Honda: high tech means low profits

Michiyoshi Hagino, a Senior Managing Director at Honda Motor, sees profit margins inevitably falling as vehicles incorporate more and more advanced technologies to reduce emissions and increase fuel economy. More efficient gasoline engines, clean diesels and hybrid powertrains are all driving per-vehicle costs higher, while at the same time demanding massive, ongoing investment in research and development.
In a Reuters interview, Hagino predicts that automakers need to invest heavily in R&D today if they are to be competitive tomorrow, saying that automakers trying to preserve high margins today (by skimping on R&D) are risking decreased market share tomorrow. The breadth of the non-traditional development effort needed for tomorrow's powertrain products is demonstrated by Honda's ultracapacitor power unit (pictured), developed in-house for Honda's fuel cell vehicles.

High tech powertrains are also (at least today) more expensive to produce, with diesels and hybrids eating into profit margins even though they may command a higher sticker price. Even gasoline powered vehicles are seeing profit margins begin to drop overall, as small, cheap cars, like Honda's Fit, grow in popularity.

Automakers in the midst of costly restructuring efforts, or smaller companies without in-house resources, will be hard-pressed to mount massive powertrain development efforts. We're expecting a great deal more powertrain partnering to appear throughout the industry, and possibly an increased role for suppliers willing and able to make the investment in key powertrain subsystems, like the hybrid products announced last week by Bosch and Getrag.

[Source: Reuters]

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