Forbes Magazine
Electric Chic
Thursday April 1, 6:32 pm ET
By Jonathan Fahey
Does the spike in gas prices have you excited about hybrid cars? Get out a pencil and the back of an envelope.
Gas prices reached an all-time high in late March, says the Department of Energy--an average $1.74 a gallon nationally. So automakers picked the perfect time to unveil a new crop of fuel-saving gasoline-electric hybrids, right?
They did, for the right kind of buyer. That would be someone who is not very good at arithmetic.
General Motors will later this year start selling hybrid versions of its big Chevrolet and GMC pickups to retail customers. For an additional $2,500 (above an average price of $35,000), buyers will see all of 2 miles per gallon in better fuel economy. Assuming 15,000 miles a year and $2-a-gallon gas, the driver would save a measly $186 a year. The government gives you back $500 or so, depending on your tax bracket, in the form of a $1,500 federal deduction for the hybrid. (Although this green-engine deduction, available even if a car or truck has no business purpose, is being phased out.) Net cost: $2,000.
It will take you close to 11 years to make the cost back at the pump. And you're probably going to trade in the pickup long before that.
Our cost figure is probably too low, anyway. Some manufacturers are going to add $4,000 to the sticker for going hybrid. Plus, Honda, Ford, Toyota and Lexus plan to stuff their hybrid cars--versions of already top-selling vehicles--with high-margin amenities like navigation systems and leather seats. The thinking seems to be that any driver in a position to throw money around on a hybrid power train isn't going to balk at other expensive features.
"Until we get to $3 a gallon, we are not going to see profound change in the way people buy vehicles," says Lindsay Brooke, a senior analyst who specializes in the hybrid market for automotive forecasting firm CSM Worldwide.
For some buyers--those consumed by environmental guilt and willing to drive lightweight, low-horsepower cars--hybrids are already a compelling buy. Since their introduction, Toyota's Prius and Honda's Insight and Civic Hybrid, which can get 50 miles to the gallon, have sold a combined 122,758 units. The Prius has a power plant that can deliver 110hp. Fine for a small car, but definitely not for towing your Airstream.
"There are always early adopters and gadget geeks," says Sheri Shapiro, the marketing manager for Ford's coming hybrid Escape SUV. "But mainstream consumers don't want to have to get a different vehicle to get fuel economy and better emissions."
To reach beyond the green crowd, carmakers are trying to sell performance, like higher horsepower, instead of just gas savings. GM even plans to entice buyers to its hybrid with 120-volt power outlets so the truck can serve as a generator on wheels. It will be handy for anyone building a house or living in one that is on an ill-maintained power grid. A hybrid Dodge truck due out late this year will offer similar features, with a diesel engine.
The hybrid version of Ford's Escape SUV will offer a peak 200hp--normally available on a V6--out of a four-cylinder gas engine. It can do that by dint of the fact that the gas engine and the battery, which is recharged during normal driving, can work together. The gas engine by itself puts out only 153hp. The hybrid SUV will beat the regular Escape's four-cylinder fuel economy by 40%.
Honda's Accord hybrid, the first hybrid V6 on the market, will boast 240hp with the fuel economy of the no-frills four-cylinder version. Toyota's coming Lexus RX400h and Toyota Highlander SUVs will trumpet 270hp and improved acceleration, along with the fuel economy of a 130hp Corolla.
CSM's Brooke says hybrids will be at best 10% to 15% of the new-car market ten years from now. "The proof will come within the next 12 to 18 months," he says.
Ford Division President Stephen Lyons says he has been ratcheting up sales estimates as the Escape Hybrid gets closer to launch. "This is a growing market," he says. "There is more knowledge out there about hybrids than I ever thought there was."
Or is there? To convince people hybrids don't have to be plugged in, Lyons has to dream up stunts like the one he's pulling this month. Ford is rounding up celebrities and politicos to drive a hybrid Escape for 500 miles through Manhattan--the combined distance of all of the island's streets--on a single tank of gas.
*Combined city/highway MPG. 2Compared with Toyota Camry. NA: Not available. Sources: U.S. Environmental Protection Agency; company information and estimates. Hybrid, Now With Horsepower!
The new crop of hybrids will be sold on performance, not just fuel economy.
Electric Chic
Thursday April 1, 6:32 pm ET
By Jonathan Fahey
Does the spike in gas prices have you excited about hybrid cars? Get out a pencil and the back of an envelope.
Gas prices reached an all-time high in late March, says the Department of Energy--an average $1.74 a gallon nationally. So automakers picked the perfect time to unveil a new crop of fuel-saving gasoline-electric hybrids, right?
They did, for the right kind of buyer. That would be someone who is not very good at arithmetic.
General Motors will later this year start selling hybrid versions of its big Chevrolet and GMC pickups to retail customers. For an additional $2,500 (above an average price of $35,000), buyers will see all of 2 miles per gallon in better fuel economy. Assuming 15,000 miles a year and $2-a-gallon gas, the driver would save a measly $186 a year. The government gives you back $500 or so, depending on your tax bracket, in the form of a $1,500 federal deduction for the hybrid. (Although this green-engine deduction, available even if a car or truck has no business purpose, is being phased out.) Net cost: $2,000.
It will take you close to 11 years to make the cost back at the pump. And you're probably going to trade in the pickup long before that.
Our cost figure is probably too low, anyway. Some manufacturers are going to add $4,000 to the sticker for going hybrid. Plus, Honda, Ford, Toyota and Lexus plan to stuff their hybrid cars--versions of already top-selling vehicles--with high-margin amenities like navigation systems and leather seats. The thinking seems to be that any driver in a position to throw money around on a hybrid power train isn't going to balk at other expensive features.
"Until we get to $3 a gallon, we are not going to see profound change in the way people buy vehicles," says Lindsay Brooke, a senior analyst who specializes in the hybrid market for automotive forecasting firm CSM Worldwide.
For some buyers--those consumed by environmental guilt and willing to drive lightweight, low-horsepower cars--hybrids are already a compelling buy. Since their introduction, Toyota's Prius and Honda's Insight and Civic Hybrid, which can get 50 miles to the gallon, have sold a combined 122,758 units. The Prius has a power plant that can deliver 110hp. Fine for a small car, but definitely not for towing your Airstream.
"There are always early adopters and gadget geeks," says Sheri Shapiro, the marketing manager for Ford's coming hybrid Escape SUV. "But mainstream consumers don't want to have to get a different vehicle to get fuel economy and better emissions."
To reach beyond the green crowd, carmakers are trying to sell performance, like higher horsepower, instead of just gas savings. GM even plans to entice buyers to its hybrid with 120-volt power outlets so the truck can serve as a generator on wheels. It will be handy for anyone building a house or living in one that is on an ill-maintained power grid. A hybrid Dodge truck due out late this year will offer similar features, with a diesel engine.
The hybrid version of Ford's Escape SUV will offer a peak 200hp--normally available on a V6--out of a four-cylinder gas engine. It can do that by dint of the fact that the gas engine and the battery, which is recharged during normal driving, can work together. The gas engine by itself puts out only 153hp. The hybrid SUV will beat the regular Escape's four-cylinder fuel economy by 40%.
Honda's Accord hybrid, the first hybrid V6 on the market, will boast 240hp with the fuel economy of the no-frills four-cylinder version. Toyota's coming Lexus RX400h and Toyota Highlander SUVs will trumpet 270hp and improved acceleration, along with the fuel economy of a 130hp Corolla.
CSM's Brooke says hybrids will be at best 10% to 15% of the new-car market ten years from now. "The proof will come within the next 12 to 18 months," he says.
Ford Division President Stephen Lyons says he has been ratcheting up sales estimates as the Escape Hybrid gets closer to launch. "This is a growing market," he says. "There is more knowledge out there about hybrids than I ever thought there was."
Or is there? To convince people hybrids don't have to be plugged in, Lyons has to dream up stunts like the one he's pulling this month. Ford is rounding up celebrities and politicos to drive a hybrid Escape for 500 miles through Manhattan--the combined distance of all of the island's streets--on a single tank of gas.
*Combined city/highway MPG. 2Compared with Toyota Camry. NA: Not available. Sources: U.S. Environmental Protection Agency; company information and estimates. Hybrid, Now With Horsepower!
The new crop of hybrids will be sold on performance, not just fuel economy.
