The Ford and Honda hybrids due out this month are among dozens planned for the coming years as automakers try to meet new fuel-efficiency standards and please politicians overseeing the industry’s multibillion-dollar bailout.
Unfortunately for the automakers, hybrids are a tough sell these days.
Americans have cut back on buying vehicles of all types as the economy continues its slide. But the slowdown has been particularly brutal for hybrids, which use electricity and gasoline as power sources. They were the industry’s darling just last summer, but sales have collapsed as consumers refuse to pay a premium for a fuel-efficient vehicle now that the average cost of a gallon of gasoline has slipped below $2.
“When gas prices came down, the priority of buying a hybrid fell off quite quickly,” said Wes Brown, a partner at the Los Angeles-based market research company Iceology. “Yet even as consumer interest declined, the manufacturers have continued to pump them out.”
Last month, only 15,144 hybrids sold nationwide, down almost two-thirds from last April, when the segment’s sales peaked and gas averaged $3.57 a gallon. That’s far larger than the drop in industry sales for the period and scarcely a better showing than January, when hybrid sales were at their lowest since early 2005.
Dealer lots full
In July, U.S. Toyota dealers didn’t have enough Prius models in stock to last two days, and many were charging thousands of dollars above the sticker price for the few they had.
Today 80 days’ worth are on hand, and dealers are working much harder — even with the help of a $500 factory rebate — to move the egg-shaped gas-savers off lots.
This month, Honda is offering $2,000 in cash, financing and leasing incentives to buyers of the formerly sold-out Civic hybrid, and a dealer in northern Michigan is dangling $6,000 cash back to those willing to purchase a Chevy Tahoe hybrid.
Yet automakers feel they have little choice but to make more hybrids. Although car buyers are losing interest, politicians are pushing the vehicles as key to reducing U.S. dependence on foreign oil and limiting the global-warming gases released into the atmosphere.
In January, President Barack Obama called on the industry to “thrive by building the cars of tomorrow” and told leaders to prepare for federal and state regulations that could push average fuel economy above 40 miles per gallon by 2020.
“The automakers are in the situation of needing to pacify politicians that are in the position to bail them out with expensive fuel-efficient cars,” said Rebecca Lindland, auto analyst with IHS Global Insight. “But shouldn’t it be more about satisfying the needs of the American consumer?”
Dubbed the Prius-fighter because of its similar looks and performance, the Honda Insight hybrid is set to arrive on dealer lots in the next few weeks. Next year, the Japanese automaker will make a sporty hybrid coupe. Hyundai and Audi will deliver their first hybrids in 2010, and Toyota has a redesigned Prius and a new Lexus hybrid coming this spring. Toyota has said that it would make a subcompact hybrid priced below $20,000 in 2011.
Onslaught
Ford plans to follow its new 41-mpg Fusion and Mercury Milan hybrids with a battery-powered van in 2010 and a family of hybrids by 2012. Last month, in their request to the Obama administration for $21.6 billion in additional bailout cash, both General Motors and Chrysler announced a hybrid onslaught.
Chrysler promised eight new hybrids or electric vehicles by 2015, and GM, which already sells eight hybrids, said 26 of the 33 cars it sells in 2015 won’t run on gas alone, including the Chevrolet Volt, a plug-in hybrid due out next year.
The hybrid flood marks a lasting commitment to a powertrain technology that currently represents about 2 percent of U.S. vehicle sales and, by most accounts, is deeply unprofitable.
Toyota said last year that it was finally making money on the Prius after nearly a decade producing it, but executives at other automakers concede they lose money on every hybrid sold. “If we were making money on the Civic hybrid, we weren’t making a lot,” Honda spokesman Chris Martin said.
That might explain why Ford priced its new hybrid Fusion, which dealers expect to start receiving this month, $8,000 above the gasoline-only version.
Ford expects to produce about 20,000 Fusion and Milan hybrids this year, amounting to about 1 percent of its total production.
“It’s a tough time to bring out almost any product right now,” said George Pipas, the company’s chief sales analyst. “But getting hybrids out right now is as much about image as anything else.”
Not for the masses
As evident on the streets of cities such as Los Angeles and San Francisco, hybrids have an almost cultlike following, but getting the masses to buy them with any consistency is another matter. In their zeal to meet what seemed an insatiable appetite for hybrids in the middle of last year, carmakers might have gone too far, said IHS Global Insight’s Lindland.
At the end of June, AutoNation, the country’s largest chain of new-car dealerships, had only a two-day supply of Honda Civic hybrids and a 14-day supply of the non-hybrid Civic. By year’s end, the picture had flipped, with AutoNation holding 107 days’ worth of regular Civics and 148 days’ worth of the hybrid version.
“The price of gasoline dictates what people buy,” AutoNation Chief Executive Mike Jackson said. “Gas fell to $2, and now my lots are filled up with fuel-efficient cars that aren’t moving.”
Consumers who do buy these days tend to focus more on present-day arithmetic than long-term commodity speculation.