Is the Hybrid Boom About to Go Bust?

by Glenn Swanson

February 2nd, 2008 8:19 AM

According to mlive.com, auto industry analysts predict that the hybrid “premium” and consumer acceptance of $3 a gallon gas will dampen near-term demand for gas – electric vehicles. J.D. Power and Associates senior manager Michael Omotoso says the arrival of the next gen Prius will revive the genre. "In 2009 we see hybrid sales going over 600,000 units." Over at AutoNation, some 70 percent of car shoppers inquire about hybrids– but only two percent end up buying one. Spokesman Marc Cannon claims the Prius has been successful because "Americans really like that fact that the Prius stands out and it's a social statement; if you have a Prius, everyone knows it's a hybrid." And what of battery-powered cars? "The lithium-ion battery is nowhere near ready for showtime," says Brett Smith, a hybrid analyst at the Center for Automotive Research. Still, the Volt hype has raised expectations– and how. "Whoever sees those concept cars thinks it's ready to go." As Albert Einstein said, “Reality is merely an illusion, albeit a very persistent one."

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Ghillie on Feb 03, 2008
# ZoomZoom : I am a former sports car owner. Don’t have any now, but I’m telling you, if Mazda, BMW, Mercedes, Toyota, or Honda ever thought to do a hybrid or otherwise very-high-milage version of a Miata or Z4 type of vehicle , I might just be convinced to get a second car again… Buy a Honda Insight (manual transmission) - Porsche 356 of the 21st century (only better). Lumbergh21 : February 3rd, 2008 at 1:40 pm I’ll stick by the assertion that it is a political/social statement not an economic decision that drives people to buy hybrids. Well, I've read numerous posts on this site by people saying buying a Prius was an economic decison for them.... so, obviously, you're wrong if you mean that statement to apply to everyone. No doubt there are many people who buy hybrids (especially a Prius) to make a statement - but what proportion of the total is just a guess, probably based on the prejudices of the person making the guess rather than any "facts". My guess is that the proportion of people buying a Prius to make a statement is probably not that much different from the proportion of people buying any car to make a statement. The luxury car industry is almost entirely based on buyers wanting to make a statement. Where I come from these are called "prestige" cars - pretty much says it all. Buying a luxury car certainly makes no economic sense (unless appearing to be successful attracts people to your business). People pay more for the aura of luxury than they get in added value (I believe that Toyota entered the luxury market with Lexus because the profits are better than with "ordinary" cars). For many people driving a truck is just a statement. (Responses welcome from truck owners for whom it makes practical sense.) The car that anyone drives is capable of being a mobile advertisement of that person's wealth, status, political views, youthful attitude, sexiness, style, power etc. etc. (even if it's just a statement that they don't want their car to be a statement). Whether you consider a particular car to be value for money may depend on whether you agree with the statement that you believe it makes.

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ZoomZoom on Feb 03, 2008

Lumbergh21 said: I’ll stick by the assertion that it is a political/social statement not an economic decision that drives people to buy hybrids. Not me. Ghillie responded: Well, I’ve read numerous posts on this site by people saying buying a Prius was an economic decison for them…. so, obviously, you’re wrong if you mean that statement to apply to everyone. No doubt there are many people who buy hybrids (especially a Prius) to make a statement - but what proportion of the total is just a guess, probably based on the prejudices of the person making the guess rather than any “facts”. Right on. Furthermore, it is a big mistake to assume that people who drive hybrids are of one particular political view or party, or that people who drive a hybrid automatically buy into the global warming religion. Yet many people continue to make this superficial mistake every day. By the way, I thought that the Insight was a great little car. Problems, however... 1. I couldn't get a test drive without putting money down at a dealer and placing an order. What's up with that? 2. The red and silver colors were nice, and later a blue one came out, but that bile-green was nasty, like yesterday's chip-dip... 3. Honda's IMA hybrid system did not allow for the gas engine to shut off at traffic lights when running the AC. I live in Florida; nuff said. 4. The Insight wasn't available as a top-down roadster. 5. Honda no longer makes the Insight.

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Ghillie on Feb 04, 2008
ZoomZoom : February 3rd, 2008 at 11:53 pm By the way, I thought that the Insight was a great little car. Problems, however… 1. I couldn’t get a test drive without putting money down at a dealer and placing an order. What’s up with that? That seems stupid to me but now no longer relevant.... as you say - Insights are no longer available new. 2. The red and silver colors were nice, and later a blue one came out, but that bile-green was nasty, like yesterday’s chip-dip… Well - I like the green but each to his own. Most Insights are silver, red or blue. 3. Honda’s IMA hybrid system did not allow for the gas engine to shut off at traffic lights when running the AC. I live in Florida; nuff said. That is a pain, but with the AC in econ mode the gas engine will shut off at traffic lights and leave the fan running (but not the AC). You'll still get reasonably cold air for a few minutes. But definitely not as convenient as a Prius. 4. The Insight wasn’t available as a top-down roadster. Out with the angle grinder :) Or think of all the useful things you can carry under the rear hatch. 5. Honda no longer makes the Insight. Buy used.

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on Feb 04, 2008

Whether or not these people believe that the Prius saves them money doesn't change the hard numbers. I'll admit the calculations I included in my first post are quick and dirty and don't take into account the resale value of the respective cars or the time value of money, only estimated gasoline price inflation (and a rather high estimate at that)and a modest return on investment after taxes. However, anyone who plans on keeping a hybrid for 200,000+ miles before reselling it, shouldn't expect much residual value. Maybe others won't consider this, but the constant cycling of those batteries over those 200,000+ miles has got to have a serious effect on their current ability to store energy. I would look at buying an old hybrid the same as buying an old conventional car that was in need of a new engine since the cost of a new battery pack is as much or more than the cost of a rebuilt engine. Then you also have the fact that you have an old engine in their as well as all other systems, just like a conventional car. These issues should certainly effect the resale value of an old hybrid, and by the tiem you have paid for the extra purchase cost through gas savings, that is exactly what you will have, an old hybrid. My point being that the cost of gas even at extremely high prices, $5+, is still small compared to the initial capital outlay in buying a car. If you buy a hybrid that gets 50% better gas mileage than a comparable conventionally driven car, you are still only saving a few hundred dollars each year. That might make you feel good, but it doesn't make up for the intial additional capital outlay of several thousand dollars for quite some time; quite posssibly not even within the life time of the car.

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