Green Cars - developing and marketing environmentally-friendly vehicles

American Demographics, Jan, 2001 by Dale Buss

Since Insight zipped into the U.S. market in December 1999, it has achieved the best gas mileage of any car on record - 60 miles per gallon in the city and 71 mpg on the highway. Sporting an all-aluminum body and a fetching, ultra-aerodynamic design, the car is targeted at buyers in their 30s, with high incomes. Insight buyers are mostly male and married, and most likely to be engineers, "or other people interested in technology or the environment," explains Art Garner, a marketing manager for Torrance, California-based American Honda Motor Co. The company reportedly got a little ahead of itself during last summer's gas-price scare, and projected sales of as many as 7,500 Insights last year. But more recently, Garner expected 2000 sales of Insight to come in around 4,000 units. He expects sales of 6,500 Insights this year.

Prius has the same $20,000 suggested retail price as Insight. But market watchers say Toyota's green entry has demonstrated more appeal to typical vehicle buyers than Insight. It's a four-door, five-passenger sedan, standard-equipped with amenities such as antilock brakes, power mirrors, and a security system, and bearing an eight-year, 100,000-mile warranty on its hybrid system, which yields more than 500 miles to a tank of gas. Because it is a more practical carrier than Insight, Toyota is looking for Prius to double Insight's sales this year, projecting sales or lease of about 12,000 units.

"I'm more encouraged now about the future of [green] vehicles than I was even a couple of years ago," says Thad Malesh, director of the alternative-systems vehicle practice for J.D. Power and Associates, a leading analyst of the automotive marketplace. "The new forces at work will result in huge changes in the market."

To be sure, purchasers of green cars now represent only a fly-speck minority of vehicle buyers. Will the environmentally-friendly car become a fixture in the American garage anytime soon? Here are some of the other factors expected to shape the consumer dynamics of the eco-friendly vehicle market:

THE TRUE BELIEVERS: Every manufacturer is counting on a certain percentage of early technology adopters and "environiks" to precipitate demand for their new green offerings. Toyota has been marketing its Prius heavily on the Web, for example, aiming at consumers who also probably bought some of the first laptop computers, DVDs, and CD-Roms, and using a database of people who have e-mailed them about the car. And Ford plans to offer discounts on its hybrids to members of environmental organizations, according to James Schroer, the auto company's vice president of global marketing. "We'd love to develop a first-mover market among folks who are particularly environmentally sensitive," he says.

But Schroer also believes that, as Generation Y matures, the appeal of green vehicles will quickly spread beyond tree huggers. "As [teenagers and twentysomethings] grow up they're going to demand more environmentally-friendly vehicles and factories from Ford and our competitors," he says. "And they'll be the first generation since the Boomers whose views will cascade across the rest of society as they age into power."