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Prius with environmental message

Prius with environmental message

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The debate over hybrids is likely to continue for some time. Just moments before starting this feature, I fielded a call from a friend, intent on buying a gasoline-electric model, no matter what the actual economic equations might reveal. The simple fact is that facing ever-rising fuel prices and ever-worsening concerns about global warming, a growing number of motorists want to do something - anything.

One thing a hybrid buyer is likely to do is pay more than they might expect. A check on any online pricing site will show that you'll usually be able to trim a thousand dollars or more off the list price of a typical sedan, such as the Ford Fusion, Chevrolet Malibu, or Subaru Legacy. And the savings grow if the maker is offering incentives. But a little research reveals that for a Toyota Prius, list price $23,535, you're likely to spend as much as $1,000 over what's shown on the Munroney sticker - if you can even find one.

Now, to be clear, Toyota's little hybrid has been in generally high demand for some time, but other models, like the Ford Escape Hybrid and Saturn Vue Hybrid, were not exactly warming the planet when it came to sales just a year or so ago. But every penny fuel prices climb, it seems, demand simply keeps growing.

A story in the Detroit Free Press, in fact, quotes Detroit-area Toyota store manager Chad Ratcliff saying that there's as much as a five-month wait for a Prius, and three months for a Camry Hybrid. "As a dealer body, we are all screaming," he told the paper.

That backlog of demand has actually distorted the latest sales figures. Shortages of product resulted in a temporary dip in the numbers for many of the more popular hybrids, like Prius. In May 2007, Toyota moved 24,099, compared with 15,011 this past month. The story was similar for Ford's gas-electric model, the Escape Hybrid. Buyers were able to snap up just 2,139 in May of this year, compared with 2,680 during the same period in 2007, when there were plenty of them sitting on dealer lots.

Manufacturers are, in many cases, ramping up production volumes as quickly as they can. But they face a number of obstacles, such as assembly line capacity limits. Toyota, for one, has run into a shortage of the nickel-metal hybrid battery packs used in models like the Prius and Camry Hybrid.

Then there's Ford. During a recent preview of the 2009 Escape Hybrid, company officials told me that they were holding production plans at last year's level, about 75,000. Surprised, I asked why demand wasn't rising, and was told that while Ford could sell more, it has chosen not to. Exactly why was unclear, though one executive issued the surprise response that the Escape Hybrid simply wasn't economically justified.

Regular readers know I have made that point before. A typical hybrid can carry a price premium of anywhere from $1,000 for a so-called mild, or limited-function, model like the Vue to $6,000 and some for a full-hybrid like Escape. Even at $4 a gallon, it's hard to justify the added cost with the modest fuel savings, unless you plan to keep the vehicle for a number of years.

But I suspect there's another reason why Ford and some other makers aren't ramping up production for some of the biggest sellers in today's tough market: even adding those premiums, industry analysts contend most makers are losing money - sometimes lots of money - on every hybrid they sell. It is generally accepted that Toyota subsidized the early Prius to the tune of $10,000 apiece. Today, the company insists it is making money on every hybrid, but I'm among those who believes this can only be the result of Hollywood-style accounting.

So while the market is demanding more, automakers may not rush as quickly as one would expect to solve the hybrid shortage.
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Comments (5)
  1. Before I bought my 2005 Scion xB (new), I looked at a Prius. I didn't like the uneven power delivery, the unknown service headaches ahead, the battery lifetime, and the smallish interior, not to mention the high-pitched squeal the switching power supply produced from under the hood. Finally, the $5000 premium over the xB meant that it would take me 12 years to break even at $2 gas IF the Prius actually got 49 MPG or whatever the claim was at the time. So today, that payback still would be 6 years, and I'd be facing possible battery replacement on the Prius at the end of the payback period.
    I've been very happy with the 30 MPG xB (town driving), which was voted the "greenest" car by CNW Marketing Research in 2006!

  2. I predict that the "full" hybrid is going to become extinct as so-called plug-in Hybrids (which are primarily electric vehicles) go mainstream. Meanwhile low cost start-stop tech will become standard on all internal combustion cars (at the minimum you need a more robust starter and a computer to decide when to shut the engine off)

  3. Paul, you need to check your bias at the door.
    I promise you toyota is not losing $10,000 on a prius that has an ancient NiMH battery and an electric motor in it.
    Secondly, its not about what consumers pay on a prius vs. a corolla, its about giving a few thousand dollars extra to Toyota rather than giving (almost the same) money to oil companies and hostile nations.
    If an american wants to give Toyota a premium for the car, when they will only save 80% of that in gas costs over a few years, you should encourage them, not claim they are ignorant for not understanding the economics involved.
    If you're going to keep whining about not saving enough gas money to justify the cost of the prius, at least be fair and acknowledge that many hybrid owners would rather give toyota $10,000 than give Iran and oil companies $5000.
    I look forward to the first plug-in hybrids. I'll adjust my driving so I can recharge or never drive more than 40miles/day and never buy gas again. I don't give a damn if it costs me $10,000 more than a corolla and you tell everyone I'm ignorant.

  4. Ah, Joe, I think you need re-read my article. The EARLY-gen Prius was heavily subsidized, bt there remains a debate over whether Toyota now makes a profit on the car -- and if so how much. Meanwhile, I wouldn't use the word "ancient" to describe the NiMH battery. It is not the ultimate state-of-the-art, but is still the industry standard in hybrids and in much consumer electronics, too. The evolution to LIon is just beginning, other than in the highest-tech systems, like cellphones and laptops.
    I don't disagree, by the way, that MANY people would rather pay Toyota (or Ford or whomever) for their hybrids v giving the money to Iran or Venezeula. But if the fuel economy advantage of the hybrid is grossly overstated, as it is with many models, then the consumer is being misled. I have a feeling that in any other market, if you bought a product that didn't deliver what you expected, you'd be demanding a refund, throwing a fit and perhaps even seeking class action relief. I think that hybrid makers need to have the truth out there and only then can consumers judge intelligently. If emotions play in, at that point, fine. After all, people spend lots of money on big engines they generally can't use, too.
    Paul E.

  5. The payback period of my 2006 Prius over a comparable gasoline car (Camry 4-cylinder) was 1 year when gas was at $3 a gallon.
    I got a $3100 Federal Tax Credit, which made my '05 Prius only $1000 more than a comparable Camry. And no, the Prius is NOT a compact car-- It has almost the same amount of interior space as a Camry, which is why the EPA classifies the gen-2 Prius as a Midsize car.
    I'm not sure what Gordon is babbling about on the Prius battery. It's covered by an 8-year / 100,000-mile warranty. If the one in my Prius fails before then (which is unheard of), Toyota will replace it for me free.

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