A champion of high fuel economy and low emissions, Honda takes the

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D ecades from now, automotive historians will call the 2007 North American International Auto Show (NAIAS) a pivotal moment in the transition to a hydrogen economy. That much was assured when Honda introduced its FCX Clarity at the show. Honda also announced that this new, second- generation fuel cell car would be leased to retail customers in Southern California starting in summer 2008.

Having unintentionally ceded hybrid leadership to Toyota, Honda is now staking an early claim on the future of personal transportation. That future, Honda seems to have no doubt, will require hydrogen to achieve the best fuel efIciency and lowest emis- sions. The FCX Clarity is only one very visible part in the carmaker 9s plans to achieve that end.

While it helps pave the road to hydrogen, Honda will continue to im- prove its gasoline engines 9 efIciency, introduce new hybrid models, and fur- ther develop alternative fuels, including clean diesels and natural gas. cGlobal warming is the number one environmental issue. For every company, increasing fuel efIciency to WHEELS B Y J I M K O S C S , A I A D A C O N T R I B U T I N G E ... more. less.

D I T O R A champion of high fuel economy and low emissions, Honda takes the long view on sustainable mobility continued on page 18 DESTINY OF AutoDealer SPRING 2008 | 17 Honda FCX Clarity reduce CO2 emissions is the single most important chal- lenge we face, along with the new CAFE standards, d Honda CEO Takeo Fukui told journalists at the 2007 NAIAS. cI look at this challenge in the same way we approached the issue of clean air more than 40 years ago. d Fuel Economy Leadership Honda built its car business on a foundation of economical cars, and its continued devotion to fuel efIciency shows in a 2006 CAFE score of 29.1 mpg. That 9s one reason Edmunds.com Senior Editor and Green Car Advisor John O 9Dell is conIdent Honda will achieve the new 35-mpg Jeet standard before the 2020 deadline. High fuel economy, O 9Dell said, cis part of the company 9s engineering DNA. It 9s not marketing driven. d Ed Cohen, Honda 9s vice president of government and industry relations, shared the company 9s basic plan for pursuing high fuel economy. cOver the last 15 years, Honda has had the highest aver- age fuel economy of all manufacturers, and that is even while an increasing proportion of our vehicles have been light-duty trucks, d he said. Light trucks, including SUVs and the Ridgeline pickup, constituted 43 percent of Honda 9s 2007 sales. When it comes to fuel efIciency, Honda has always of- fered standout choices. In many years, Honda offered the country 9s highest-mpg vehicle, including the Irst Civic (1973), special, high-mpg versions of its CRX two-seater (1980s) and Civic (1990s) and, more recently, the slow-sell- ing Insight Hybrid. NoV8s 3 But Timing May be Perfect Consistently strong sales of economical models don 9t pro- vide the only route to a high CAFE result. What is not in Honda 9s lineup helps, too: no conventional full-size pickups, and no truck-based large SUVs and especially, no V8 en- gines. Timing and rising gas prices could vindicate Honda 9s strategy. A recent new-car buyer study from Edmunds. com revealed that America 9s appetite for V8s is declining in all segments where they 9re offered except full-size pickup trucks. Overall, shopper demand for V8s has dropped from 19 percent two years ago to 15 percent today, according to Edmunds . Declines were steepest in the SUV and large car categories. Do Customers Get the Message? O 9Dell said that Honda hasn 9t been as vocal about its fuel economy leadership as it could be. cHonda attracts atten- tion for fuel economy, but there 9s not a lot of drum banging in the marketing. Brands with a lesser message are making louder noises. d Dave Conant, who owns the country 9s largest Honda dealership, Norm Reeves Honda in Southern California, sees an opportunity to speak up. cHonda has traditionally taken a very understated approach to marketing. Everything has been on the strength of the product, d Conant said. cBecause of that, Honda has always been a brand that savvy customers research and study, and its cars tend to be bought by more 8inJuentials, 9 which ultimately does help. d Enough customers seem to be getting the message to keep pushing Honda 9s sales upward. In 2007, Honda (including Acura) sold 1,541,542 new vehicles in the United States, a 2.5-percent increase over 2006. It was the company 9s 14th consecutive year-over-year sales increase. cI think the best consumer research is found in the sales, and ours keep going up, d said Cohen. Hybrids: Act II Eight years after launching the Irst gasoline-electric hybrid in the U.S. market, the two-seat Insight, Honda found itself announcing a cdo-over. d The company has not come close to matching Toyota 9s success with hybrids. To remedy that situation, Honda will build new, dedicated hybrid models with lower prices. What went wrong? The Insight sold only 13,000 vehicles over six years. The Irst- and second-generation Civic Hy- brids, well regarded by the auto media and customers alike, were left in the Prius 9s clean exhaust trail. In 2007, the Prius sold 181,221 compared to 31,253 for the Civic Hybrid. The Accord Hybrid, engineered for high power rather than high fuel economy, sold only about 25,000 units over three years before Honda cancelled it. The problem was not technology. Honda 9s Integrated Motor Assist (IMA), which sandwiches a low-proIle electric Jywheel/motor between the gasoline engine and transmis- sion, is as elegant in its seeming simplicity as Toyota 9s hybrid system is in its complexity. The problem was positioning and perception. cWe were Irst [with a hybrid in the U.S.], but you have to give Toyota a lot of credit, d said Cohen. cThey led with a dedicated vehicle, and it was a very smart thing to do. Our The small start of something really big: The first Honda Civic arrived in 1973, just in time for skyrocketing gas prices and gas lines. Get sporty: Honda has not yet revealed the first of its next- generation hybrids, but the second one will be a sports coupe like the CR-Z Concept. 18 | AutoDealer SPRING 2008 approach was to make the hybrid technol- ogy transparent, a powertrain option on existing models. d The idea was to demys- tify hybrid technology to help take it mainstream quickly. But hybrid buyers, Honda learned, want to stand out from the main- stream. Now, Honda has a new plan. It will build a new hybrid cworld car d in Japan next year, with a capacity for 200,000 units. Half of those are slated for the U.S. market. The price will be cunder the Civic Hybrid, d Cohen conFrmed. cWe 9re trying to reduce the cost premium of a hybrid to under $2,000 on this next vehicle, d he said. By comparison, the 2008 Civic Hybrid is priced $3,090 more than the Civic EX sedan with auto- matic transmission. Just as important to many hybrid buyers, the new Honda hybrid will be a distinct vehicle, not a version of a current model. And car enthusiasts who have been lamenting the departure of the CRX since 1991 should be excited about the second new-generation Honda hybrid planned, a sporty two-seater based on the rakish CR-Z concept. Fueling the Future with Hydrogen Honda is careful not to put an arrival date on mass-produced fuel cell cars, but its FCX Clarity makes clear its intention to hasten that day along. A fuel cell vehicle is an electric vehicle. But rather than drawing energy stored in a battery, it creates energy by pulling electrons out of hydrogen as it is passed through a special membrane. The only emission is water vapor. In the FCX Clar- ity, a small fuel cell cstack d is positioned between the front seats. Range is about 270 miles on a tank of pressurized hydrogen. That 9s a 30 percent improvement over Honda 9s Frst fuel cell vehicle, the FCX, which a handful of consumers began test- ing in 2004. There have traditionally been three obstacles to fuel cell cars becoming main- stream: One was the physical size of the technology, which has now been addressed. Two is cost, which commercialization can theoretically reduce by economies of scale. The third is a doozy: com- mercialization will require hydrogen infrastructure, which barely exists today. Honda has some ideas on that, too. cIt 9s the chicken and egg situation 4 you can 9t do one Frst. Both must evolve simultaneously, d said Co- hen. As one part of the solu- tion, Honda envisions using homes as fueling stations. Honda announced its Home Energy Station (HES) IV at the same time it unveiled the FCX Clarity. The HES IV would tap a home 9s natural gas supply to produce hydrogen, while also provid- ing heat and electricity to an average-size home. According to Honda, such an instal- lation can reduce CO2 emissions by an es- timated 30 percent and energy costs by an estimated 50 percent. Others are testing fuel cell vehicles now, too, including Daimler, Ford and General Motors. But nobody else is putting them into the hands of paying customers for three years. Still, there are doubters. In its March issue, Car & Driver magazine said, cThe Honda FCX Clarity is a technology of the future and may always be just that& d Cohen shrugs off naysayers. cWe would not be investing hundreds of millions of dollars or more in technology that we thought was a dead-end, d he said. cLook at the extraordinary difference between our Frst FCX from four years ago versus the FCX Clarity. The magnitude and rapidity of our progress and reFnement is simply breathtaking. d Rita Sims-Snyder of Coeur d 9Alene Honda in Idaho, which sells the entire line of Honda cars, trucks, motorcycles, power- sports, and power equipment, is optimistic about Honda 9s chosen road. cHonda is very innovative, but also conservative. They make sure technology is perfect before they release it. As dealers, we sometimes Fnd ourselves waiting and waiting for some- thing new. But when it arrives, we realize why we had to wait. d AD With each new-generation of its Civic and Accord, Honda has improved fuel economy, even as the cars gained in size, weight, power, features, and safety technology. cIn order to not lose ground, you must make both the powertrain and the vehicle more ef%cient, d said Ed Cohen, Honda vice president of Government and Industry Relations. 1988 2008 HONDA ACCORD HONDA ACCORD cIT WAS 20 YEARS AGO TODAY& d AutoDealer SPRING 2008 | 19 Elegant packaging: Civic Hybrid 9s Integrated Motor Assist (IMA) uses a low-profile electric motor sandwiched between the gasoline engine and the trans- mission.

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