Is Hybrid Production Scalable? (Update)

Toyota has announced that it will start producing its Prius hybrids in the United States:

Toyota said it will start producing the Prius in late 2010 at a plant it is building in Blue Springs, Miss., just northwest of Tupelo. Toyota already builds a hybrid version of the Camry sedan in Kentucky, but this will be the first time the Prius, which has been on sale for more than a decade, will be built outside of Japan and China.

For background on the Prius I suggest you read the excellent entry with bibliography at Wikipedia.

I’ve been puzzled for some time about why Toyota isn’t producing more Priuses. It’s certainly not that they’re not selling them. The waiting list in the U. S. for Priuses is about 6 months and from conversations with dealers it’s clear that Priuses are under allocation. I interpret this move by Toyota as an end run around Toyota’s quota system for importing vehicles into the United States. As long as the Prius was manufactured in Japan or China, it was solely an import vehicle. When they’re manufactured in the U. S., it’ll be a domestic vehicle. Two years is a long time.

One thing I’ve heard is that there are concerns about the nickel used in the critical Prius batteries. China has been importing a lot of nickel for use in stainless steel and there have been some worries about nickel prices. However, world nickel production continues to rise and prices, illustrated in the graph on the left graciously provided by Metalprices.com, aren’t rising monotonically so I doubt that’s the reason. Toyota executives have been quoted to the effect that lithium batteries aren’t ready for prime time.

The claim is that the replacement rate for the batteries is very, very low—something like 1 in every 40,000 vehicles. That suggests a very high degree of quality control and I can’t help but wonder if that quality control itself isn’t a gating factor for battery production which, in turn, is a gating factor for the vehicles overall.

It seems to me that, if hybrid production and, analogously, electrical vehicle production is not scalable, the problems that face us may be of a very different order than many seem to be thinking.

Update

As if on cue here’s a little more support for my speculation:

With the Feds eager to keep raising the bar on CAFE standards, and apparently doing so based on proposed future technologies, General Motors Corp. bluntly told federal regulators not to count on the Chevrolet Volt, or other planned plug-in hybrids, when proposing new rules. GM is maintaining the position that those vehicles will be built in such low numbers through 2015, that they won’t make a significant enough impact on the fleet.

The cited post goes on to remark on Toyota’s problems in producing batteries for its Priuses.

Hat tip: Glenn Reynolds