes the nickel-metal hydride battery required for this car.

The Honda Fit Hybrid will be the most affordable and cheapest Hybrid vehicle in Japan’s domestic market.

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The Toyota Prius has been the best selling car in Japan for the past 16 months, thanks to incentives from Japanese government to boost the sales of environment friendly cars.  Toyota has sold about 340,000 3rd generation Prius cars in Japan.  It has sold more than 2.7 million hybrid cars worldwide so far, and almost half of them in Japan.  There were complaints particularly from the blind and aging population in Japan that they can not hear the hybrid car approaching as it is too quiet.  So finally Toyota Prius hybrid car is going to become a little noisy with a novel electronic gadget that will produce a whirring sound to warn the pedestrians.

This new device for Toyota Prius is based on suggestions regarding the dangers of silent electric and hybrid automobiles prepared by the Government of Japan in January this year.  The new Prius cars will have a speaker system installed beneath its hood which will produce a humming sound which has almost the same decibel level that of a normal car engine.  This new system will cost about 12,600 yen (US$ 145), and will go on sale in Japan from August 30.

It is up to the Prius car owner to install this system as its use is voluntary.  Owners will have to pay extra installation charges.  The noise making gadget’s humming is not so jarring and it is barely audible in noisy city traffic, but can be of a great help in quieter places.  The humming gadget can be switched off by the driver but it would switch on automatically every time the car is started.

Toyota has not yet decided about introducing this passenger warning system for their Prius models in other countries, but the Japanese car maker is going through regulations of different countries including the United States as it is considering to market the device in these countries too.  Toyota, the Japanese car maker which also manufacturers the Lexus luxury and Camry sedan models, has plans to release the noise making gadget for other plug-ins, hybrid models, electric vehicles, and vehicles powered by fuel cells.

A research carried out by the United States government last year revealed that compared to cars with conventional engines, hybrid cars are more likely to be involved in accidents involving pedestrians at lower speeds.  The electric-gasoline hybrid delivers good fuel efficiency and mileage, but it is also super quiet as the engine runs as an electric motor most of the time – particularly at lower speeds.  Hence, it received complaints especially from the blind and old pedestrians who are more prone to be hit by the hybrid car, particularly at low speeds.  As Japan’s crowded cities have crisscrossing, narrow roads and streets, the pedestrian death instances compared with other traffic accidents are quite high.  Japan also has a large percentage of aging population, which makes audible cars critically necessary.

Other Japanese auto maker Nissan is also working on similar measures to make quiet eco-friendly cars safer for pedestrians.

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Major automakers in Japan are competing fiercely to get their share of the hybrid car market pie.  Competition between the leaders in hybrid cars – Toyota and its rival Honda – is now set to intensify as both the companies are preparing to launch their new hybrid car models next year.   This is going to lead to a price war which would help the help to increase popularity of hybrid cars in Japan.  As per the latest news from Nikkei Business Daily, Honda’s new two-seat hybrid car CR-Z will cost just around US$16,750 (1.5 million yen), which would make it the cheapest hybrid car in Japan.  CR-Z will be available in the market from autumn this year.

CR-Z — which stands for Compact Renaissance Zero — is a two-seater gasoline-electric hybrid car, which is lively and comfortable and comes with CVT (continuously variable tranmission) as well as manual transmission.  In spite of its low price tag, the Honda CR-Z doesn’t look or feel like a cheap, thrifty car.  The new hybrid from Honda has fuel efficiency of 30 km per liter (34 miles per gallon) of gasoline, compared with the Fit’s 24 km per liter.

The design of Honda’s new hybrid car CR-Z will be based on its gasoline powered compact car Fit, and will share core components of its hybrid model Insight – in order to reduce the development costs.  As a result, the new hybrid car will cost about US$4,400 (400,000 yen) less than Insight hybrid, and about US$2,200 ( 200,000 yen) more than Honda Fit.  With this move the  Honda CR-Z  will cost 20% less than the cheapest hybrid car in the Japanese auto market today.

This price war will put both the car makers – Toyota and Honda – at a disadvantage when profit margins are concerned.  However, when hybrid cars would be available in the normal price range of gasoline powered cars and can offer a performance better than the conventional cars powered by gasoline, hybrids are going to be popular even if the government offers no tax incentives.

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Toyota Motors whose popular hybrid car Prius posted top-most sales in Japan for the 6th consecutive month.  Apart from being an fuel efficient car, something which helped the domestic sales of Prius is the Japanese government policy to offer subsidies and tax breaks for purchasing eco friendly vehicles.

In this gloomy situation of Auto Industry, Toyota Prius is turning out to be a rare bright spot.  With Toyota Prius you can drive about 38 Km per liter.  In heavy traffic situation, hybrid cars like Toyota Prius rely completely on their electric motors and thus burn no gas.  As of now Toyota’s Prius, which works on both electricity and gasoline, continues to dominate Japanese auto sector.

According to the Japan Automobile Dealers Association (JADA), Japan’s biggest automaker – Toyota sold over 26,900 Prius hybrid cars this October, which is quiet a big leap considering its October sales last year which was just around 6,341 units.

After facing losses for three consecutive quarters, the biggest auto maker from Japan – Toyota – has finally hit the bull’s eye in the month of July and September by gaining profit of around 22 billion yen (US $240 million).  Toyota Motor Corp has also reduced its expected loss by 50% for this financial year. Increasing domestic demand of Prius has helped Toyota to post a surprise profit this quarter.

Meanwhile for the fourth consecutive month,  Honda’s Fit – a people carrier, occupied the second position, selling around 15,440 units in Japan. Compared to last year’s October sales Honda Fit has gained about 26.7 percent more sales. To boost its sales, Honda wants to come up with the hybrid version of the Fit next year. Even though the Fit is not a hybrid vehicle, it still eligible for all subsidies and tax breaks given by government as it is fuel-efficient vehicle.

This October third position was occupied by Vitz subcompact from Toyota whereas, the direct competitor of Toyota’s Prius – Honda Insight occupied ninth position.

Considering the environmental concern, and the initiative taken by the Japanese government, Japanese auto market is experiencing increase in the demand for environmentally friendly and fuel efficient cars.  These eco-friendly cars are going to dominate for few more years.

Technorati Tags: Japan, Toyota Prius, hybrid cars, Automobile, Honda Fit