Detroit's Hybrid Vehicles Face a Tough Race Against Asia

(MoneyWatch)  General Motors, Ford and Chrysler are in trouble, and everyone knows it. The running assumption is that if they just clean up their acts and start making fuel-efficient vehicles, both their prospects and our energy profile will be improved. Yet the goalposts might be moving too quickly for the already-damaged companies to catch up in the game.

The problem is Asia. But not the part that contains the old enemy of the US carmakers, Toyota. That Japanese vehicle brand is now the largest in the world, and leads hybrid sales with its Prius. The Big Three are well accustomed to competing with Toyota.

The real challenge is smaller companies who want to grab market share by offering low-cost alternatives to mid-range American hybrids like the Ford Fusion, which will be released in 2010 which a base price approaching $30,000. Consider two Chinese companies, BYD and Chery.

Both firms have recently announced plug-in electric cars. Plug-ins take a step beyond hybrids, by getting rid of the combustion engine altogether -- the only fuel comes from the electric socket, hence the term plug-in. These vehicles may present a larger danger to the American car industry than it realizes. China's car makers have long been looked down on by the West, but as occurred decades ago with Japan, consumers will at some point be surprised by how high-quality the products have become.

It's also important to consider the cultural background that BYD and Chery are working out of. China is still quite a poor country. With this in mind, the two have trimmed the costs of their new vehicles to the lowest level possible. BYD's F3DM, for example, is about $22,000 in China, more than $5,000 under the price of the Fusion. That's a significant amount, but the fact that the car is all-electric makes it much more significant -- electric cars are usually far more expensive than hybrids, which use fewer batteries. BYD, in particular, is also advantaged because its parent company is a major battery maker.

Yet because China is still on average very poor, its automakers can't expect a thriving market at home for their relatively high-priced vehicles. With the Chinese government alternately pushing companies like BYD and Chery to succeed, and supporting them in the background, they'll have to turn to the markets in which they can sell significant numbers of their vehicles, namely Europe and the US.

Besides the two Chinese companies, there are a bevy of others that are far ahead of Detroit. Honda, for example, will soon release its Insight hybrid at a cost lower than the Prius (or its own Civic hybrid). The Prius itself is getting an upgrade, and its proven reliability means it will remain a better choice than a brand-new line from any American carmakers for several years. And there's also the Mitsubishi iMieV, an all-electric vehicle that will come with a low price tag.

In short, the major domestic car companies are facing a raft of trouble from overseas, not to mention at-home insurgents like Aptera (although those have a long ways to go). The energy revolution in vehicles will come, likely faster than anyone expected, but not the way that American industry may be hoping.