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Can I sell you a hybrid?

BloggingStocks – January 3, 2009

So once again Americans prove to be a fickle lot.  We just came through a period of record oil prices and now we are enjoying liquid fuel at a price point that is probably as low (adjusted for inflation) as it was in the 70s before the first big oil rush.  Our car companies are in trouble because of lack of money for loans and the general lack of consumer interest in buying cars.  One of the chief complaints about the Big 3 is that they didn’t build fuel efficient cars but instead concentrated on gas guzzlers like SUVs and trucks.  The pundits are all saying they should build hybrids and that would save them.

But are the pundits correct?  According to BloggingStocks, hybrids sales have dropped 53% in November and 37% from a year earlier.  Edmunds says that in now takes 8 years for a Prius owner to break even on the purchase by factoring gas savings.  Few people keep their car for 8 years so at this level of gas pricing, it is not profitable to buy a Prius unless one is motivated by other factors such as environmentalism.  If you are so motivated though, one would think you would also be motivated to keep your fellow American employed and buy a Chevrolet (perhaps a Volt since it is supposed to be a year or two away). 

We are blessed with some pundits that simply believe that this level of gasoline pricing is bad.  They want to raise the price of liquid fuel to at least some minimum level (higher than today’s) to create an environment where reforms are possible.  Matt Miller frequently discusses this on his radio show “Left Right and Center“.  These pundits are basically correct that the oil producing nations will never price their product so high that alternative forms of energy are economically successful.  It does create a problem to raise the price of a commodity so that another commodity can be economically feasible.

Read the BloggingStocks article by clicking through here.

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One Response to “Can I sell you a hybrid?”

  1. Here, as in most instances, I follow the “all other things being equal” test. All other things being equal, I believe most people would make the environmentally sound choice; most people would buy the hybrid.

    But all other things aren’t equal.

    I’m not a car person (don’t own one and mostly don’t follow the industry), so I could be wrong, but from what I’ve heard, you sacrifice a bit of performance for the mileage. People don’t like that. And right now, pocketbook issues count for more than usual. If they’re not reasonably sure of getting that money back in cost savings (even if we think oil will be expensive again soon–we’ve been thinking that for decades), then they can’t justify spending more to buy.

    If someone manages to build a hybrid that is cost competitive and performance competitive with gas guzzlers, I think it would do very well.

    That said, I don’t support policies to artificially inflate the price of gas just to try and force technologies now that would, by the very nature of technological advancement, be better in 10 years than anything we could come up with today (that’s the dirty little secret force fed innovation–in the long run we are likely to wind up with inferior technology).