Eco-Advantage Blog

November 30, 2006 | Andrew Winston | Jump to: Comments (0) | Post A Comment

GM Reaches for (Toyota's) Brass Ring

Apparently, this week’s auto show in Los Angeles has a distinct tint (“Auto firms go green for L.A. show” USA Today declared). New Hybrids, diesels, and hydrogen prototypes are all over the place. And GM is leading the charge, doing a big 180 degree turn from its recent days of dismissing hybrids. CEO Rick Wagoner is now saying that GM will make developing plug-in hybrids a “top priority.” Of course GM also continues to push the idea of hydrogen as the ultimate answer. But it’s not just betting on hydrogen for the future…Wagoner is hoping that GM’s commitment to greener vehicles will help bail GM out of its troubles today. As the Wall Street Journal put it bluntly in one article title, “GM Hopes Engine of Future Sells Cars Now”.

The auto industry is waking up to the enormous benefit Toyota has seen from leading on green technology. A “halo” has surrounded the Toyota brand, allowing it to sell more cars in every vehicle class, including gas-guzzling SUVs. The Journal article included this critical passage:

Mr. Wagoner and other top GM executives believe Toyota has gained an edge by jumping ahead of other car makers on gas-electric hybrids. Toyota is now often viewed as the industry’s innovation leader, while many consumers see Big Three Detroit auto makers as laggards that only excel at making gas-guzzling trucks—and at losing money in the U.S. market.

Ouch. If only it weren’t true. The Prius is the most successful eco-product in history (please email me if you have another suggestion for best ever) precisely because of the halo (of course it’s not just a brand effect — the company is more innovative, in part due to its development of the Prius). It’s the ultimate revenue-driving eco-strategy — the benefits spread out over the whole company like a stone thrown in a pool, stretching far beyond the direct impact of Prius sales (which are still just a small share of Toyota’s revenues).

GM has a long way to go to catch up, but recognizing these secondary effects — which turn the intangible value of being known as the “environmental and innovation leader” into very tangible sales — is a good first step. Trying to leapfrog Toyota and hit the plug-in hybrid market first is an even better idea. We’ll see who wins the race.


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