Hybrid sales are (going to be) in trouble as much as SUVs and trucks, maybe worse

This is a response to the excellent "I just paid $2.45 for gasoline! But what effect will this have on hybrid sales?" discussion.

I noticed references to battery supply problems to explain the latest hybrid sales drop including Prius. I think this is just lazy thinking not wanting to face the big forces at work. The real issue is that Prius (hybrid) sales are *VERY* sensitive to gasoline prices, despite the minority who think long term about dependence on foreign oil. Here is why:

Part A = Hybrids don't work, don't really use less fuel

This is the common belief which is actually true

Car makers and sales people will naturally promote the good qualities (such as hybrids use less fuel) without warning consumers about caveats:
1) mild hybrids deliver only small underwhelming improvements
2) aggressive style of driving may negate most of the hybrid tek efforts to save fuel
3) a big/heavy vehicle even with hybrid tek still uses a lot of fuel

Any combination of these will convince most people that hybrid technology doesn't work. Keep in mind that expectations are often high, minimum 50% less fuel or more. So when a mild hybrid or even a good HSD on big/heavy Camry delivers only 25% improvement then people are dissapointed and make up their minds against hybrid tek in general.

This is how my neighbour decided that hybrids don't work because his friend has Camry hybrid and didn't save much fuel.

Of course, most here understand that the proper combination of good hybrid tek (HSD) combined with a nice lighter body (Prius) and a common sense reasonable driving style (hyper miling, some version of it) can produce amazing savings (well over 50 mpg). Unfortunatelly, it should be noted that none of these opints are promoted by the car industry and sales people; only enthusiasts on sites like these.

The end result is that people are looking for big fuel savings from hybrid tek and only get tiny improvements for the most part. So regardless of the Prius' potential, most folks don't save much fuel and decide that hybrid is not worth the money and hassle.

Part B = Don't use much fuel and/or need more capacity

I used to live close to downtown next to a major bus route. I drove so little that I would fill up maybe once per month. I had no clue about gas prices and didn't care. What difference does it make if I have to pay $30 or $60 per month???? I still discover some people driving 3-5 miles to work.
This weekend I had a new wireless internet dish installed on top of the roof. They came in a GMC Yukon loaded with parts, tools, pipes, etc. while pulling a lift to bring them up onto the roof. I am no fan of Yukons and similar beasts, but you can actually see it sag due to all the heavy stuff. Perhaps they could use a pair of wagon type cars, but ... Many trades people simply have to use larger vehicles regardless of gas price.

In other words, there is a significant portion of drivers who are simply not price sensitive for fuel.

Part C = Price jump is temporary and price will come back down

While many smart people now believe in the Peak Oil theory (theoildrum.com) the majority of driviers are not even aware of it and simply assume an infinite supply. Their firm belief is *STILL* that price jumps are temporary. The recent oil price volatility is only confirming their belief.


All of these are permanent factors working against hybrid car sales. It should be noted that hybrid cars have many obstacles to overcome. What is making the current period especially challenging for hybrid sales is the current economic decline.

When faced with declining incomes and credit troubles, the last thing North Americans are thinking about is a new car pruchase of any sort. To the contrary, due to many incentives (0% financing, etc.) most of us have more vehicles than we really need. That means that a car buyer will tend to look for cheaper smaller cars and cheaper used cars.

In particular, as bankruptcies pick up there will be more used vehicles for sale at low prices. Families will be getting rid of extra vehicles we don't need as we take a closer look at the ongoing costs of operating our vehicles.

In summary, between the lower gasoline prices and oversupply of cheaper conventional vehicles, hybrids like Prius just won't sell as well as in the past. Consumers will turn to cheap used vehicles more and more. Prius sales will stall and possibly decline erasing the past 2-3 years' gains.

 

As an example, here is my case:

I have 3 vehicles:
Honda CRV for winter driving
Honda Civic CX for summer
Mazda Protege5

CRV is a small SUV and only used for bad weather so not a concern.
Civic CX is old, but gets around 50 mpg, so almost as efficient as Prius.
Of course, it is smaller and old so ... at some point it has to go.
Mazda has horrible gearing and gets around 28 mpg, so I'd like to replace it with Prius.

However,

Here in Canda Prius MSRP was around $30K and now has dropped to around $27K. EcoRebate returns $2K, so about $25K
That is still bit high. Looking at alternatives:

A diesel VW Jetta wagon has more room and gets about 50 mpg highway. Clearly city driving is not as good, so Prius has an edge there, but I do a lot of highway driving. Plus diesel engines last forever and it is a nice size wagon that can serve me for all sorts of family needs. It is about $2K cheaper and may qualify for EcoRebate as well, not sure yet.

Another possibility is to replace Mazda with another commuting car, Smart car with MicroHybrid. Clearly it is much cheaper, around $10K
For family trips I can simply use the Honda CRV. That way I trade poor FE of the family SUV for excellent FE of the work commute cars. Since my kids are still young we don't travel much with them so family driving is limited.

Finaly, there is new Honda Insigth that promises a lower MSRP and comparable FE.

My point is that unless Toyota adjusts Prius' pricing significantly, many car buyers will be able to find many alternatives and simply pick something else!!!

 

Clearly the current North American economy cannot handle $150+ oil. So even after the recovery the oil price is limited until the structural changes are made improving fuel efficiency.

For instance, average MPG of cars will have to move up to 40-50 mpg range to be able to handle $100+ oil without economic disurptions. It may be achieved using Geo Metros, or bigger hybrids, or whatever.... The point is that oil price is tied to overall economy.

This recession may last some time during which oil remains down and hybrid sales are hit.

 

There is no question that long term oil dependency has to be dealt with. My point is that short term people are more likely to go with conventional cars. Even when oil price does rebound, many car owners will be able to reduce their gasoline use by 50% simply by downsizing. Not to mention using mass transit, hypermiling, etc.

As an example, wife's friend drivers a Jeep to work even though she hates its high fuel use. Even when looking for a new vehicle she was still looking for a SUV that uses less fuel. As a compromise she drives only half way to work, then switches to bus transit.

Compared to other non-conventional vehicles like GM Volt, Prius is dirt cheap. Not to mention that cars like GM Volt and Honda FCX hydrogen car are not sold in any real volume. As much as we want them the reality is that nobody makes them yet.

Indeed that is the point - hybrid and other new tek cars are either expensive and/or limited supply. During hard times like now people will aviod them.

 

From Green Car congress:

From the charts you can see that the share peaked over 3% during the spring. Also note that total US hybrid sales dropped from almost 40K in the spring to about 22K. On one hand there is seasonality but on the other hand new hybrids are being added all the time.

The latest reports show decline accross the types and brands. Even Honda's Civic are declining. To the contrary I think some SUVs may rebound little bit while hybrids will continue to decline.

Certainly diesel cars have their own issues and I didn't even consider them until now. Canada air regulations are not as strict so we need less pollution control devices on diesel cars. The point is simply that there are some decent alternatives, even for family cars getting 50 mpg.

 

I see you are also in Canada. I actually agree with you. For this post I put on a "hybrid doubter" hat just to stir up some tro... ahem debate I mean

If it wasn't for the high price of Prius in Canada I would be driving one as well. In the past I rode a motorcycle to work as I was going alone. It was funny to discover that no other riders would care about fuel efficiency and such.

Anyway I just wanted to bring up the reality of many people who are not to keen on the hybrid technology and what they are facing. I want hybrid to take over the world but ...

This post is as much about what hybrids need to do in order to become a more dominant force as opposed to stuck at 3%-4% of market share.

 

These are all good points and I don't mind admitting I could be wrong.
In particula I am clueless about waiting lists and Prius demand. Not sure where to find that info.

Bob Wilson,
Thanks for the info. I was looking forward 3-6 months when talking about battery supply. I am assuming battery supply should not be a problem next year. Therefore Prius sales numbers should at least stop dropping assuming battery supply is the only limiting factor.

Indeed, the sales are probably still solid. My post is forward looking. I am looking at the deepening recession and its impact on hybrid/Prius sales, more than what happened this year in the past.

 

That particular statement was meant to cause you to think about what seems to be the great chasm between us (for the lack of a better term call it clean-mpg-drivers) and the general population.

A clean-mpg-driver is well informed about hypermiling techniques, hybrid technology and how best to improve efficiency and use less fuel. Thus he/she obtains froms a Prius car superior efficiency well above nominal 50 mpg. Even in the worst case you are getting 50 mpg, but more often 60 or more. Thus for us hybrid DO work.

What my post was trying to point out is that general public is the exact opposite. They have no clue about hypermiling or have misconceptions like it is dangerous and should be avoided. They don't really understand hybrid technology and often go with a mild hybrid due to brand recognition. They drive a hybrid car like their old regular car using heavy acceleration and heavy breaking. And so on.

Thus someone switching to a Camry Hybrid because he is familiar with Camry brand and likes it, but expecting an instant 50% less fuel consumption is disappointed. He still accelerates and breaks hard because he is always in a rush. Since Camry is a relatively heavy car the gas engine works as hard as in a conventional version and HSD cannot save much fuel. Regen breaking is not engaged, high acceleration and high speed don't offer much opportunity for battery charge,...

Clearly I am just making up a fictional example based on my experience. Hey, I was passed by a bus the other day just because I refused to accelerate too much approaching a red light?!?! I was even passed when riding a motorcycle. So average driver accelerates hard and drives fast leaving little opportunity for battery charge.

This is unfortunate. I haven't seen a Camry Hybrid or Prius manual, but I am guessing there is not much information on driving techniques maximizing FE. Really there is no motivation to do anything different as sales people probably say hybrid drives the same.

So average driver spends a bunch of money to switch to a hybrid only to discover a meager 10%-30% FE improvement. You can see how people already with predisposition to dislike hybrids will jump to the conclusion that hybrids don't work.

My concern is that we - clean-mpg-driver - are a minority, a small one. So the majority will keep believing that hybrid doesn't work. Which is a pity.