Hybrids Are A Speck On The Wall

Call me a cro-magnon cave dweller, but whenever I read these “car of the future” stories, I am reminded of a discussion I had with a Volkswagen engineer, some time in the late 70s. I was a wide-eyed copywriter and believed anything.

“I am working on the car for the year 2000,” the engineer announced.

“Wow! What will it be?” the wide-eyed copywriter asked in awe.

“For one thing, it will have four tires. A steering wheel. And guess what: A combustion engine.” It had expected wings. History did prove the engineer right.

That episode whizzes through my mind again as I read a story in this morning’s Nikkei [sub]. It reports that hybrids, which supposedly are everywhere, account for less than 2 per cent of the world passenger-vehicle market. J.D. Power predicts that this year, worldwide hybrid sales will again miss the 1 million mark. Total 2010 world hybrid volume is estimated at 934,000. It’s up from 728,000 in 2009, but largely on overall industry growth. Lest we forget, 2009 was the car industry’s worst year in decades.

More than two thirds of the world’s hybrids come from Toyota. When asked about the not quite a million worldwide, Toyota spokesman Paul Nolasco quips: “At least it’s a million more than 13 years ago.” Toyota launched the world’s first mass produced hybrid, the Prius, in December 1997. So far, it has sold 2 million in total and is the world’s best selling hybrid. It is also Japan’s top selling car.

Given the above, it is interesting that this article, originally penned by the Financial Times, is distributed widely by The Nikkei. About half of this year’s hybrid growth comes from Japan, where hybrid sales were powered by tax incentives. No more of those since September.

The U.S. comes second to Japan in hybrid-affinity. Here, J.D. Power forecasts total sales to reach 315,000 this year, up 8 per cent from 292,000 in 2009. The overall car market will grow 12 percent, hybrids are losing market share. 315,000 hybrids into 11.5 million cars expected to sell in the U.S. in 2010 makes for a total hybrid market share of 2.7 percent.

Europe may even be considered as hybrid hostile. JD Power predicts that EU hybrid sales will reach 107,000 units this year, a mere 0.7 percent of the European market. Now you understand why EU carmakers, when it comes to alternative propulsion, are a lot of talk and precious little market action.

In the emerging markets of China, India et al, hybrids are pretty much unsalable. BYD sold 230 F3DM hybrids this year in China. Toyota’s Prius never got above 4,000 units in the world’s largest car market.

“There have been so many small, efficient gas-engine cars launched in the last year, that in pure dollars and cents terms it doesn’t make sense to buy a hybrid any more,” said Jesse Toprak of Truecar.com. “You have to drive it for 10 years just to make up the premium you pay over a gas engine.”

Says The Nikkei: “The modest sales projections highlight the extent to which many consumers are reluctant to pay more for new-technology cars, even if they promise lower emissions or fuel costs.”

Something to keep in mind when making wide-eyed predictions for the success of EVs. Hybrids have no built-in range anxiety, they don’t have the chicken or egg problem of a charging infrastructure. Just like EVs, hybrids cost a little more, and this remains an impediment to market success. EVs cost a whole lot more and come with a huge can of worms.

There is another thing this cro-magnon writer has learned the hard way in the industry: Customers lie through their teeth when it comes to the environment. In studies, they want to protect the planet at all costs. In the showroom, they make their own little cost-benefit analysis. If there is too much cost and not enough benefit, they won’t bite. If environmental responsibility comes knocking, customers quietly tell the environmental responsibility: “What can me alone do for the environment? Go away.” In the emerging markets, and that’s where the growth is, they want mobility with a roof over their heads at a price they can afford.

Oh, and trucks are back.