When hybrid cars first hit the scene approximately fifteen years ago, the two first players were Honda (NYSE:HMC) and Toyota (NYSE:TM). Those first models - Insight and Prius - were dedicated hybrid cars, as opposed to variants of existing cars.
Of those two models, Prius became almost synonymous with hybrid cars, and the Honda Insight quickly faded away. In early 2009, Honda made a return to the dedicated hybrid car market with another entirely new car also called Insight, but it looked almost like a copy of the Prius. It was a flop and was subsequently canceled.
Almost all other hybrid gasoline-electric cars launched since then, have been adaptations of existing gasoline cars. Many automakers from Volkswagen (OTCPK:VLKAY) to Audi (OTCPK:AUDVF), Mercedes, BMW (OTCPK:BAMXY), GM (NYSE:GM), Nissan (OTCPK:NSANY) and Subaru have offered those over the last half-decade.
Only one company has had at least some success in challenging Toyota in the dedicated hybrid game in the US, and that's Ford (NYSE:F) with the C-Max model. It's not even so much as a dedicated hybrid model from an engineering standpoint, as it's sold as hybrid-only in the US market - unlike in Europe, where it is also available as non-hybrid.
Even so, both Toyota and Ford saw sales declines in their US sales of Prius and C-Max in 2015. Toyota Prius declined 11% to 184,794 units. Ford C-Max declined 21% to 21,768.
Despite this shrinking market for dedicated hybrid models, Hyundai-Kia is now launching a new family of dedicated hybrid cars geared to compete with Toyota Prius and Ford C-Max in the US. These are the Hyundai Ioniq and the Kia Niro.
Basically, the Hyundai Ioniq and Kia Niro are the same car under the skin.
Source: Autoblog
The Hyundai Ioniq looks much like the basic body style of the Prius, optimized for aerodynamics and sitting lower to the ground. The Kia Niro is a slightly taller vehicle, sitting more upright, having slightly higher ground clearance and a higher so-called "hip point", in which people sit higher, making it easier to get in and out of the car.
Kia announced that it is targeting 50 MPG fuel economy, but the Hyundai version will naturally do better than that, given its more aerodynamic body. The Hyundai Ioniq hybrid goes on sale in the US in the fourth quarter of 2015, and the Kia Niro in January 2016.
It looks like the Kia Niro will be able to achieve fuel economy slightly below the new Toyota Prius, at 50 MPG, and the Hyundai Ioniq will be able to approximately match the Prius fuel economy with an MPG number above 50 MPG. With all that said, why would anyone buy the Hyundai or Kia hybrids instead of the Prius?
For starters, not everyone may like the styling of the new Prius. Months after I saw it for the first time, I continue to be on the fence about it, even if I like it more now than at first sight back in September. Many people with whom I have spoken do not like it as much as I do. My advice: Don't make up your mind until you've seen it in person, in real traffic. It looks better than in that picture you saw.
In that context, the Hyundai and Kia hybrids are more conventional designs. I especially find the Kia Niro to be more attractive as a "one box" design that reminds me of the Mercedes B-Class and Kia's own Soul model. The front of the car is Kia's new trademark, similar to the new Sportage, which is extremely attractive.
The interior differences may be greater than the exteriors. While the new Prius represents an infinite improvement over the outgoing Prius, I am not a big fan of the new interior either - especially as it compares to the Hyundai and Kia interiors. No matter the model these days, Hyundai and Kia deliver the industry's best cockpit ergonomics, and their interior style is very pleasing as well.
Toyota is also missing key cockpit features, most notably Android Auto (NASDAQ:GOOG) (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) CarPlay, both of which are Hyundai and Kia selling points on their newest models. I think most people who compare a Prius interior with either of these Hyundai and Kia models side by side, will agree that Hyundai and Kia are ahead of the game.
Journalists have not yet driven the new Hyundai Ioniq or Kia Niro hybrids. The new Prius drives extremely well with outstanding handling and steering, a giant leap ahead of its predecessor and will be difficult for Hyundai and Kia to match, let alone exceed. We will just have to see, in the coming months, as they are tested against each other.
Even if Hyundai-Kia end up matching or even exceeding the new Prius in terms of driving dynamics, going up against the Prius - with its iconic name recognition - is like getting involved with a land war in Asia. It will be a struggle, to say the least - or at least that is what conventional wisdom suggests.
Beyond the basic hybrid model, Hyundai and Kia will launch plug-in versions of these two new cars, but only well into 2017. By that time, Toyota may also have launched its plug-in version of the Prius.
In the meantime, Ford continues to offer a plug-in version of the C-Max. It sold 7,591 of those in the US in 2015, down slightly from 8,433 in 2014.
Hyundai will also launch a pure EV version of the Ioniq in the US, in the fourth quarter of 2015. It has not yet said what kind of range this pure electric car will have.
Kia already offers a pure EV in this size and price class, the Soul EV. It has 93 miles of range. Therefore, it is not clear to me whether Kia will continue to build on the Soul for its EV future, or switch to the Niro for this purpose.
The challenge for both Hyundai and Kia in terms of pure EVs is the same as for most other automakers: GM and Tesla (NASDAQ:TSLA) will deliver cars in the $35,000 - $37,500 range that will have more than 200 miles of range.
This leaves all these other companies - Kia, Hyundai, Ford, Nissan, Volkswagen, Fiat, BMW, Mercedes and some others - with this challenge: If you are going to launch a new EV in this "entry level EV" class, and it doesn't have 200 miles of range (or anything close to it), at what discount will you have to sell it?
GM will deliver the Chevrolet Bolt at the end of 2016 with 200+ miles of range. Tesla will deliver its Model 3 with 200+ miles of range potentially as early as the end of 2017. Nissan will deliver its LEAF 2.0 probably around the middle of 2017, with potentially around 200 miles of range as well.
If you are Ford, Kia or Hyundai, and you are trying to sell an EV with only 100-125 miles of range in 2017, how much less will you need to charge for this car than the $35,000 that Tesla and GM are targeting? Will you need to go down to only $20,000? What will the market be willing to pay for a 100-125 mile EV instead of an otherwise equivalent 200-220 mile range car? These are the critical questions.
Conclusion: Brutal competition ahead
Toyota is now facing its toughest competition in the dedicated hybrid market yet, Hyundai-Kia. In 2015, Hyundai was the world's fifth largest automaker, larger than Ford and not all the far behind industry leader Toyota, with approximately 8 million cars sold, compared to Toyota's 10 million and Ford under 7 million.
These new Hyundai and Kia hybrids appear to stack up very well against Toyota, especially for those of us who are addicted to either Android Auto or Apple CarPlay, as well as for those who prefer the Hyundai-Kia cockpit interiors. That said, Hyundai-Kia has another tougher challenge in turn, and that's to compete with 200+ mile range EVs from GM, Tesla, perhaps Nissan and others, starting very soon.
Disclosure: I am/we are short TSLA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: At the time of submitting this article for publication, the author was short TSLA and long GOOGL. However, positions can change at any time. The author regularly attends press conferences, new vehicle introductions and equivalent from most major automakers, including Ford, Hyundai, Kia, Toyota and others. Sometimes, those events are hosted by the automakers.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
Source: Hyundai And Kia Challenge Toyota And Ford With New Hybrid Cars
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