Posted: January 8, 2008

Even as General Motors, Toyota and other carmakers rush to bring to market plug-in electric hybrid vehicles, Honda Motor’s president Takeo Fukui has gone on record as saying he sees no value in developing plug-in vehicles (the kind that run on electricity supplied through an ordinary household electrical outlet).

With the world in desperate need of vehicles that reduce the need for gasoline and the foreign oil dependency this perpetuates, is Honda making a critical error that will cost the company its immensely valuable marketing claim to being the world’s most fuel-efficient car company (a claim it now shares with Toyota)?

EnergyTechStocks.com asked five experts with varying perspectives to weigh in, with an eye to giving investors a sense of whether Honda’s public image, and just maybe its bottom line, is about to take a hit. A number of them said that, while it may turn out to be a mistake, it may also be part of a shrewd and calculated strategy that winds up paying off for Honda.

According to Phil Reed, consumer advice expert for Edmunds.com, it appears that Honda will soon be turning out a “unique hybrid” that will be cheaper than the current industry leader, the Toyota Prius. (Neither is a plug-in model.) In addition, he said, Honda is developing a hydrogen car that may effectively compete with plug-ins on clean-running capability. With these projects in the pipeline, Reed said, it makes sense for Honda to go out of its way to divert attention from plug-ins, even if it is simultaneously developing plug-in vehicles.

Mike Millikin, editor of the alternative energy web site Green Car Congress, echoed the notion that Honda might be shrewdly positioning itself against its rivals. Millikin said that Honda really doesn’t have a vehicle that it can leverage into a plug-in car, and thus it will likely depend on its existing fuel-efficient gasoline and diesel vehicles to challenge the first wave of plug-ins. Meanwhile, according to Millikin, Honda has done terrific engineering work with its hydrogen vehicle that can be re-purposed into a plug-in vehicle when the regulatory climate becomes more favorable.

Alternative energy investment expert Tom Konrad of AltEnergyStocks.com also sees Honda effectively covering up for its relative weakness in the area of plug-ins vs. Toyota, GM and the others. “I think that not rushing on to the plug-in bandwagon is likely a smart move for Honda,” he said. “They were never likely to be the first to market, and taking a wait-and-see approach will give them the chance to get an idea of what consumers really want” out of a plug-in, an all-electric vehicle, or maybe something else altogether.

One of two experts contacted who saw Honda’s statement more as a mistake was Felix Kramer of CalCars.org, perhaps the leading plug-in advocacy group in the world. According to Kramer, Honda’s belief in its hydrogen fuel cell vehicle is misplaced. “I expect the company to reconsider (its position on plug-ins) within the next two years,” he said.

The other was Pavel Molchanov, the alternative energy expert with Raymond James & Associates, the investment firm. Molcanov said it appears Honda is betting that plug-ins will permanently remain a development-stage technology. If they’re right, the company will avoid a lot wasted expense. “On the other hand,” he said, “if they are wrong and plug-ins enter into the commercial arena, Honda will miss out on creating a potentially lucrative new profit center.”

As for what Honda itself is saying, last week Fukui followed up his comment about seeing no value in plug-in vehicles with a prediction that Honda could be ready to begin mass producing fuel cell vehicles within a decade. He said this would be achievable, despite a lack of supply facilities for the hydrogen on which fuel cell vehicles will run. How? According to Fukui, Honda should have ready a home-based fuel storage system.

Let the games begin.