Are Hybrids Losing Their Pull?

Anthony Fontanelle
February 4, 2007

Gasoline prices are increasing and sales are slipping. In addition, the automotive industry is showered by lots of alternative options. These are the factors why critics in the industry are saying that hybrids are already losing their pull. Several automakers have ventured into hybrid manufacture and they are now coping with the change of heart of vehicle aficionados.

Last year, Carlos Ghosn, Nissan chief executive, told a convention of car dealers that the business case for the eco-friendly vehicles had yet to be proved. In a bid to keep up with auto giants, Nissan said it will be introducing a hybrid car developed for the U.S. and Japanese markets this month. This move is aimed at challenging the success of Japanese automakers like Toyota and Honda.

According to Edmunds.com, an automotive shopping website, in July last year, when gasoline prices were hovering near record highs and consumers were eager to save on fuel costs, vehicles that run on both a gas-powered engine and an electric motor peaked at an annual rate of nearly 1.5 million units. However, since August of the same year, sales of hybrid vehicles have fallen sharply as the price of gas and fuel has declined and Toyota has run up against a federal limit for tax credits that have helped fuel sales of the vehicles.

Alex Rosten, Edmunds.com’s manager of pricing and market analysis, said that from September to October, sales of Toyota hybrids, including the popular Prius model, tumbled 22.4 per cent, a downturn that can be attributed in large part to a quirk in federal law. Toyota had come up against the limit of 60,000 vehicles that are eligible for the full tax credit of up to $3,600 provided under a 2005 federal energy bill

“The tax credit has played a large role, and it will expire at the end of 2007 unless Congress renews it,” continued Rosten. But he added that other factors, including lower gas prices, also could reduce demand for hybrids. “There’s certainly less buzz around hybrid vehicles — consumers are burned out on all the hybrid hoopla,” Rosten further noted. “But the days of $3 for a gallon of gas are still in their minds when they shop for a car, so a hybrid is still on their list; it’s just that consumers will be less willing to pay a premium to own one.”

Analysts said there will always be a demand for hybrids from “green” consumers who want to cut harmful emissions as well as the country’s reliance on foreign oil. In addition, automakers are also working making hybrids affordable for each one. The Saturn Vue Green Line hybrid will be one of the most affordable hybrids in the industry. The hybrid costs just $1,000 more than the regular Saturn Vue.

“The Vue Green Line is expected to be the lowest-cost hybrid-powered SUV in the market,” said Mark LaNeve, GM North America vice president of Vehicle Sales, Service and Marketing. “Its lower price allows us to offer the fuel-saving benefits of hybrids to a wider group of customers.”

The Saturn Vue Green Line is equipped with sophisticated controls and a unique electric motor/generator mated to a 2.4L VVT four-cylinder engine and 4T45-E four-speed transmission. To boost its braking functions, Saturn used EBC brake rotors and pads mated with state-of-the-art suspension. The car boasts of its simple and flexible hybrid design that provides additional power from the motor/generator during acceleration and allows increased fuel economy through engine shut-off at idle, fuel cut-off during deceleration and the capability to make the most out of electrical energy through regenerative braking.

But there are significant misconceptions surrounding hybrids. Some enthusiasts believe that hybrids are superior to conventional gas-powered vehicles in all driving conditions. And when the car failed to meet those levels of expectation, drivers become disappointed shifts to another type of vehicle.

“Some think a hybrid will get the stated EPA mileage returns of 50 or 60 miles per gallon all the time,” Rosten said. “But if you are using the hybrid on the highway you are using the gas engine, and cars like the Prius are much better-suited for around town driving in gridlock — they are not meant to be long-distance driving cars.”

Rebecca Lindland, an automotive industry analyst at Global Insight, who has studied how much consumers are likely to save with hybrid vehicles vs. their gas-only counterparts, concluded that a driver who buys a Honda Accord hybrid, which can cost some $3,000 more than a regular model, will need 10 to 12 years to break even in fuel savings, assuming the price of gas remains within the $2.50 to $3 range. She added, “To get that saving you have to drive 15,000 miles a year, and if you are driving a hybrid 15,000 miles a year, you are doing a lot of highway driving and not maximizing the best use of your vehicle.”

Lindland pointed out that when it comes to saving money at the pump, there are alternatives to hybrids. These include engines with a highly efficient continuously variable transmission or GM’s “Active Fuel Management,” which allows a V6 or V8 engine to “turn off” cylinders under light-load conditions to improve fuel efficiency. She added, “The other possibility is diesel. New regulations requiring low-sulfur diesel fuels, which went into effect this fall, are likely to boost the popularity of diesel vehicles in the United States. Those vehicles are already popular in Europe. (Diesel) has got a really bad rap because most of us think of it as loud and smelly, but this is not your father’s diesel. Cars that run on diesel get consistently better mileage than gas engines, whether on the highway or in the city. That’s the huge advantage they have over hybrids — they are not as ‘duty-cycle’ sensitive.”

Source: Amazines.com