Hybrids Hit Hard as Auto Sales Slide
January 6, 2009
Automobile sales have slumped around the world, with the latest data from December offering a grim outlook for some of the world's top car companies. Already, auto giant Toyota has announced plans to close its Japanese factories for 11 days in February and March in an attempt to reduce its inventory of unsold vehicles. One model that has been hit especially hard is the company's highly touted, fuel-efficient gasoline-electric hybrid.
The world's largest car companies took a major hit in December, many of them seeing sales plunge by more than one-third. Among them, Japanese automaker Toyota, which reported a 37 percent drop in sales.
Edmunds.com auto analyst Jesse Toprak says Toyota is struggling because of the types of cars consumers are willing to buy.
"In terms of the types of cars that sold in December, we've seen the consumer preference tilting back to SUVs [sport utility vehicles] and trucks again," he said.
As a result, sales of Toyota's Prius hybrid - the best-selling hybrid in the United States - tumbled 45 percent in December compared to the same time last year. And Toyota was not alone. Japan's number two automaker, Honda, saw U.S. sales of its hybrid vehicles drop almost 70 percent in December, selling only about 1,000 of the high-tech, fuel-efficient cars.
Industry analyst Jesse Toprak says that while the slumping global economy has hurt all vehicle sales, trucks and sport utility vehicles outsold cars because of deep dealer discounts, lower gas prices and the fact that hybrids cost $3,000 to $5,000 more than conventional cars.
"If people know they're going to save money by buying a hybrid they will do so, otherwise it becomes a tougher sell," he said. "They care most about the financial 'bottom line' [the costs versus benefits]. And the truth is, despite our strong preference for these vehicles, when you do the numbers, most hybrid vehicles are still not very good financial investments."
Toprak says that could affect plans to help retool America's "Big Three" car companies - Ford, Chrysler and General Motors. He says that if U.S. policymakers do not give consumers a financial incentive to buy fuel-efficient vehicles, encouraging Detroit to produce hybrids will not save the U.S. auto industry.
According to Toprak, the success or failure of the American car companies will likely have global consequences.
"Smaller start-up companies, particularly suppliers to automakers, especially in South America and China and Eastern Europe, may be hurt," he said.
In the meantime, major car companies around the world are bracing for more tough months ahead - suspending operations at some plants, laying off workers, and, in the case of Toyota, stopping construction of a new hybrid factory in the United States
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