Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Who needs a hybrid?

Posted by: David Welch on January 6, 2009


Green is for sale. But who’s buying? Seriously, who needs a hybrid? Without question, fuel-saving technology is essential both for automakers who hope to compete in the next decade and for a nation stricken by energy problems. But if you dig through the sales numbers over the past few months, it’s easy to see that more consumers are asking whether the extra cost of a hybrid-electric car is really worth it.

In December, sales of Toyota’s Prius—the standard bearer of all hybrids—fell by a whopping 45%. In November, sales were off 48%. During those two months, gasoline prices plummeted below $2 a gallon. This proves that America hasn’t turned truly green. More likely, they turned red at the pump back in July when gasoline prices topped $4 a gallon. People fled their suvs and bought smaller cars and hybrids like there was a fuel shortage.

But once gasoline prices fell back to levels that Americans have normally paid, they pulled back on hybrid purchases. Toyota has indefinitely delayed its plans for a Prius plant in Mississippi. Toyota isn’t the only company feeling a pinch. Ford’s Escape hybrid and the competing Saturn Vue hybrid both saw sales sink by more than 40% last month. And the hybrid Civic? Off almost 70%. Ouch.

Jim Lentz, President of Toyota Motor Sales USA, notes that for the year, hybrid sales fell only 12%. That shows better staying power than a car market that fell 18%. His point shouldn’t be ignored. He is also right when he says that in the long run, gasoline prices will rise and hybrids will be a better sell. Plus, he says, 80% of Prius owners trade in for a new one. That means the existing buyers keep coming back.

But annual numbers are padded by the huge fuel-price spike of the first half of the year. Recent months show that when gas prices fall, consumers aren’t buying. This creates a huge dilemma for car companies and policy makers. New fuel economy rules will mandate fuel-saving technology. Carmakers the world over are pushing hybrids and other fuel savers to market. But without a hit to the wallet, Americans still aren’t sold on them. Without a price spike—or a tax on gasoline—carmakers will once again be caught between a policy that demands fuel economy and an American consumer who remains indifferent.

Reader Comments


January 6, 2009 12:50 PM

A hybrid is simply useless complexity. It adds next to nothing in fuel economy given my commuting profile. A diesel on the other hand fits perfectly and is both simple and reliable. Guess which one my favorite car maker is working on. They sell a lot of them in Europe, but can't see their way to import them.
Guess which car maker became my *former* favorite car maker...


January 6, 2009 12:51 PM

A hybrid is simply useless complexity. It adds next to nothing in fuel economy given my commuting profile. A diesel on the other hand fits perfectly and is both simple and reliable. Guess which one my favorite car maker is working on. They sell a lot of them in Europe, but can't see their way to import them.
Guess which car maker became my *former* favorite car maker...


January 6, 2009 12:59 PM

The problem here is car companies are charging too much for Hybrid cars. We need to reduce our dependancy on gas powered vehicles but how can we do this if the fuel efficient car are much more expensive? I believe the car manufacturers are trying to take advantage of the consumer by playing price games. If you continue to add a premium to Hybrids we will not buy your cars and if gas prices rise we will not buy your gasoline cars. Or option is to hold on to our current cars longer. So change or go bankrupt. Frankly we have too many car manufacturers. Time to consolidate.


January 6, 2009 1:03 PM

that's true. until the consumer dosent feel the need to switch, may it be because hi gas prices or unbreathable air or some other thing, they will not change. lets hope that whe they will, it wont be too late.


January 6, 2009 2:20 PM

No one ever includes the cost of pollution into the savings on a buying a hybrid. If there was a pollution tax then people would easily switch. I agree with the comment that unless consumers get hit in the pocket book by either cost or tax they will not change.


January 6, 2009 2:37 PM

The US should tax gas higher and drive consumers to make the 'correct' choices as it's obvious that americans would much rather sit alone in gas guzzling SUVs than use an appropriate mode of transport. The hybrid is at best a weak solution, a smaller car with a better MPG and lower selling cost is a much better way to go, problem is that many americans can't fit their oversized butts into one....


January 6, 2009 4:50 PM

When GM was considering the future of hybrids, the wise people around the table decided it made more sense to use hybrids in big urban vehicles (buses) where they could make an impact. It made no sense to put hybrid power in cars because the technology was expensive and the fuel economy gains weren't that great on the highway. Gas would have to go to unimagined levels and people would have to rack up huge mileage figures every year.Plus, it's a stopgap measure that can be replicated easily with smaller and less powerful cars. That all made sense then and it makes sense today. The only mistake that GM and most of the rest of the auto world (including me) was to underestimate the gullibility of the mainstream media (which hugely inflated a hybrid's abilities) and the buying public (which over-reacted on several fronts).


January 6, 2009 7:40 PM

Must be great to be part of the exclusive high IQ Club that didn't fall for all of this hybrid hype. Isn't it amazing how Toyota pulled the wool over the eyes of the masses and year after year steadily climbed to number one automobile manufacturer position, and so many never saw it coming?
You, GM, and the rest of the auto world who underestimated the gullibility of people like me, and who refused to face changing auto trends, must be proud that you know better than to buy into a passing fad like hybrid cars & trucks.


January 6, 2009 8:51 PM

The question comes down to a matter of national energy dependence, so I agree with CanadaMark. If the cost of fuel isn't high enough, consumers won't do what's right for the country (and the environment). In the long-haul we need to reduce our dependence on foreign oil. Imagine if we actually used what we produced in the US? Problem is, legislators who make the tax decisions have oil lobbyists putting $$ in their pockets to keep it the way it is.


January 6, 2009 9:06 PM

Hybrids are a "feel-good" guilt assuager and that's it. When you figure in all factors, you're really not saving anything, and gasoline even at $4.00 a gallon is a small part of my budget anyway. I'm still part of America's old school car culture. I like power and comfort. Any car with less than eight cylinders and 6 liters is a car I won't drive. I worked to get where I'm at and think I deserve to spend my money wherever I want. The nihilism of the current age tells us to get by with less, consume less, lower our standards. Wrong. Technical progress, new and copious energy sources and consumerism all are the right things to pursue. By the way, anthropogenic global warming is a socialist lie.

Makes Gas Cheaper & Saves Soldiers Lives

January 7, 2009 1:08 AM

@ Alexander:

That must be why I just bought a Prius, one of the top 10 selling cars in the US for 2008, as gas dives towards $1/gallon. I bought it for the electric drive portion, to get us off of imported oil and improve national security. The things that have killed ALL car/SUV/truck sales recently are market saturation, a recession, and a credit crisis. You and GM are just plain wrong. Once the recession ends, credit loosens up and there is genuinely NEW personal transportation product, the markets will take off, in new directions. Once my Prius power pack starts to weaken in many, many years, I'll just get an after market plug in option, like the Hymotion L5. After that goes, some years later, I'll be ready to buy the hottest high performance electric drive vehicle that I can afford, whoever makes it. Think it'll be GM?

I'm open to a top gear range extended electric drive plug in car, especially if it's got a diesel generator. We have yet to see all the possibilities, such as multiple power pack chemistry options, use of turbo on the generator or supercapacitors for quick recharging, etc. My guess is that there will be many little silver bullets coming and that gearheads will increasingly get all hepped up over all the excellent, cost effective electric drive based configurations possible with various strengths and flexibilities.

Make mine a plug in electric drive, 0-60 in 8.5 seconds or better and at least 200 mile driving range (more than my last pickup truck) at 55 mph constant speed, less than $80,000, with decent looks and quality and I'm good to buy if I want. Hmmm...another 20k for 4.5 seconds faster 0-60 speed? For some that's worth it. The Tesla Roadster's (or Fisker Karma, or Lotus EV, etc. etc.) looking good... Better hurry up, big domestic three. It's the Japanese eating your lunch all over again, only this time with even smaller, even more nimble and in some cases domestic piranha OEMs, and they're ready to eat the now big Asian Tigers this time as well.


January 7, 2009 6:50 AM

Jeff, fuel usage and pollution are directly connected. A litre of petrol contains 2.3kg of carbon, so using a litre of petrol releases 2.3kg of carbon into the atmosphere. You might as well simply increase the tax of fuel, because a pollution tax would amount to the same thing. Pollution that doesn't get mentioned anymore is N0x production, in the 80's and 90's all the focus was on reducing NOx production in engines, which is why modern small engines produce similar power and fuel economy today as they did in the early 90's. To reduce NOx production engines were forced to work less efficiently through the addition of catalytic converters and the reduction in lean burning. Nowdays its all about CO2.

As for people buying hybrids for cost savings rather than the environment, is anyone surprised? And I'm glad actually. Why is it that we put so much pressure on one particular industry, the automotive industry to reduce pollution, which only accounts for 11% of total manmade CO2 pollution, which in itself only accounts for 50% of total CO2 production, when you have the power industry pretty much getting off scott free. Where's the pollution tax of Coal power? Everyone is tax and blame happy on car manufacturers, but couldn't care less about the much bigger fish. Why are we going to so much effort to pick the small fruit, when there are a few massive ones within easy reach that we don't touch. If the general population really cared about climate change, you'd get people picketing coal power stations, but instead they waste their time picketing SUV dealerships.

Our society doesn't give a rats about the environment, never has, never will. Its only ever cared about money, thats why when electricity is cheap everyones all rosy, but when gas is expensive, people can't wait to accuse car manufacturers of environmental murder, despite 2 years earlier, happily walking into car dealerships and buying huge SUV's. If the media actually cared about reporting and informing and less about making the most money, and if people cared less about Paris Hilton and more about actual world issues, that'd be a start at least. I won't hold my breath waiting for it.

jake fishman

January 7, 2009 11:01 AM

this is car maker propoganda ... and it is this thinking (or lack thereof!) that moved Detroit into the financial disaster they are having ... anyone reading the 'innovation' articles ... innovation drives (pun intended) the open market economy ... the consumer needs car alternatives (hybrids of all sorts) as does our children and the planet!


January 7, 2009 12:32 PM

In order to sustain growth and sales in the market for fuel efficient vehicles of any stripe, unfortunately the only way to accomplish this is through a gas tax. It is true that the mere suggestion of a gas tax is to shoot one's self in the foot politically but the deed requires the debt. Recommend anyone considering this to get their steel tips on first!


January 7, 2009 1:13 PM

Hi All,

The people who say Hybrids are too complicated have never had to repair a traditional Automatic Transmission theselves. These things are like 200 HP pocket watches, and the modern ones have computers just as complicated as any ECU in a Prius.

A Prius transmission on the other hand has 1/3 the parts, no clutches, no bands, and functions like a simple single gear gear box. Its no wonder they last in to the 200K plus mile range in taxi cab service.

I would rather have a battery to replace if something did not last, than a transmission! Besides, I am tired of doing brake jobs every 40K miles. I guess I can do one every 125K miles for my Prius. Let alone replacing alternators and starters in old style cars.


January 7, 2009 1:26 PM

The article is right about one thing, MOST AMERICANS ARE IDIOTS!! Anyone of you, so called, expert money manager/investors ever heard of PEAK OIL?? $8 a gallon is coming before most fat SUV drivers ever hope to pay off their junk purchases within 5 years, meanwhile I'm going to take a drive in the new Prius that my car club bought last month. I could care less what gas prices are because I kicked my oil/car addiction down when gas passed $2 a gallon.


January 7, 2009 8:58 PM

Jeff, you are a perfect example of the "If I can afford it, I don't care what the impact is" American.

And your "Hybrids are a "feel-good" guilt assuager and that's it" conclusion is wrong. Unless, of course, you are talking about mild hybrids like the Chevy Malibu that barely gets better mileage than the 4 cylinder model or people who think buying a hybrid Escalade somehow makes it something other than a hulking gas hog. You can put lipstick on a pig, but it IS still a pig.

I think it fair to say that your 8 cyl 6L engine can't come close to even 20 MPG average. But let's say it does. That is still a bit less than I averaged in the vehicle my 2004 Prius replaced. In the past 4 years and 82K miles, I have saved $6,500 in gas (2,430 gallons). Thus I have more than made up the 'hybrid premium' and my maintenance to date has been only oil and filters.

If everyone replaced their sub 30 MPG vehicle (when the time comes) with something that got even 50% better MPG, the amount of fuel saved would be massive and the supply/demand would keep the prices down. Now we need the car companies to build them. The Prius is mid-sized INSIDE. There is NO reason you have to squeeze into a sardine can to get 45 to 50 MPG COMBINED.

We not only need to use less imported oil, we need to use less energy of all types.

And I agree that we need to jack the fuel taxes up a LOT. Like other countries, use the money to pay for social programs like education and health care. I've had so many problems with health insurance in the last two years that prove the administrative inefficiency with private insurance companies and just SCREAM for a national health care plan.


January 7, 2009 11:20 PM

People don't like small cramped low-power cars. Let the people decide for themselves what they want. Don't let liberal do-gooders tighten the grip of Big Brother on our lives by dictating what we can and cannot drive. Before long Big Green will have us parking a skateboard in the driveway and paying a big tax on every exhaled breath of CO2 when we use it.


January 8, 2009 1:51 AM

My weekly fill-up nowadays is about $10. I like my Prius just fine, thank you very much.


January 8, 2009 10:48 AM

It seems to me that we need to stop the conversation that includes making someone else's choice "wrong."

We need to consider all of the possibilities that will lower our oil consumption and our dependance on foreign oil. The hybrid is a nice alternative if you drive short distances. In my case, a clean diesel made the most sense as I live out in the country. As an aside, my car is a large luxury car and I get 30MPG locally and 36MPG on the highway. I have reduced my fuel consumption by a third versus my prior car and the cost per mile is about the same. There are now a number of responsible ways to reduce fuel consumption...all of them good and some even fun to drive! I'm sure technology will/could enable more/better options going forward.

But as long as gas is cheap, I fear we as a people won't make the responsible decision. We need to tax fuel and throw out the ill-conceived CAFE standards.


January 8, 2009 11:55 AM

"If you dig through the sales numbers, it’s easy to see that more consumers are asking whether the extra cost of a full size V8 pickup truck or SUV is really worth it."


January 8, 2009 12:02 PM

re: "A diesel on the other hand fits perfectly and is both simple and reliable. Guess which one my favorite car maker is working on. They sell a lot of them in Europe, but can't see their way to import them."

Very few people are going to buy diesels in an environment where diesel fuel costs 37.5% more than gasoline. You are not going to save much considering the inconveniences you put up with (availability, cold weather starting, slow acceleration, odor, etc.).


January 8, 2009 4:37 PM

realy true got 2 save gas nd next time ill ride a bike


January 8, 2009 5:29 PM

The most OBVIOUS thing to do here, folks, is to start manufacturing mini cars with mini engines.

Most people in America need a car to COMMUTE. So why in hell are the manufacturers providing 3,000 to 6,000 pound vehicles to transport one or two people? Pretty STUPID if you ask me.

Step 1: Car should have 3 wheels for weight reduction. Two in the front and one in the back.

Step 2: Use tubular frame and light composite paneling, again, for weight reduction and increased strength.

Step 3: Cut down on useless creature appointments. It's a replacement for a horse for crying out loud.

Step 4: Place a small two or three cylinder engine with lighter manual transmission.

There is NO REASON why such a car should weigh anymore than 1,000 pounds and get any less than 80 mpg with competent engineering. No hybrid or special electric gear of any kind. Furthermore, such a car could be CHEAP to build. The vehicle would be a cross between a car and enclosed, heated motorcycle.

This is WHY the Big Three are failing. They don't have a car like this. America could be leading the World. I mean, how much complicated is this compared to a Boeing 787 or F22 Raptor?


January 8, 2009 7:56 PM

Hi All,

The thing about the Prius is even though its low-power, its not slow. Its quicker to 60 mph than many of the 70's V8 AT cars (camaro, trans-am etc).

This is one of the reasons the Prius is so successful. People do not buy power, they buy accelleration. And even with 110 HP, the Prius accellerates better than other automatic transmission cars with up to 140 hp.

This is possible because of the V8 level torgue in the electric motor at low speeds, no wasted shifting time, and the wide effective gear ratio range of the transmission. Many people first driving a Prius think the transmission is slipping. Its not, its just has such a wide range it will allow the engine up to full power RPMs at relatively low vehicle speeds. Power is proportional to torque times RPM, remember.


January 8, 2009 8:10 PM

Hmm-- Big Brother. Last time I heard he was bailing out the makers of inefficient, expensively assembled vehicles. Big Brother if anything, wants you to drive a Chrysler V6 car or V8 SUV/Pickup. So he can get his $4 Billion back!

Its not Big Brother that is putting these gas guzler companies out of buisness, and limiting your vehicle choice. Its common sense of the car buying public. If nobody is buying em anylonger, nobody will be making em!

Mark Gutting-Kilzer

January 9, 2009 1:34 PM

When I placed the order for my 2001 Prius in July 2000, gas prices were $1.19 per gallon. I calculated my financial break even point at $1.48 per gallon.

But the 2001 Prius continues pay me back in value due to its low operating costs and high reliability. All warranties, including the (8 year/100,000 mile hybrid system warranty) have finally expired, but I continue to drive confidently.

Out-of-warranty battery failures for my generation of Prius (2001-2003) currently run at 1% with the average battery life exceeding 220,000 miles. The newer generation Prius (2004-2009) demonstrates 0.08% out-of-warranty battery failures.

Arguments regarding whether or the hybrid cost will be recovered is fallacious. NO other vehicle option SAVES the owner money! Leather seats can't save one money, but people pay a premium price for that option. The same is true for Premium Stereo Systems, GPS Navigation and higher horsepower engines. No journalist ask buyers to try and justify these costly options that actually worsen fuel economy. So why is the hybrid a special case?

Economy tuned hybrid technology is proven as both reliable and a great value ESPECIALLY since today's low fuel prices certainly won't last.


January 9, 2009 11:05 PM

Anyone who thinks this world will be weaned off fossil fuel in their lifetime is nieve. Oil is finite and so will always be trending higher in cost.

Post a comment



Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

BW Mall - Sponsored Links

Buy a link now!