Tuesday, October 11, 2005

Do hybrid cars save money? Short answer: no. (HT: Scrivener)

15 comments:

Pat Patterson said...

To get around the company CAFE averages the efficient cars are sold at a loss, though balanced by the profitable trucks and SUVs. Same thing with alternative fueled cars, until that is the trucks and SUVs that were sold at a healthy profit are no longer being sold at a volume necessary to offset the losses from the fuel efficient ones. A good way to go bankrupt is to sell cars at a loss, hybrids and other fuel efficient cars will now become more expensive and thus not be as popular with the public. The very successes of these cars will cause their coming unpopularity. Not to mention the cost of maintinence.

Anonymous said...

Well... no kidding. I normally enjoy your analysis, but you are way off here. The main reason to get a hybrid isn't to save money, but better fuel efficiency is simply better for the environment, for US security vis a vie petroleum and a host of other reasons Teddy Roosevelt would have heartily endorsed. With the ability to change the environment in massive and permanent ways comes a great responsibility for stewardship.

Having said that, there is an obvious energy cost to purchasing a new car, which means that an operating car within normal tolerances and performance is better for the environment than ditching it for a hybrid.
Why is it that everyone talks about Prius, Prius Prius, meanwhile Honda has been quietly making two and soon to be three hybrid models for the better part of five years? Also the other analysis with CAFE and subsidizing these cars with SUV is BS, Honda doesn't make most of it's money from SUV's and extra profits from SUV's went largely to US automakers and to shareholders as dividends and bonds... carmakers don't subsidize a car price with the SUV sale... No company trades profit in that manner.

Pat Patterson said...

Executives at both Ford and GM have admitted that hybrids are not profitable now and are unlikely to be so in the future. Lutz of GM in CNN/Moneyline(1-12-05) said "From a strict business proposition it's not clear that you'll ever be able to recapture the cost of a hybrid in pricing". Ford's President, Jim Padilla, said "I don't think that there's a chance with the first generation product" for it(the hybrids) to be profitable, Detroit Free Press(3-1-05). While both Honda and Toyota claim to be making hybrids profitably, they can do so because Japanese accounting practices allow them to exclude the combined R and D cost of over $4 billion dollars from their costs. Somewhere in the retail price of its cars these companies are retrieving the losses caused by the construction of hybrids and using these more fuel efficient models to average out their CAFE numbers.

Anonymous said...

Apparently Anonymous didn't read the linked article. The last paragraph mentions that spending excessive discretionary income, while admirable in one sense, is misguided. That same investment would be put to much better use if given to an organization that works directly for eco-conscious efforts. It's a simple matter of results versus cost. The hybrid cars provide a very small improvement for a rather large cost.

But the big question, for me at least, is why should the consumer have to be conscientiously badgered into supporting a technology that he doesn't benefit from? When the auto industry comes up with a new technology that really does make a difference at an affordable price, it'll sell without the government subsidies.

Back to the drawing boards, Toyota et al.

Eric said...

Joe, I agree about government subsidies in that it actually detracts from the automakers incentive to make an affordable hybrid.

A while ago, I spoke with technical guys from a major auto company and they derisively referred to their tiny cars as a scheme to get under CAFE standards. So everything Pat said is true.

Anonymous said...

OK... Same anon here. I don't believe the problem with Detroit is that the Japanese companies are writing off R&D or whatever... American companies have consistently refused to budge environmental standards throughout history, including impassioned speeches to Congress that Clean Air Act I standards were impossible to meet. The head of Honda then testified that they could do it, without using a catalytic converter, and the Civic was born. I think the evidence is clear that Japanese automakers aren't using these cars to get around CAFE. While GM bitches and complains, they are getting 10 years of free road-R&D to perfect and try out new ideas on electric powertrains, power management, storage etc while GM fiddles itself away into legacy bankruptcy. Why are the only people who say it can't and shouldn't be done are US automakers. Consumers aren't being bullied into buying these, they have a myriad selection of comparable mileage cars that are not hybrids. A hybrid is essentially illogical, a vehicle should not have two powerplants, it is redundant, but in the interim, Toyota and Honda are going to be so far ahead of Detroit in design on these, I fear GM will exist only as retro art like Pan Am

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