Hybrid Vehicle Sales . . . What Happened?

January 23, 2009, 7:47 UhrLeo Karl III

As the following article from Automotive News shows, U.S. sales of Hybrid Vehicles actually fell 9.9% in calendar year 2008 vs. calendar year 2007. With all the hype about fuel economy, high fuel prices and ‘going green’, how is this possible???

Obviously one factor is the overall economy. As the financial crisis took its grip on our economy in the second half of 2008, sales of all vehicles fell dramatically. Another factor was the dramatic fall in gasoline prices at the pump. The irony of lower fuel prices is that the economics of paying a premium for a hybrid vehicle begin to disappear. And the final factor simply became affordability. As consumers in Connecticut and all over the U.S. found themselves looking to save money any way they could, the prices of many hybrid models were just too high to justify.

Each of these factors are real and were contributing factors, but there has also been some significant technology advances that have contributed as well. Automakers face a perplexing series of decisions when it comes to advance product planning. The entire theory behind ‘hybrid’ models is that you are combining two different propulsion systems with the goal of saving overall energy costs. Most of today’s gas/electric hybrid models were developed using the benchmark of gasoline only models that existed during their development; and those hybrid models showed some nice economy improvements.

However, as technology advances are made, many of those gasoline only models have shown amazing improvements with the addition of features like direct injection, 6-speed automatic transmissions, and even turbo chargers. In a short span of time, there have been significant improvements in the fuel economy of many non-hybrid models. Take the Chevrolet Malibu as an example. The Malibu is offered in a Hybrid model, but now there is also a gasoline-only 2.4liter L4 engine mated to a 6-speed automatic that gets fantastic mileage (24 city / 33 highway) at an exceptional value price point. This new Chevrolet Malibu now gets better fuel economy than a Toyota Camry or Honda Accord and consumers are taking notice.

The Chevrolet Tahoe 2-Mode Hybrid remains an exception to the fate that has befallen many passenger car hybrid models. The Tahoe’s advanced 2-Mode Hybrid system achieves significantly better fuel economy than comparable gas-only vehicles; and it does so with little premium in cost. General Motors has used the Tahoe platform to launch this ground breaking technology and over the past 18 months the Tahoe Hybrid has been quite successful. Initially available in very limited numbers, now more consumers are able to experience the Tahoe Hybrid as production volumes have increased. In fact, GM saw a 179% increase in Hybrid sales during 2008 while all other manufacturers experienced a 9.9% decline overall.

Bottom line: consumers will search for the vehicle that makes the most economic sense when all factors are considered. If a Hybrid model is offered with little or no premium over a gas-only model, and also offers improved operating economy, then they will buy it. Here in Fairfield County, Connecticut, consumers are smart enough to recognize value and make sound decisions.

Hybrid sales in U.S. slip 9.9% in 2008
Chrissie Thompson

Automotive News | January 23, 2009 - 12:01 am EST

PRINTED FROM: http://www.autonews.com/apps/pbcs.dll/article?AID=/20090123/ANA05/901229967/1186&template=printart

U.S. sales of gasoline-electric hybrids fell 9.9 percent in 2008, after rising with gasoline prices early in the year and falling along with fuel costs and a collapsing auto market at the end.

Automakers sold 315,761 hybrids last year, 2.4 percent of the total vehicle market.

Toyota Motor Sales U.S.A. again sold about three of every four hybrids in the United States, despite new entries from General Motors. The segment-leading Toyota Prius reflected the topsy-turvy year: It tallied 91,440 sales in the first half and 67,444 in the second.

U.S. Hybrid Vehicle Sales
	2008	2007	% change
Chrysler LLC	81	-	-
Ford Motor Co.	19,522	25,108	-22.2%
General Motors	14,439	5,175	179.0%
American Honda	31,495	35,980	-12.5%
Nissan N.A.	8,819	8,388	5.1%
Toyota Motor Sales	241,405	275,779	-12.5%
TOTAL	315,761	350,430	-9.9%
Source: Automotive News Data Center, companies and National Renewable Energy Laboratory

“At $1.50 a gallon, the American public is not willing to pay for fuel-saving technology,” GM Vice Chairman Bob Lutz said at last week’s Detroit auto show.

American Honda Motor Co. and Toyota each sold 12.5 percent fewer hybrids last year than in 2007.

Ford Motor Co., No. 3 in hybrid sales behind Honda, suffered the greatest decline, down 22.2 percent. GM nearly tripled sales to 14,439 after adding hybrid versions of the Cadillac Escalade, GMC Yukon and Chevrolet Malibu and Tahoe.

Combined Detroit 3 hybrid sales were below Honda’s total of 31,495, and Honda sold one hybrid for every eight Toyota delivered.

Fuel prices changed habits

Consumers changed their buying habits when gasoline prices passed $3.50 a gallon in April, Fin O’Neill, president of the market research firm J.D. Power and Associates, said in a speech last week in Detroit. After topping $4 in July, fuel prices tumbled to an average of $1.62 per gallon last month.

The sliding cost of gasoline coincided with a global financial crisis that squeezed credit and dragged vehicle sales to 25-year lows in the fourth quarter.

Hybrids weren’t immune. Prius sales in November and December plunged more than 45 percent, prompting Toyota to delay plans to build the car in the United States.

The abrupt shift in Prius demand shows that fuel-efficient vehicles lose some appeal when gasoline prices are low, AutoNation Inc. CEO Mike Jackson said Wednesday at the Automotive News World Congress. A government that mandates fuel efficiency should use a fuel tax to encourage consumers to buy energy-saving vehicles, he said.

“Cheap gasoline combined with fuel efficiency mandated by the government is an economic disaster for America,” Jackson said. “When the cost per mile driven goes down, people buy bigger, faster” cars and trucks, he said.

But consumers do want fuel-saving technology, other speakers told the World Congress.

‘Catching up’

“North America is catching up with the rest of the world — particularly the North American consumer — on the importance of these things,” said Harold Krivan, president of the consulting firm Sawgrass Solutions LLC.

For now, automakers need to bring green technology’s cost in line with its value to consumers, said Andrew Brown Jr., chief technologist at Delphi Corp.

“People want the technology, but it’s got to be economical,” Brown said. “That’s the challenge in the industry now: to get the cost of those components down.”

Most of the figures for hybrid sales come from automakers; the National Renewable Energy Laboratory provides estimates for Nissan, along with the 2007 totals from GM that were used to calculate its gains for last year.

Arlena Sawyers contributed to this report