Hybrid sales inelastic despite surging gas prices
Despite a conspicuous rise in gas prices over the last three months, the demand for hybrids isn't budging.
According to analysts cited in a new Reuters article, consumers aren't being swayed by increases in fuel economy, available tax credits and in some areas, high-occupancy vehicle (HOV) lane privileges that hybrid ownership offers. The reason? Most cite a reluctance to pay the up-front premium of around $3,000, while others believe would-be buyers are turned off by hybrid vehicles' added complexity and potential long-term costs.
Earlier this month, Consumer Reports magazine worked out ownership costs over five years and 75,000 miles for a number of hybrids, determining that only the Honda Civic Hybrid and Toyota Prius saved owners any money (the former scrimped just $400 and latter $300). More to the point, others cost thousands more over the long haul.
[Sources: Reuters; Honda UK]
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Reader Comments (Page 1 of 3)
HemiDakota 12:35PM (4/25/2006)
Consumer Report test was deemed not credible using there own test methods. Consumer Affairs out of Canadian proved that the Hybrids are more costly to own and maintain over the long period than regular vehicles.
Another black eye for CR...though, it isn't the first time.
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Ralph Chauncy 12:37PM (4/25/2006)
Just what I've been telling people all along. Hybrids are hype.......real world cost of ownership is barely cheaper than an economical non-hybrid vehicle. The added complexity for repairs down the road really turns me off since I'm the type of person who buys a vehicle with the intention of keeping it for 10+ years. Hybrids in my opinion are just a mere bandaid for a much more serious problem.
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Jim 12:39PM (4/25/2006)
Can't say it's much of a surprise. Ostentatious displays of "holier-than-thou-ism" by the wealthy aside, the fuel economy just isn't good enough to repay the additional cost over any reasonable timeframe. Not for us real-world people.
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RossL 12:40PM (4/25/2006)
Not to nitpick, but demand for hybrids could only be said to be inelastic if it remained constant while prices fell. But prices aren't falling, so it's no surprise that demand is stable.
If we actually did see substantial price cuts for hybrids (or a sustained increase in fuel prices), I'm sure demand would rise. But consumers have been conditioned to believe that runups in gasoline prices are relatively short-term phenomena.
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car dude 12:42PM (4/25/2006)
llooks just like a saturn...
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Chris 12:42PM (4/25/2006)
It's fairly simple to understand.
1) People do not want to pay the premium for hybrids because they don't make financial sense.
2) People do not want to buy hybrids because they look whimpy and unattractive relative to their dino-sipping siblings.
So it simple automakers, sell a hybrid for the same price as the regular models and make them attractive (note to GM, this will require a redesign of almost all of your vehicles).
Just to take a cheap shot at CA. The Toyota Prius is about as good looking as a Stanford coed during midterms. Drop a hybrid into the Lexus IS250 and you've got a socal coed in mid-summer.
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Tim 12:46PM (4/25/2006)
I agree, where's the sporty hybrid? Something like the Ford diesel hybrid concept would make a great commuter.
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Brian 12:52PM (4/25/2006)
Those of us who've yet to buy a hybrid are either afraid of the gathering smug problem or we can't stand the smell of our own farts.
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shiznannigan 1:01PM (4/25/2006)
When figuring the money that you would save (or lose) by buying these vehicles, what vehicle do they use as a comparison to the PRius?
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Tom 1:11PM (4/25/2006)
I still don't get it. I understand comparing a Civic to a Civic Hybrid. But there are other comparisons that can be made that seem to go completely unnoticed.
The Prius doesn't have a non-Hybrid version. So, say a family is looking a a Camry that costs $25,000. There's a Prius on the dealer lot that also costs $25,000. The family decides to buy the Prius. They get a tax break. They buy less gas than they would have with the Camry.
What's not to like about that comparison?
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steve s 1:16PM (4/25/2006)
I think you will see more of a shift to higher MPG non-hybrid vehicles than hybrids. This may change if you can get a hybrid for similar cost to a standard gasoline model.
I actually thought of getting an used Audi S4 or perhaps a Charger SRT 8 but with gas prices they way they are and not likely to come down very far a turbo 4 or good 6 seems to be a better choice.
Also keep in mind hybrids help auto makers whether they sell or not since the boost average fuel economy across the brand.
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Chris 1:17PM (4/25/2006)
Here is the anaylisis of ownership costs done by Vincentric (who was cited in the Consumer Reports article):
http://www.vincentric.com/hybrid_analysis/index.asp
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Daniel 1:18PM (4/25/2006)
Uh, what about the insight? I save ungodly amounts of money by driving my insight for 7 months on my 200 mile commute.
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Mike 1:25PM (4/25/2006)
Daniel - think how much you would save, and how much pollution you would not create if you lived within 10 miles of work......not mention what you could do with an extra four hours a day, 20 a week, and 1000 a year....
Nahhhh! I drive an Insight so all is well.....
And don't break an arm patting yourself on the back.
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Daniel 1:32PM (4/25/2006)
I had a long commute because I work in construction management. I had to do a job for a year far from home, and didnt feel like moving my entire family up there. I bought a used insight, drove it, got paid for mileage, made a lot of profit, and sold the car for a profit when I was done.
I now have a 300 mile commute on a new project, and AM moving the family since it will last a few years. However, I have a company car now.
No patting myself on the back, except maybe for a sound business decision.
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Joey (Kev) 1:33PM (4/25/2006)
Well that may be because people realize they can get better mpg with less effort.
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Richard Warren 1:35PM (4/25/2006)
I'm not a huge Toyota fan and have not decided on the whole cost of hybrid ownership. Yesterday I had a conversation with a neighbor and friend who owns an early Toyota Prius. 178,000 miles 4 years old, averages 48 mpg and has had only 2 minor warranty problems, those were not associated with the hybrid system. As he put it "at this point the car owes me nothing" He has averaged 48 mpg since he got it.
So if this is any example, I'd say it's time to take a real long look at them.
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Brett Breitwieser 1:36PM (4/25/2006)
I'm forgoing the car/truck/SUV syndrome completely this time around. Shopping for a motorcycle instead. The automakers aren't really serious, are they? Nothing economical about any of their vehicles, it's all about maximizing profits and "what the market will bear"...
of course I'll be paying about the same for a good motorcycle as I would have paid for a car a decade ago...
arrghhh!
and the insurance rates will be astronomical because I have to share the road with oversized dinosaurs.
But at least the technology on motorcycles has improved tremendously in the last decade... just goes to show that it IS possible to design small motors and vehicles that are relatively economical...
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Joey (Kev) 1:40PM (4/25/2006)
And the reason the prius looks as shitty is because as hybrid technology is still mostly about the hype they had to design it to be very aerodynamic.
If Toyota was honest, they would say that a lot of the mpg improvement derives from a feable engine and good aerodynamics.
We can only hope that hybrid technology improves fast.
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Sheniferous 1:43PM (4/25/2006)
As far as the "hybrid premium" goes... What about the DVD Entertainment and Navigation System premium? How does one make their money back on that? And the 18" Sport Allow wheels Premium? What about the Authentic wood trim Premium? And the V8 Premium? How does one ever make their money back on that?
As Toyota and Honda have demonstrated, the "Hybrid" option will and is already becoming just another option when getting your car. In addition, publications all over are touting that Hybrids cost up to $7000 than their non-hybrid counterparts. Where the F is this $7,000 figure coming from?
The 2006 Civic EX has an MSRP of $18,260. The Civic Hybrid is $21,850. That's a $3,590 difference. Factor in the $2,100 federal tax credit and the difference becomes $1,490.
I drive 20,000 miles a year. Based on the "real world" conditions that I drive in, in conjunction with my own personal experience with actual mileage (for me) vs. the EPA estimated mileage (I get 20mpg in the Element)... let's say the Civic EX, rated at 30/40 and the Civic Hybrid, rated at 49/51 only come in at 90% of their City estimates with the way I drive. That means the Civic EX will net me 27mpg and the Civic Hybrid will come in at 44mpg (pretty much on par with the real-world database here: http://www.greenhybrid.com/compare/mileage/honda-civicii.html ) that's a 17mpg difference between the two (hell, I've gotten 17mpg in my Element before!).
I would need 740 gallons a year with the Civic EX, vs. 454 gallons with the Civic. At an assumed $2.50 a gallon, that comes out to $1,850 for the EX and $1,135 for the Hybrid. That's a $715 yearly savings. Within 2 years I will have recouped the so-called Hybrid Premium. Even without the $2,100 tax credit, it will take me 5 years to recoup it. Well within the useful life of the vehicle. It's been nearly 7 years since the Insight was introduced in the US and there have been very very few reports of the blown-out-of-proportion dreaded batter and motor replacement that those wary of Hybrid tech are touting. In addition, the current IMA system in the 06 Civic is the 3rd Generation of Honda's IMA system (99 Insight 1st Gen, 03 Civic Hybrid, 2nd Gen). There has been a lot of improvement in both the power and efficiency of the system. Not to mention the IMA system is warrantied for 8 years as well. Once again, well within the useful life of the vehicle.
So if gas were at the hypothetical $6 a gallon (that you state would be required to recoup the hybrid "premium") I would recoup the premium in just 2 years (not counting the federal tax credit). That means I still have another year of standard warranty, 5 more years of powertrain warranty, and 6 more years of IMA warranty.
Factor in time not spent in traffic (being able to take the car pool lane solo in certain states). And the cost of supporting emerging technologies that leads to more R&D that leads to innovation, the hybrid is still a clear winner.
In addition, no one seems to under that someone could be looking at a much less fuel efficient vehicle at the same price point as either of these hybrids (for example cross shopping a vehicle that gets around 20mpg vs. one of these hybrids). At that point the standard non-hybrid Civic vs. the hybrid version comparison becomes moot and you'd have to do you cost analyses based on the 20mpg vehicle and the hybrid.
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