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HYBRID CARS: INCREASING FUEL EFFICIENCY AND

REDUCING OIL DEPENDENCE

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND RESOURCES

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JULY 20, 2006

Serial No. 109–233

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

CHRISTOPHER SHAYS, Connecticut

DAN BURTON, Indiana

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

JON C. PORTER, Nevada

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

CHARLES W. DENT, Pennsylvania

VIRGINIA FOXX, North Carolina

JEAN SCHMIDT, Ohio

BRIAN P. BILBRAY, California

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. DUTCH RUPPERSBERGER, Maryland

BRIAN HIGGINS, New York

ELEANOR HOLMES NORTON, District of

Columbia

———

BERNARD SANDERS, Vermont

(Independent)

DAVID MARIN, Staff Director

LAWRENCE HALLORAN, Deputy Staff Director

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON ENERGY AND RESOURCES

DARRELL E. ISSA, California, Chairman

LYNN A. WESTMORELAND, Georgia

JOHN M. MCHUGH, New York

PATRICK T. MCHENRY, NORTH CAROLINA

KENNY MARCHANT, Texas

BRIAN P. BILBRAY, California

DIANE E. WATSON, California

BRIAN HIGGINS, New York

TOM LANTOS, California

DENNIS J. KUCINICH, Ohio

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

LAWRENCE J. BRADY, Staff Director

DAVE SOLAN, Professional Staff Member

LORI GAVAGHAN, Clerk

SHAUN GARRISON, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on July 20, 2006 ............................................................................... 1

Statement of:

Frank, Andrew, director, University of California-Davis, Hybrid Electric

Research Center; David Hermance, executive engineer, Toyota Motor

North America; John German, manager, environmental and energy

analyses, American Honda Motor Co.; and Don Mackenzie, vehicles

engineer, Union of Concerned Scientists .................................................... 19

Frank, Andrew ........................................................................................... 19

German, John ............................................................................................ 68

Hermance, David ....................................................................................... 58

Mackenzie, Don ......................................................................................... 74

Letters, statements, etc., submitted for the record by:

Frank, Andrew, director, University of California-Davis, Hybrid Electric

Research Center, prepared statement of .................................................... 22

German, John, manager, environmental and energy analyses, American

Honda Motor Co., prepared statement of .................................................... 71

Hermance, David, executive engineer, Toyota Motor North America, prepared statement of ........................................................................................ 60

Issa, Hon. Darrell E., a Representative in Congress from the State of

California, prepared statement of ................................................................ 3

Mackenzie, Don, vehicles engineer, Union of Concerned Scientists, prepared statement of ........................................................................................ 76

(1)

HYBRID CARS: INCREASING FUEL EFFICIENCY AND REDUCING OIL DEPENDENCE

THURSDAY, JULY 20, 2006

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND RESOURCES, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 2:05 p.m., in room

2247, Rayburn House Office Building, Hon. Darrell E. Issa (chairman of the subcommittee) presiding.

Present: Representatives Issa and Watson.

Staff present: Larry Brady, staff director; Dave Solan and Ray

Robbins, professional staff members; Joe Thompson, GAO detailee;

Shaun Garrison, minority professional staff member; and Cecelia

Morton, minority office manager.

Mr. ISSA. In the essence of trying to minimize the waste of your

time, I will ask unanimous consent that we begin without our reporting quorum. Without objection, so ordered.

I will do my opening statement and then, hopefully, the ranking

member will be here by then. If not, we will make other provisions.

Good afternoon. I want to welcome everyone to this subcommittee hearing.

Today’s record oil and gasoline prices underscore our country’s

need for more fuel-efficient automobiles. We need to use fuel more

efficiently to lessen the dependence on imported oil from unstable

areas of the world. Almost 70 percent of the oil consumed in the

United States is used by the transportation sector. Therefore, to

improve the Nation’s energy security, it is vital that we increase

fuel efficiency of the cars and trucks—particularly light trucks and

SUVs—that we drive.

One of the more practical solutions in the near term and I might

say in the present term is to increase the number of the hybrid vehicles on our Nation’s roads. A hybrid is a vehicle that combines

an electric motor and a battery pack with an internal combustion

engine to increase fuel efficiency over traditional automobiles.

These one-time improvements have their limits. Today, we will

explore these limits and how we can further advance in the future.

Is the recapture of kinetic energy in its infancy, its midlife, or have

we, in fact, gotten most of what we can get from this technology?

Can we increase the efficiency of recapturing this energy into batteries or even capacitors? Additionally, hybrids have a reputation

for superlow emissions. Can we accomplish more in the way of reductions of emissions using constant speed engines and the other

attributes that often come with hybrid technology?

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Currently, hybrids are about 30 percent more fuel efficient than

nonhybrid counterparts, so they burn less fuel and emit fewer pollutants per mile travel than non-hybrid vehicles. Advances in hybrid technologies could potentially increase these benefits.

A complex series of factors influences an individual’s decision to

purchase a hybrid vehicle, including purchase price, cost of gasoline, government incentives and personal convictions. This is the

brag part of it. As the owner of two hybrid vehicles and the previous owner of two other hybrid vehicles, I am convinced of their

benefits, but I am also concerned about the low level of market

penetration that limit the overall impact of hybrids on fuel efficiency of the U.S. fleet.

In an effort to better understand these competing factors, today’s

hearing on hybrid vehicles will focus on, but not be limited to, potential fuel efficiency and environmental benefits, cost-effectiveness, market penetration, government incentives, U.S. manufacturing capacity, and anticipated advances in technology.

[The prepared statement of Hon. Darrell E. Issa follows:]

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Mr. ISSA. We are privileged to have here today Dr. Andrew

Frank, director, University of California at Davis, Hybrid Electric

Research Center; Mr. David Hermance, executive engineer, Toyota

Motor North America—and, yes, mine happen to all be Toyota. But

I am looking forward to hearing more from Mr. John German,

manager, Environmental and Energy Analyses, American Honda

Motor Co.; and Mr. Don MacKenzie, vehicles engineer, Union of

Concerned Scientists.

I am looking forward to your testimonies; and particularly, since

we have those in the record, I ask unanimous consent that the

briefing memo prepared by the subcommittee staff be inserted into

the record as well as all relevant materials.

I additionally ask that your written statements all be placed in

the record so that you need not do your opening statements verbatim but in fact can embellish or short cut or add to, essentially

get more than we got in writing.

I now would turn to the ranking member, but instead what we

will do is I will ask that the panel be sworn in. As soon as the

ranking member arrives, she may choose to insert her opening

statement into the record or at that time may give her opening

statement.

I would ask you at this time to please rise to take your oath and

raise your right hands. I mention this is a rule that we do to everybody, not just auto companies. We do it to university professors,

too, I guess is what I’m trying to say.

[Witnesses sworn.]

Mr. ISSA. The record will show all answered in the affirmative.

Please be seated.

Dr. Frank, we have introduced you. We haven’t begun to say

enough about how pleased we are to have you here. Before this

began, you did one-up me, by letting me know that you had already

created a hybrid vehicle in 1971 before I first saw the technology

coming out of the University of Michigan in 1972. So, with that,

I would like to learn more.

Please—normally, we say 5 minutes, but it is a plus or minus 5

minutes. There will be a light that will come on, and with 1 minute

remaining it will go to yellow, and when it goes to red do not open

any new thoughts.

Mr. FRANK. Hit me on the head with a hammer.

Mr. ISSA. No, no. We are the kinder, gentler Government Reform.

We didn’t even hit Sammy Sosa on the head.

STATEMENTS OF ANDREW FRANK, DIRECTOR, UNIVERSITY OF

CALIFORNIA-DAVIS, HYBRID ELECTRIC RESEARCH CENTER;

DAVID HERMANCE, EXECUTIVE ENGINEER, TOYOTA MOTOR

NORTH AMERICA; JOHN GERMAN, MANAGER, ENVIRONMENTAL AND ENERGY ANALYSES, AMERICAN HONDA

MOTOR CO.; AND DON MACKENZIE, VEHICLES ENGINEER,

UNION OF CONCERNED SCIENTISTS

STATEMENT OF ANDREW FRANK

Mr. FRANK. I am going to talk about hybrids and plug-in hybrids.

I want to distinguish the difference between what the two are, and

mostly I want to focus on environmental benefits, cost-effectiveVerDate 11-MAY-2000 10:15 Jul 10, 2007 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\34660.TXT HGOVREF1 PsN: HGOVREF1
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ness, market benefits, transition incentives, and U.S. manufacturing capacity.

The car companies and most research of hybrids of today use a

relatively small battery pack. It has fuel economy up to 50 percent

better, but it has no electric energy or not enough electric energy

to drive the car all electrically for any substantial distance. The engine is downsized 10 or 20 percent.

But if you add a plug, then the question is, what is a plug-in hybrid? The plug-in hybrid is like a Toyota Prius, but it has a much

smaller engine, much smaller—I am talking about half or less—

and a much larger electric motor and larger batteries. But these

batteries can be plugged in at 120 volt standard plugs. The most

important thing is the combination allows the vehicle to actually

have better performance and, of course, much better fuel economy.

But, really, we shouldn’t be talking about fuel economy. We

should be talking about fuel consumption. Because when you plug

it in you are using energy from the wall rather than using gasoline,

and that is the best way to get ourselves off the oil diet, as President Bush says.

So we call this all-electric range. All-electric range [AER], operates on batteries from 100 percent state of charge down to about

20 percent states of charge. Then when you stop driving you plug

it in and the batteries fill up.

This is what a long-range, all-electric range or plug-in hybrid is

all about. There is a much larger battery but much smaller gasoline engine. There is the conventional hybrid, and there is the 60-

mile-range HEV. Sixty means that it is possible to build a car with

60 miles of all-electric range. This requires a lot of batteries, but

the overall vehicle does not have to weigh any more.

We have already built these cars. They don’t weigh any more because the engine is much smaller. But the most important thing is

we add a plug. So the advantages of a large battery pack is it provides the ability for zero emission driving, and it does not have to

be charged since the gasoline or diesel engine is always there. If

you don’t charge it, you just use more gasoline, but if you do charge

it, you use one-tenth to one-third the cost of fuel. In other words,

using electricity is like buying gasoline at 70 cents a gallon instead

of $3 and going up. People will be plugging these cars in.

Mr. ISSA. Even in California?

Mr. FRANK. Even in California. In fact, all the numbers I will

talk about are California numbers.

Batteries can be used to store energy from small wind, solar and

water systems. In other words, you can have personal solar panels

on your house, and today’s sun will give you tomorrow’s driving.

And what that does is give individuals energy independence.

So here are some examples of solar panels that are built by the

Ovonic Solar Co. specifically to charge automobiles.

The same thing will hold for wind. The problem with most renewable energy like wind and solar, however, is storage, but the

plug-in hybrid gives you that storage, and it does not cost the utilities anything because the private person is paying for that.

Therefore, the plug-in hybrid provides the most efficient use of

renewable energy; because in a conventional renewable energy, big

solar and wind, when the sun shines or the wind blows, you have

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to shut down a power plant somewhere because every electron you

generate has to be used; and when you shut down a power plant,

that makes the power plant less efficient.

In this case, with a plug-in hybrid, you have a place to put that

energy, and that is in the car. So a plug-in hybrid makes the renewable energy much more cost effective.

Additional use batteries can be charged at night, thus balancing

the electric grid, making the electric grid actually more efficient.

The electric charging does not have to be done with anything special. A standard plug, 120 volts with GFI, is all you need. So we

can reduce gasoline consumption by 80–90 percent just by charging

the cars with a standard 120 volt plug. That is not using any solar.

So here are some results of a study that was done by EPRI, the

Electric Power Research Institute, but I must say this is not solar

electric power. The DOE, General Motors and other California

agencies were involved in this study, and the results are a compilation of U.S. DOE labs and car companies and, of course, the universities. That’s me.

On the left hand side is the fuel costs—the CV means conventional vehicle; and the HEV zero is a conventional hybrid like a

Prius.

The upshot of all these curves is the more batteries you have, the

more benefits. More batteries means that CO2 and smog decreases.

This is a market preference, and the objective is to get to 50 percent.

I am going to skip ahead.

And this is the most important one. This is the annual fuel consumption [referring to power point presentation]. The annual fuel

consumption goes down. This is for SUVs all the way down to compact cars.

Notice once you get out to 60 miles all-electric range that the

amount of fuel used is one-quarter of a compact Ford Focus. This

is the amount of gasoline saved.

If we could get 10 percent of the fleet of HEV 40’s—by the way,

that is the number chosen by President Bush—we would reduce oil

consumption by about 300 million barrels a year. That is about 4.5

percent of the U.S. oil used per year, and we would be out of the

Middle East.

So that is the diesel, [again referring to power point] and I am

going to skip right to the conclusions.

We can reduce the Mideast imports. Plug-in hybrids can use

solar and other renewables, and plug-in hybrids allow us to integrate—here is an important feature—integrate both transportation

and stationary energy use for an overall society that is much more

efficient. We need to convince the car companies to make these

things, and maybe they are convinced already. We need to create

public demand for these, and we need to construct at least 1,500

more demonstration vehicles.

I’m sorry to overrun.

[The prepared statement of Mr. Frank follows:]

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Mr. ISSA. David, are you roughly 5 minutes?

Mr. HERMANCE. Yes, sir.

Mr. ISSA. We will do your testimony, and I will run like a bunny

for two votes, one which should be just about over and the next,

and then I will return. They are the last votes of the day, and I

am yours when I get back.

STATEMENT OF DAVID HERMANCE

Mr. HERMANCE. Mr. Chairman and members of the committee,

my name is Dave Hermance; and I’m the executive engineer for

Advanced Technology Vehicles at Toyota’s Technical Center in Los

Angeles. I want to thank you for inviting Toyota to participate in

this hearing and to provide our perspective on hybrid vehicles.

Toyota believes that there is no single fuel or powertrain technology that can solve all of society’s transportation needs. Simply

put, there is no silver bullet. This is why Toyota and many other

companies are pursuing multiple fuel and technology paths in the

continuing quest to reduce the impact of the automobile on society.

Through our research, we have discovered one key, however, to

making improving efficiency of any choice of fuel or powertrain system and that is hybridization. Toyota is committed to hybrid as a

core technology for future product.

Today, by combining a secondary energy storage system, usually

a battery, with conventional powertrains, Toyota’s hybrid energy

drive has the ability to reduce fuel consumption, reduce criteria

pollutants and increase the ‘‘fun to drive’’ of the vehicle, which is

why some people drive.

In the future, similar hybrid systems can be combined with new

diesel technology or alternative fuels technology or, ultimately,

maybe even with hydrogen fuel cell technology. In all of those

cases, hybridization increases the efficiency of any fuel or

powertrain system; and increased efficiency is what is going to be

the key to admission to the future.

The vehicle purchase process is usually not an academic exercise

in logic. It is usually more an emotional process. Manufacturers

strive to find a balance of attributes that a potential customer will

value. The overall process is referred to as finding the right value

proposition, and this will likely vary by market segment, and it

may vary over time, depending on what fuel prices and other outside effects are in play.

For example, the Prius pairs a best-in-class fuel economy, saving

about 350 gallons of fuel per year relative to class average, with

class average acceleration performance. The Lexus GS 450h provides better than V–8 performance, while saving about 160 gallons

of fuel per year. And the new Camry hybrid vehicle offers better

performance than many midsize V–6 products, while saving about

220 gallons of fuel per year.

I should note that all Toyota and Lexus hybrid vehicles are federally certified as Tier 2—Bin 3 and in California as superultra low

emission vehicles. Importantly, hybrid vehicles are saving fuel

today using the existing infrastructure.

Since our introduction of Prius in the Japan market in 1997,

Toyota’s cumulative global hybrid sales have exceeded 600,000

units. Of that total, slightly more than 300,000 through the end of

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the first quarter have been in the United States. We have sold another 50,000 since then in the States.

Currently, Toyota has five hybrid models on sale in the United

States and one additional model, the Lexus LS 600h, which you

can buy——

Mr. ISSA. Which I have on order.

Mr. HERMANCE. All right—in 2007 as a 2008 model year vehicle.

Clearly, the United States is an important market for Toyota’s hybrid strategy.

Moving forward, we can easily see the results of Toyota’s continuous improvement philosophy by examining the improvements in

Prius over the initial 6 years since it was launched. Since launch,

we have increased the combined label fuel economy by over 30 percent, we have improved the acceleration performance from zero to

60 by 4.4 seconds, and we have steadily reduced the already low

emissions. These enhancements are the result of increasing the efficiency of all the components, steady improvements in battery

technology, and applied learning to the control systems. Over the

same time interval, the vehicle has also grown physically in size to

better meet the U.S. market and sold at steadily higher volumes,

and we also managed to take 50 percent of the cost out of the component set.

As a direct result of this approach, we can foresee a time when

we offer a hybrid in every segment in which we compete. Over

time, the cost/benefit of our hybrid systems will be improved to the

point that a hybrid becomes a normal ‘‘check the box’’ option for a

powertrain, just like a choice of a 4, 6 or 8 cylinder engine is today.

Our goal is to double the number of hybrid models by early next

decade, and it is reasonable to expect that doing so will bring Toyota’s global hybrid production to over a million units a year. We

also plan to take 50 percent of the cost out of the system in that

time interval as well.

Thank you, Mr. Chairman. I will be happy to answer your questions now or later.

Mr. ISSA. I am going to depart for just a few moments.

[The prepared statement of Mr. Hermance follows:]

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Mr. ISSA. I have to be honest, Mr. Hermance. I have had nothing

but Toyota and Lexus hybrids, but I am looking forward to seeing

what Honda has to offer. It is just an order. It is cancelable still.

So this is a perfect segue for me to depart for a moment and Honda

to think about the hard sale.

With that, we will stand in recess for about 20 minutes.

[Recess.]

Mr. ISSA. Thank you all for your patience.

As earlier promised, before we begin again, the ranking member,

the gentlewoman from California, Ms. Watson, will make her opening statement.

Ms. WATSON. Thank you, Mr. Chairman.

Because our Nation’s demand for energy has increased 30 percent since 1990 and the U.S. Energy Information Administration

estimates that the demand will rise another 45 percent by 2025, it

is important for us to be researching and examining all possible solutions to our energy problem. The purpose of this hearing is to examine the innovative technology of hybrid vehicles and assess what

the potential for hybrid vehicles is in increasing the overall fuel efficiency of automobiles while decreasing our dependence on imported oil.

There are several potential benefits to increasing the number of

hybrid vehicles on America’s roads, but do those benefits outweigh

the costs of possibly having more cars on the road, increasing congestion? Is this breakthrough technology the answer to our environmental problems with fuel emissions? And I hope that our witnesses will address that. I know that you have started; and so, if

you have given us that information, maybe you can put it in writing to my office.

Hybrid vehicles are becoming increasingly popular in the United

States compared to the traditional vehicles. Hybrids are more fuel

efficient, emit lower amounts of fuel, and their use in the long run

is less expensive. The United States saw the sale of its first hybrid

in 1999 and went from only 10,000 vehicles sold in 2000 to almost

206,000 sold in 2005. They have many cost savings, State taxes

and environmental benefits.

In my own State of California where the traffic problems are

among the worst in the Nation, there are several benefits for purchasers of hybrid vehicles. An example, if you own a zero emission

vehicle or a superultra low emission vehicle in the city of Los Angeles, you can park without paying at metered parking spaces

throughout our city. Other States have adopted tax incentives for

consumers who purchase alternative fuel and advanced technology

vehicles.

These incentives are great, but are they really helping us accomplish our goal of saving energy and taking cars off the road? Saving

energy is everyone’s responsibility. Almost every aspect of business

and commerce use some type of energy to perform their daily operations. Automakers especially need to work with government to set

reasonable goals to improve fuel economy standards and reduce

greenhouse gasses.

So, Mr. Chairman, it is important that, while we do want to advance the production of hybrid vehicles, we do take into account

that we should caution against simply promoting hybrid technology

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as the answer to promoting fuel efficiency and reducing oil dependence. We must explore what we can do to focus on a broad range

of policies that would transition toward the use of renewable resources, reduce emission of greenhouse gasses and other air toxins

and promote a reduction in driving habits. We need to work with

the industry experts in developing policies that would include

stronger fuel economy standards, which would benefit both the hybrid industry and our environment.

Again, I thank our witnesses for your input; and I thank you,

Mr. Chairman, for calling this meeting. I look forward to the testimony, and I yield back.

Mr. ISSA. Thank you.

Mr. German, you have been very patient. The floor is yours.

STATEMENT OF JOHN GERMAN

Mr. GERMAN. Thank you, Mr. Chairman. I welcome the break so

perhaps you will not realize how similar my first two paragraphs

are to Mr. Hermance’s.

Mr. ISSA. As we said before the break, it is the difference in cars

we want to hear about. It is very similar of the Toyota Prius’ determination of whether or not its passive start works. Up is on and

down is off.

Mr. GERMAN. Good morning, Mr. Chairman and members of the

subcommittee. My name is John German, and I am manager of environmental and energy analysis for the American Honda Motor

Co. Let me thank you for the opportunity to provide Honda’s views

on the subject of hybrid vehicles and their role in the Nation’s efforts to reduce its consumption of petroleum.

Hybrid technology offers very significant opportunities for improving vehicle fuel economy, and that is one of the reasons why

Honda was an early adopter of the technology. It is important to

point out, however, that global demand for transportation energy

is so immense that no single technology can possibly be the solution. There is no magic bullet. We are going to need rapid development and implementation of as many feasible technologies as possible.

Honda has a long history of being a technology and efficiency

leader. Our overall philosophy is to be a company that society

wants to exist. One of the results of this philosophy is Honda’s

leadership on hybrid vehicle development.

We introduced the first hybrid vehicle in the United States in

1999, the Honda Insight. This vehicle was designed to showcase

the potential of hybrids and advanced technology. The Civic Hybrid, introduced in 2002, was the first hybrid powertrain offered as

an option on a mainstream model. The Accord Hybrid was the first

V6 hybrid, and the 2006 Civic Hybrid incorporated significant improvements to the battery, electric motor and hybrid operating system to improve both efficiency and performance.

Honda’s commitment to reduce energy consumption extends beyond hybrid vehicles. As the world’s largest producer of internal

combustion engines, we have already incorporated many technologies to make those engines more efficient, and there is substantially more that can be done in the future. For example, Honda pioVerDate 11-MAY-2000 10:15 Jul 10, 2007 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 C:\DOCS\34660.TXT HGOVREF1 PsN: HGOVREF1
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neered variable valve timing in the early 1990’s, and we now use

it on 100 percent of our vehicles.

For the future, we have announced plans to introduce within the

next 2 years a more advanced version of Honda’s four-cylinder iVTEC technology with up to a 13 percent improvement in fuel efficiency over 2005 levels and a more advanced variable cylinder

management technology for six-cylinder engines with up to an 11

percent improvement in fuel efficiency.

Honda has also announced its intention to introduce within 3

years a clean diesel vehicle, meeting stringent clean air standards

and achieving up to 30 percent better fuel economy.

Honda also believes that alternative fuels offer significant potential. We are the only company that continues to offer a dedicated

compressed natural gas vehicle, the third generation Civic GX.

We recently introduced a home natural gas refueling station that

will expand the market beyond fleets to retail customers. We were

the first company to certify a fuel cell vehicle with the EPA and

the first to lease a fuel cell vehicle to an individual customer.

So development of hybrid vehicles needs to be viewed within this

context. Hybrids have a lot of potential, but to achieve significant

market penetration they must be able to compete in terms of cost,

performance and utility with advanced gasoline and diesel engines.

In this regard, the most important factor to consider is to reduce

the cost, size and weight of the battery pack. We have found that

today’s hybrid customers are most interested in fuel cost savings,

but at this juncture mainstream consumers do not value the fuel

savings as highly and hybrid sales represent only about 1 percent

of annual sales nationwide. Market penetration will increase as the

costs come down in the future.

Taking what we have learned, Honda’s next step in hybrid vehicle development will be the introduction of an all-new hybrid car

to be launched in North America in 2006. The hybrid vehicle will

be a dedicated, hybrid-only model with a target price lower than

that of the current Civic Hybrid. I am not sure it is a direct competitor to the LS 600h, but I can check it out. We are targeting an

annual North American sales volume of 100,000 units, mostly in

the United States, and 200,000 sales worldwide.

The ability for hybrids to reduce refuel consumption and green

house gas emissions is proportional to the efficiency improvements

and market share. If hybrids increase to a 5 percent market share,

this will reduce in-use fuel consumption and CO2 emissions by 1

to 2 percent. A 10-percent market share will offer 2 to 4 percent

reductions. Note that there is nothing distinctive to hybrids about

these effects. The same benefit could be obtained by raising the

overall fleet fuel economy using conventional gasoline technology or

diesel engines.

As Honda has previously announced, we believe it is time for the

Federal Government to take action to improve vehicle economy.

Performance requirements and incentives are the most effective

policy instruments, as they allow manufacturers to develop and implement the most cost-effective solutions. One example would be to

increase the CAFE standards. The NHTSA already has the authority to regulate vehicle efficiency, and Honda has called upon the

agency to increase the stringency of the fuel economy requirements,

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and we have also supported efforts to reform the passenger car

standards. At the same time, Congress should develop a program

of broad, performance-based incentives to stimulate demand in the

marketplace to purchase vehicles that meet the new requirements.

The other effective action the government can take is research

into improved energy storage. The success of the electric drive technologies, including hybrids and fuel cells, depends on our ability to

build less expensive, lighter and more robust energy storage devices.

The Department of Energy’s work in this area should be supported and funded by Congress.

I appreciate the opportunity to present Honda’s views, and I

would be happy to address any questions you have.

Mr. ISSA. Thank you.

[The prepared statement of Mr. German follows:]

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Mr. ISSA. Mr. MacKenzie.

STATEMENT OF DON MACKENZIE

Mr. MACKENZIE. Thank you, Mr. Chairman and Chairwoman for

the opportunity to testify before you today. I’m an engineer in the

clean vehicles program at the Union of Concerned Scientists, a national nonprofit alliance of citizens and scientists who have been

working at the intersection of science and policy for over 30 years.

We also maintain a now award-winning Web site, hybridcenter.org,

that is dedicated to educating the public on hybrid vehicles.

Hybrids are indeed a timely subject. Despite the nay-saying from

some and the reneging of certain automakers on their hybrid commitments, the hybrid market as a whole continues to grow quickly.

In fact, hybrid sales in the second quarter of this year were up 20

percent over the same period last year. That said, hybrids still represent only a quarter of a percent of all the vehicles on our roads

and continue to need support if they are going to live up to their

potential.

They do have a significant potential to help reduce our dependence on oil and the environmental and economic burdens that come

with that dependence. But hybrids alone cannot deliver the kind of

reductions that we need. To solve our oil dependence problem, we

need a three-pronged approach that will: No. 1, reduce the amount

of fuel that consumers burn by increasing fuel economy standards

for all vehicles. This is an area where hybrids can help. No. 2, we

need to reduce the number of miles that our vehicles are being

driven. And No. 3, in the long term we need to replace the petroleum fuels that we’re still using with sustainable low-carbon alternatives.

A good advanced technology hybrid is capable of doubling fuel

economy and can be equipped to use alternative fuels, but not all

hybrids are created equal. Those like the Toyota Prius, Honda

Civic hybrid, the Escape hybrid and now the Camry hybrid increase fuel economy by 40 to 80 percent. On the other hand, muscle

hybrids like Honda’s Accord and the Lexus GS–450h from Toyota

forego fuel savings in favor of faster acceleration, thus missing out

on much of the potential of hybrid technology. Hollow hybrids like

GM’s Silverado pickup claim the hybrid name, but don’t have the

true hybrid’s ability to capture and reuse significant quantities of

energy.

A further challenge is that if the sale of a hybrid is offset by the

sale of another gas guzzler, then there is no net savings in oil use.

Despite leading the industry in hybrid sales, both Toyota’s and

Honda’s overall average fuel economy is projected to be lower in

2006 than in 2005, this is according to an EPA report that was released this week. It is therefore somewhat inaccurate to ascribe

specific fuel savings numbers to hybrid sales to date. The way to

ensure that the U.S. car and truck fleet cuts down on its oil use

is through increases in fuel economy standards.

I will now discuss some steps that the Federal Government can

take to encourage greater sales of clean, high-fuel-economy hybrids,

and ensure these hybrids deliver the maximum possible benefit in

terms of reduced oil use. Any incentives for hybrids should be designed to encourage the sale of vehicles that take full advantage of

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the technology’s potential for increasing fuel economy. Putting

aside all jargon and classifications, the bottom line is how much of

a fuel economy increase does this vehicle deliver and how much

pollution comes out of the tailpipe.

The structure of the Federal hybrid tax credit is a good example

of a rational, performance-based incentive that gives larger credits

to hybrids that deliver larger fuel economy gains. The fatal flaw in

this program is the 60,000-vehicle-per-manufacturer cap on the

number of eligible vehicles, which will soon take away credits from

many of the best hybrid models while leaving credits in place for

poor performers. Congress should make it a priority to lift this cap

as quickly as it can.

Members of the committee and others in Congress have identified the importance of producing hybrid vehicles and their components in the United States. Congress should adopt manufacturing

incentives that promote the production of hybrid technologies in

the United States, but should do so only if these incentives are

linked to increases in fuel economy. This pairing avoids corporate

welfare, and ensuring that meaningful increases in fleet fuel economy are achieved. Industry should not receive public dollars unless

a public benefit is guaranteed in return.

Manufacturing incentives tied to increased fuel economy are essential because it is high gas prices and not investments in technology that threaten domestic auto manufacturing. A study by the

University of Michigan and the Natural Resources Defense Council

found that as a result of the Big Three’s poor positioning on fuel

economy and technology, a sustained gas price of $2.86 a gallon

would put almost 300,000 Americans out of work. In contrast, a

study by UCS found that increasing fuel economy standards to 40

mpg over 10 years would lead to the creation of 160,000 new jobs

nationwide, including 40,000 in the automotive sector.

I will stop there, and I thank you for the opportunity to testify,

and I look forward to your questions.

Mr. ISSA. Thank you. And thank you very much for observing the

5 minutes. That is always very much appreciated.

[The prepared statement of Mr. MacKenzie follows:]

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Mr. ISSA. We will get right to questions. I will lead off.

First of all, Mr. German, I will look at the 2006 Civic for my son.

Having said that, I would like to start with Mr. MacKenzie.

The EPA report on Honda, if I understand correctly, the projected reduction has to do with the mix that Honda is enjoying primarily because the Big Three have dominated the full-size truck

market for a long time, and Honda and Toyota and others are now

going into that. This is a mixed change, not a ‘‘per a given like vehicle’’ reduction. In other words, the Honda Accord is not going

down in mileage, the Honda Civic is not going down. No major

platform is going down in mileage, but rather the projected mix is

anticipated to be different. Is that roughly what I remember reading?

Mr. MACKENZIE. Yes, that’s a very good point, and I think it illustrates the need for us to have increases in fuel economy standards at the same time as we have incentives for some of these highfuel-economy vehicles in order to ensure that we get those increases.

Mr. ISSA. This goes back to a question I have specifically for you

because you touched on this. I am a supporter of CAFE standard

increases. I am personally convinced that we should never have

stops and starts that send mixed messages to the industry. They

can be incredibly small if technology is sort of at a stumbling point

and larger if we see opportunities.

Having said that, don’t you agree, or would you be willing to

agree with me, that a modernized CAFE should look at each category, where we expect them to be, where they can be, and begin

increases in fuel economy by major categories? Meaning if I have

a family of one grown child, so by definition my wife and I drive

alone, but if you have seven children and you need to carry nine

people, that realistically you don’t have the option of going to the

Honda Civic, you have to choose a family sedan or perhaps even

a van of some sort.

So wouldn’t you agree that, in fact, CAFE standards should observe block categories, although we could disagree on where those

blocks are; that the ratings should be on some tangible performance that is unique to perhaps a slightly larger vehicle.

Mr. MACKENZIE. I think the idea of a class-based or attributebased standard is reasonable. If you look at the rule that NHTSA

came out with for trucks, that does a good job of addressing a lot

of the concerns about possible disparate impacts on different manufacturers. What we need now is to see larger increases, see that

kind of a framework, but using that to drive larger increases that

we know are possible with the technology that is available.

Mr. ISSA. And then I don’t want to dwell on CAFE, but for both

of the auto manufacturers, realistically I would assume that your

companies, as representatives of many companies, support that

concept; that you can look at each of your major platform categories

and work to improve standards on a platform-by-platform basis. Is

this a reasonable approach as you view it?

Mr. GERMAN. Honda has supported CAFE increases. We are on

record that we actually prefer the current system, but that if you

do want to do an attribute system, that size works a lot better than

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weight. We are happy that NHTSA adopted a size system, and we

are supportive of the system.

Mr. ISSA. And I was referring to a size system. I don’t want to

penalize something for using aluminum rather than steel.

Mr. GERMAN. Exactly.

Mr. ISSA. Moving back into the core, as we talked about batteries, because part of this hearing is how much further can we go,

supercapacitors typically, as well as capacitor-type technology, typically intake and outflow capacity of electricity quicker and can operate at higher voltage. Would you recommend that when the Federal Government is looking at these developments that we look specifically to higher voltages so that you can have more efficient electric motors and the coupling of those? Does that make sense?

I will give Dr. Frank a chance. In a plug-in environment this

may not always be optimal, but certainly when you are looking at

quick recovery for some kinetic energy savings? Doctor.

Mr. FRANK. Ultracapacitors have higher efficiency and higher

power capability, but when you go to a plug-in hybrid where you

have a lot of batteries, you already have high power capacity, so

you don’t need ultracapacity. The only purpose of ultracapacity is

you want to stick to a very small battery pack, but if you stick to

a small battery pack, you can’t make a plug-in. The big battery

pack does everything that the ultracapacitor will do, but better.

Mr. ISSA. I appreciate that.

I noted that the some of the studies have suggested that it is a

hybrid of the hybrid, if you will, that mixing batteries for depth

and capacitors for those quick on and off accelerators may also be

part. Are these the nuances that we should be looking at?

Mr. HERMANCE. You can indeed increase overall efficiency, particularly on the regenaritive side, with the use of ultracapacitors,

but they store very little energy. So even in today’s hybrids, not

even toward plug-in hybrids, you’re marginal whether you can

store enough energy in a capacitor. So, yes, those applications that

have used both have generally used them together, with the exception of some fuel cell applications which are quite different applications.

The bus industry has used both combinations of battery storage

and capacitor storage, and that is possible. The one downside is

that capacitors are both pricey, and they take a lot of volume.

Mr. ISSA. But they are light.

Mr. HERMANCE. No, they are actually not. Well, they are light for

their unit volume, but they are not free from a weight standpoint.

Mr. ISSA. Of course.

Mr. HERMANCE. But they are also quite expensive, and you have

to balance the benefit you might get from that improvement with

the cost of that system and whether that makes a viable decision

for the customer.

Mr. GERMAN. Right now Honda is using ultracapacitor on our

fuel cell vehicle where you don’t need much energy storage. But I

agree with all the comments of Dr. Frank and Dave Hermance. The

only thing I will add is that there is some very early stage research

being done on using nanotubes with ultracapacitors, which has the

potential, if it works out, to tremendously increase the storage caVerDate 11-MAY-2000 10:15 Jul 10, 2007 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 C:\DOCS\34660.TXT HGOVREF1 PsN: HGOVREF1
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pacity and still maintain all the good characteristics. It is a long

way off, but it is fun to watch this stuff.

Mr. ISSA. When I was a young boy in the auto industry, we generally looked at about 32 volts. As we got above that, we started

worrying about arcing, we started worrying about all the disadvantages that keep us from putting our finger anywhere near 110 volts

if it were DC. However, in the technology that you are both going

toward, clearly voltage matters, and you are going up in voltage.

Where is the sweet spot now and in the long run in voltage development? In other words, how high can you go in order to reduce

the size of the electric motor and gain other efficiencies? And where

are your engineering challenges today that the government might

play a role in helping to get past?

Mr. HERMANCE. You want to go first, John?

Mr. GERMAN. No.

Mr. HERMANCE. OK. Today our systems operate at as high a voltage as 650 volts. There is a practical limit that changes to a different class of materials if you go much beyond that. There is a little more margin, but not a lot more. The other break point that you

mentioned before is at nominally 50-volt system. Below that there

are different requirements for safety. At high voltage you require

a level of safety, isolation and what-not that is different from the

low-voltage systems. But there are practical limits to the voltage as

well from the standpoint of the class of materials that you use to

provide the necessary isolation, and it is not a lot higher than the

650 that is in current use.

Mr. ISSA. So you think your voltage is getting close to where it

can be? And by definition does that mean that you are going to

multiple motors, which I know is in Toyota’s strategy, but multiple

motors is going to become a bigger strategy?

Mr. HERMANCE. Actually, you don’t need to go to multiple motors. You might go to an additional motor for all-wheel drive, which

allows you a little bit better regen capture, but at a cost. We are

managing to make the motors themselves more compact over time.

Really we don’t see a need to go to multiple motors from a traction

power standpoint. We just made them more efficient and more

compact by going to the higher voltage.

Mr. GERMAN. Having electric motors in each wheel is an interesting idea which has a number of efficiencies. The problem is that

is unsprung mass; that is, mass that has to be controlled by the

springs and affects ride and handling of the vehicle. So far we

haven’t figured out how to make electric motors light enough to be

able to put them in the wheels.

Mr. ISSA. You can put them in the middle of the transaxle. Sadly

enough, I had an Indy car team, and we never solved the problem

of our unsprung weight versus the competitors’, so we never won

in my years.

I am going to finish up here. I guess I will ask for a second

round, but when I look at California’s experiment with the zero

emissions vehicle, the General Motors famous leased vehicle, an

abysmal failure because it was, in fact, a product that needed special charging, and it basically had limited range, and then you had

to find yourself a high-voltage source and plug in and wait.

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Dr. Frank, particularly for the technology you are looking at, I

see that essentially what you are hoping to get by is to find the

sweet spot of 60 or so miles so that we can avoid the problems of

the General Motors vehicle and incorporate the ability beyond 60

miles to go from plugged, if you will, to totally unplugged. Is that

roughly the basis for your preference toward a plugged hybrid?

Mr. FRANK. That’s exactly the objective. But the plug-in hybrid

opens the door to renewable energy use directly as well. So the

plug-in hybrid solves all the problems of the pure electric vehicle

because there is no charging infrastructure. You have always got

gasoline on board. It is a dual-energy-source system. So because of

the dual-energy-source capability, you don’t have to charge quickly,

and that’s one of the main features, so that means you can charge

with conventional 120-volt plugs, which are everywhere in our society already.

Mr. ISSA. Last question, Mr. Hermance. I’m going to put you on

the spot and use the bloggers against you. You are probably familiar with the Prius stealth mode modifications that are actually

available outside the United States, but in the United States are

being done aftermarket by people who read your sites—essentially

creating the ability to extend to the limits of the batteries you already equip a zero emissions mode. They make some significant

claims, tens of miles. Would you like to comment on those with

your existing product and whether or not that approach, in Toyota’s opinion, could be in the future, which would be closer to Dr.

Frank’s concept?

Mr. HERMANCE. The basic difference between the vehicle as it exists today and Dr. Frank’s concept is there is no provision for putting grid electricity, plug-in, into the battery pack. You only have

the energy on board within the narrow operating range of the vehicle to use. The actual distance possible with the on-board energy

is only about a mile, not tens of miles, in addition to which in the

current system without grid replacement of that energy, you have

to replace that energy with gasoline, and therefore it is an inefficient operation. In fact, there is an increase in CO2 emission and

increase in fuel consumption utilizing that modification of the vehicle as it is currently configured. Some of what they think they are

getting, they are not.

Mr. ISSA. Thank you. And I am pleased I was able to get that

on the record for my nephew, another Prius owner.

Diane.

Ms. WATSON. Thank you very much. I’m going to direct my questioning to Mr. MacKenzie. He looks like the one that is going to

be around with these cars.

Mr. ISSA. Ouch. You could have just said he was your witness,

instead of my witnesses are old, and you have the next generation.

Ms. WATSON. I did not say those words, Mr. Chairman. You said

‘‘for my son in the future,’’ so I’m calling on someone’s son here.

What would you see are the most effective ways to reduce oil consumption in our overall transportation sector?

Mr. MACKENZIE. Well, the No. 1 thing the government can do is

to increase fuel economy standards for all vehicles. That’s the fastest and most effective, proven way that we have to reduce oil consumption.

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Ms. WATSON. Then how can we make sure that the advantages

of hybrid penetration are not offset by less fuel-efficient vehicles

elsewhere in the fleet? Will hybrid penetration necessarily result in

higher fuel economy?

Mr. MACKENZIE. Well, that’s a good point. I alluded to that, of

course, in my testimony. You see that looking at some of the automakers today, you can see that leading the market in hybrids does

not necessarily mean that your fuel economy is going to get better.

So promoting hybrids in and of itself is not a guarantee of oil savings. If we want to make progress on our oil dependence, we need

to couple those incentives for hybrids with increases in fuel economy standards to ensure that we reap those benefits.

Ms. WATSON. I want to just throw this out, because all of you

have been watching what has been going on in the Middle East,

and there is a prediction there that all of us would expect that the

prices are going to go up. And we are so heavily dependent on oil

in the Middle East, and I am just wondering, when will the industry be up to a position where we don’t have to be dependent on

Middle Eastern oil? You know, the President said we are addicted

to oil, and my question is what do all of you feel will be our potential in the manufacturing industry, the high-technology industry, in

seeing that all the vehicles that we use are up to a point where

we don’t depend on foreign oils?

Mr. GERMAN. One of the main problems faced by the auto industry is that the average customer places a relatively low value on

fuel economy and fuel savings. If you look at it, you take even $3

a gallon, if you adjust it for the price of inflation and adjust it for

the increased efficiency vehicles adjusts compared to what they

were in the 1970’s, adjust it for the difference in the standards of

living and the disposable income, $3 a gallon is still pretty cheap.

It is a smaller part of the budget of the average family than fuel

was before the first oil crisis in 1973.

Some customers are certainly responding to the increase in gas

price. You see that in certain segments, but most customers are

not. If you look at it from the standpoint of dollars and cents, it

is actually fairly rational.

So this is the problem we face. Society needs reductions in fuel

use. Individual customers don’t see it as a major part of their purchase decision. There is a disconnect. And it is this disconnect

which is the reason why Honda is supporting increases in CAFE

standards.

Ms. WATSON. You know, I represent an area in central Los Angeles, and right now the main street in my district is a street called

Crenshaw. There is evidence that the youth are coming out at

night, and they are doing these donuts. Do you know what a donut

is? They go speeding down, and they put their brakes on, and they

spin around. It happens after 1 a.m. And I come down that artery

and I am saying, my goodness, look at the tracks, look at the gasoline expended.

When you said what you did, Mr. Chairman, I thought we have

a tremendous need to educate all our people as to how to make the

best use of our resources, gasoline or whatever. The kids have to

fill up at the gas station, and in California our gasoline prices have

gotten up to $4 from time to time.

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Of course, we need better, shall I say, law enforcement, traffic

enforcement on our streets. But there is a mentality, it is a lifestyle

mentality. Kids do it because that is what you do during this era.

So there is a combination of things that we have to grapple with,

I think, in our society, because it is really lifestyle, and all of our

kids, particularly the gang members, they want to do what everyone else does. It is a real issue as the prices continue to go up and

the resources continue to diminish.

Mr. HERMANCE. There are a number of folks in an area not far

west of your district that are promoting that with movies like Fast

and Furious 1, 2, 3, and several more yet to come, but you’re right.

There is a huge need for education and a message to be communicated of the value of the resource versus its long-term scarcity.

That is not there.

And as John says, right now, if you ask on a list—we survey 31

attributes of a vehicle for purchase decision. Fuel economy used to

be dead last. It has moved up, but it is still in the bottom third

of reasons for purchase of a specific vehicle, except in very small

segments. So you are right, there is a major education process necessary.

Ms. WATSON. Dr. Frank.

Mr. FRANK. Thank you.

Ms. WATSON. I just want to say he is from USC, and that is right

in the area that I am talking about. I think you are familiar.

Mr. FRANK. I am at UC Davis.

Mr. ISSA. But he does a wonderful job. Undergraduate Berkeley.

Graduate Berkeley. Ph.D. at USC. Now he’s at Davis. He covers it

all.

Mr. FRANK. Right.

Anyway, the point is the objective is to give the general public,

including kids who are doing those donuts, everything they want,

but not use gasoline. The real objective is to reduce oil. So the plugin hybrid which I have been promoting for about 25 years, and I

think Dave knows about that, anyway, is one way to do this. The

whole objective of the plug-in hybrid is to use electricity, which is

equivalent to buying gasoline at 70 cents a gallon. That’s the big

goal. At 70 cents a gallon people will plug their cars in.

The California Resources Board did not like the idea before, but

they do now because the price of gasoline is $3 and $4 a gallon.

If you can buy the equivalent power for donuts or whatever, if you

buy the equivalent power for 70 cents a gallon, that’s the motivation. The question is how do we get the car guys to buy into that?

Ms. WATSON. That’s the reason why my question was, Mr. Chairman, is when do you think the industry will be ready to accept that

particular option? Car guys?

Mr. HERMANCE. Toyota has announced the intent to pursue the

development of a plug-in hybrid. That said, it is probable that it

will not be a plug-in hybrid as described by Dr. Frank. The most

cost-effective way to use electricity to reduce fuel consumption is

not to have all-electric range, but rather to have longer periods

that the engine is off during normal operation. That mitigates the

need for significantly larger drive motors and power electronics,

and this is the evolving direction from the large workshop with

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hicle have all-electric range. The benefits are very substantial with

much less incremental costs. The incremental costs of large-battery

vehicles now is still very high.

Ms. WATSON. You know, there was a statistic that showed that

your Honda Accord was the car most often stolen in California. So

there is something about that Accord that they love. It has a faster

speed? You want to counter that?

Mr. GERMAN. It is just a lot of them are being stolen for parts.

You chop it up. We sell 350,000, 400,000 Accords a year. There is

a big demand for parts. The latest statistics is the older Accords

that are being stolen the most, they are going to chop shops and

chopping them up and selling the parts off them.

Ms. WATSON. Thank you, Mr. Chairman.

Mr. ISSA. Thank you. I will try to sum up a few more questions.

First of all, I am old enough to remember when the Oldsmobile

Cutlass was the most stolen car in America. Now there is no Oldsmobile.

And for those who don’t—I think I should confess here, my prior

business was the largest manufacturer of car security systems in

America. So thank you because Honda made me a Congressman in

many ways; however I started the company with Olds Cutlass.

A couple of quick questions. First of all, as we are discussing

plug-in hybrids and extended-range batteries for greater amounts—

let’s just say more electricity, less motor, in a sense aren’t we looking for—both of what you are trying to do, we are looking for a

sweet spot similar to the one that the train companies found in the

1950’s and 1960’s and so on. Trains—locomotives that power America have been diesel electric for a very long time for a number of

attributes they found: diesels running at constant speed, the advantage of being able to get the amount of power they needed over

the drive wheels. And we could go through all the tradeoffs that

went into the development of the electric train, which is a universal product basically today.

In a sense, isn’t your development—this is primarily for Toyota

and Honda—isn’t your development to try to find within the market demand for performance and other characteristics the highest

overall productive use of the vehicle, both, of course, acceleration,

deceleration, fuel economy and emissions? Isn’t it sort of a combination that you are working with today, David?

Mr. HERMANCE. Clearly it is. If the buying process were wholly

rational, you could tell fuel economy much easier. Since the buying

process is often emotional, you have to find the balance of benefits

that customers are willing to pay for. That includes fuel economy

certainly, but it also includes performance, and at least in California it includes emissions performance. Finding that sweet spot, if

you will, the best value proposition is how you get customers to buy

your vehicles.

Even if we were to develop independently the best vehicle to

solve any specific problem, if we couldn’t sell them in significant

volume, it wouldn’t make any difference. So you have to find something the customers value, they are willing to part with their hard

earned money to buy and still reap both societal benefit, and the

customer has to feel good about his decision.

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Mr. GERMAN. The value proposition is what has led both Toyota

and Honda toward small battery packs in primarily assist-type

modes. That is because the battery right now is still very expensive, and its energy storage density is very, very small compared

to liquid fuel. You are trying to maximize the fuel savings without

putting more batteries in, and you have to make sure that the battery is going to last the life of the vehicle, and part of the way we

are doing that now is by limiting the change in the energy stakes

to very small levels, which greatly improves the life.

Mr. ISSA. We have a little housekeeping before the ranking member is going to have to leave. I would ask unanimous consent that

we be able to hold the record open for 2 weeks from this date so

that all the Members may make submissions and possible inclusions into the record. Without objection.

I would also ask unanimous consent that this hearing continue

until the remainder of this cycle of questions, at which time we will

adjourn. Without objection. I thank the ranking member.

That allows us to be very legal in this because this is one of the

most bipartisan subcommittees. We have done every one of our

hearings in an effort to try to get to the best opportunity for America to go the right direction on energy.

I would like to ask a couple more quick questions. This is not intended to be a speech, but it will sound a little bit like it.

If it is fair to say that the President was right about us being

addicted to oil, and that addiction being dangerous, then it would

be fair to say that it is, in fact, a national security imperative that

we lessen our addiction, slash, dependence on foreign oil.

If that is the case, what messages from Congress within the capabilities of your technology and within the reasonable time constraints to move to those technologies—what messages besides

CAFE would best come from Congress that would move the decision process toward lower emissions absolutely—that is certainly

something that this Congress is dedicated to—but the higher fuel

economy?

I hear all of you, rightfully so, and I spent years selling the products the customer wanted, and every once in a while I would make

something that I wanted the customer to want, and very seldom

did it end up being what the customer wanted, but Congress has

an influence. Used imprudently, we can put your companies into

deep, deep recession. We can change the whole nature of the buying pattern. We can cause a recession.

At the same time, what measures do you think would be prudent

for Congress to use, besides what we have already talked about,

CAFE, to encourage a movement toward dramatically lower fuel

consumption, again, within those norms that would allow society

not to have a whipsaw?

Mr. HERMANCE. One quick thing I think John mentioned in his

testimony and I would reiterate, you could lift the 60,000-unit cap

for manufacturers on the hybrid tax credit. We have already gone

through the cap. Our customers will cease to realize the full benefit

at the end of September. Lifting that cap to allow customers to buy

the most efficient vehicles which are the ones that get the largest

credit seems a prudent thing to do as a near-term help.

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Near term it is hard to do other things immediately. Some

longer-term program of education to improve the understanding of

the buying public about the value of the scarce commodity is certainly—we have to change buyer behavior somehow so that they

value fuel efficiency.

Mr. ISSA. Anyone else?

Mr. FRANK. There are many ways to carry out these benefits. Of

course, I have been promoting the use of the plug-in hybrid, and

Mr. Chairman mentioned that the cost is high and the batteries

and so on. The life is short. We have a lot of evidence that shows

that is not quite exactly true.

The Honda—excuse me, the RAV 4, the Toyota RAV 4 electric vehicle batteries are very similar to what we’re going to in the plugin hybrid, I think lasted over 120,000 miles, and Southern California Edison has already shown this, and that is a lifetime battery.

The metal hydride batteries have now come down significantly in

price over the years. One of the most important things is the plugin hybrid battery is not the same as the power batteries that are

currently used at much lower price per kilowatt hour. There is a

lot of evidence to show the battery technology is not so far off. That

is No. 1.

No. 2, lithium batteries are much better, much lighter, half the

weight for the same amount of energy. So when we go to energy—

and Toyota, by the way, has already invested in lithium, and almost everybody else has as well, and all of their competitors are

looking at lithium. So the batteries is I don’t think as far an issue

as before. As I have shown in slides, we can build these cars with

long range and not cost anything in weight and incremental costs.

I have addressed that. It is much less than you think.

Mr. ISSA. Please.

Mr. GERMAN. I think the primary message from Honda is whatever you do, try to make it performance-based. Don’t try to pick

specific technologies or whatever. Set out performance standards or

incentives and base them on equal footing so manufacturers can

develop their own products.

Some States are looking at changes in sales tax based upon the

efficiency of the vehicle. You could extend the gas guzzler tax, use

those moneys to incorporate more incentives for high-performance

vehicles. There are all kinds of possible scenarios out there, including the CAFE. As long as it is performance-based, that is really the

key.

Mr. MACKENZIE. In terms of things——

Mr. ISSA. We want to hear from the youth of America, as our

ranking member wanted to tell you.

Mr. GERMAN. David, I want to make sure that by performance

we don’t mean how fast it accelerates. Performance in the efficiency

of the consumption of the vehicle.

Mr. ISSA. Both of your companies, for investment in traction control, which the gentlelady was not aware that your traction control

vehicles clearly did not leave those marks.

Mr. HERMANCE. There is no switch on our car. You can’t shut it

off.

Mr. MACKENZIE. I was using performance in the same way, and

I want to echo our support for an action that the government could

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take promptly would be to remove that cap on the number of eligible vehicles for the hybrid tax credit, should be done as soon as

possible in the interest of consumers getting a strong and consistent message.

Mr. ISSA. I’m going to ask you a followup question since you are

the only one that doesn’t have a financial gain if I bring that to

fruition. If you were in my seat, would you eliminate the cap on

all vehicles, or would you—because it is going to cost money to—

at least to the Federal revenue. Would you incentivize that toward

the overall higher performing as far as fuel savings vehicles?

Would you, in fact, change the existing rules of the road now, or

would you simply raise the number?

Mr. MACKENZIE. Well, the structure as it stands is quite good.

It is a performance-based system, and those vehicles——

Mr. ISSA. You are happy with the 3,000 and all the different levels?

Mr. MACKENZIE. The levels are fairly reasonable and set up well,

so I think the solution is to just remove the cap.

Mr. GERMAN. If I could make one additional comment on that, I

am not going to disagree——

Mr. ISSA. He made your case wonderfully. Take ‘‘yes’’ for an answer.

Mr. GERMAN. The current tax incentives are based only on the

city fuel economy, and that is not really the best performance metric. Some hybrid systems do better on the city and highway. Diesels do better on the highway. And to make it more neutral, it

should be based on the combined fuel economy of the vehicle, not

the city. So that would be one positive change that could be made

if you are going to change it.

Mr. ISSA. Sure. I am probably overstepping this committee’s jurisdiction, but with all due respect to the city and highway measures, I think some of your companies have been lobbying to—I

know there has been a small change, but to really modernize the

EPA fuel economy standard, to make it as accurate as possible,

which it historically has never been. Is that fair to say that is the

other part is, yes, make it combined, but also make it—don’t make

it assume that highway driving is 50 miles an hour, and city driving has this incredibly amount of stops relative to what really happens?

Mr. GERMAN. I won’t get into the details because they are monumental, but yes, you are correct.

Mr. MACKENZIE. It is a whole other kettle of fish in a large kettle.

Mr. ISSA. My Committee on Energy and Commerce, which I am

on leave of absence from, would assume primary jurisdiction on

some of that.

Mr. GERMAN. Just one point. Because of the timeliness requirement, it might be better to quickly lift the cap and then adjust the

metric, because the EPA changes in labeling won’t occur for at

least another year, and the cap is going to be an issue at the end

of September.

Mr. ISSA. By the way, I would completely agree with you, except

I have seen the history of when we do one and promise to do the

other. I am certain that a staggered view all in one bill might, in

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fact—with a deadline for new standards, might, in fact, be a compromise.

Mr. MacKenzie.

Mr. MACKENZIE. In regards to basing the credits on the combined rather than just the city fuel economy, an additional complication there is that may then be appropriate to adjust what

those credit levels are if you are going to adjust your numbers to

the combined.

Mr. ISSA. Dr. Frank, because you got your Ph.D. before anyone

else in the room, you get the closing statement.

Mr. FRANK. Well, I just want to say that by going to the plugin hybrid—I will push it one more time—that you get both fuel

economy in city and highway because of the downsized gasoline engine. All the performance comes from the electric motor. So I have

to disagree with Mr. German from Honda a little bit. Toyota certainly knows that they have done a very good job, but when you

go to the plug-in hybrid, everything gets better. You can downsize

the engine much further and get city and highway fuel economy

both.

Mr. ISSA. I thank you all for your testimony. I would be remiss

if I didn’t make a plug that if California lifts its ban on nuclear

energy, and as a result we are using far less fossil fuel to produce

our electricity, although the 70 cents may still be 70 cents, the

emissions benefit goes to a zero emissions.

With that, I will make my closing remarks. From what I have

heard here today—and, by the way, we really did look at your

statements before I made ‘‘what I heard here today’’—it is clear

that the breakthroughs in technology and manufacturing are needed to improve hybrid cars. It is also clear that those are on the horizon. We can increase their efficiency and commercialize plug-in

hybrids to reduce the Nation’s reliance on unstable foreign suppliers of oil.

The hybrid car market is not a niche market in America, and

manufacturers must acknowledge this fact. Consumers are clamoring for more hybrids, and today, with the increased CAFE standards, the next generation of hybrids can provide a foundation for

reducing U.S. petroleum consumption.

I’d like to thank our witnesses here today for such an informative

hearing. And once again, there is no level of thanks this committee

can give for people who come together from very different backgrounds, from academia, from, to be honest, the for-profit car companies, and from think tanks and bring together just consistency

that the direction that we are going is just the beginning; the direction that we can go is up to you, but it is also up to Congress. With

that, I hope this record will help the rest of the Congress seek some

of these solutions. We stand adjourned.

[Whereupon, at 4:03 p.m., the subcommittee was adjourned.]

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