Toyota Exec: Hybrids don't pay off

June 18, 2005
There's a Toyota Highlander Hybrid sitting in my driveway this weekend, and I'm planning to work up a review when I return from vacation later this month for both TheCarConnection.com and for Wired Magazine. Readers of that tech bible may have noticed my own contribution to the April cover story on "The Rise of the Green Machines." I pulled together a comparison of every hybrid on the road. For Wired's upcoming, annual buyer's guide, I can now plug in a review of the new Highlander HEV.

In the original piece, I tried to give as balanced an overview as possible, though I have to admit that I am becoming increasingly frustrated by the technology. My biggest reason is the huge gap between the mileage promised on the window sticker and what is actually delivered. Even Consumer Reports found it difficult to get 40 mpg out of the Toyota Prius, compared with the claimed 51 Highway, 60 City. I averaged around 21 mpg with the Lexus RX400h -- only a slight bit better than a Volvo XC90, and a huge shortfall from the rated 28 City, 30 highway. Worse, I find that it becomes a much harder business case to make for paying the premium for a hybrid with the sort of numbers I have experienced, even at $2.25 a gallon.

This is a running source of debate with Marty Padgett, TCC's Executive Editor -- and the very proud owner of a recent-vintage Prius. Curiously, the latest in our e-mail exchanges coincided with a forwarded copy of an article that ran in this past week's Financial Times. Written by James Mackintosh, and titled, "Toyota Says Hybrid Cars Face US Fuel Barrier," what followed the headline might just as easily have been written by GM's "car czar," Bob Lutz, who is still running around arguing that there's no such thing as global warming. In January, at the Detroit auto show, Lutz insisted there is no business case for hybrids, but that one cannot ignore the emotional value people are placing on being environmentally-friendly. What's strange is that Kazuo Okamoto, the new head of R&D at Toyota -- the top HEV manufacturer -- apparently agrees. A couple excerpts from the FT article:

Kazuo Okamoto, who takes over as head of research and development at Toyota next month, said the extra costs of hybrid cars more than wiped out any financial gains of lower fuel consumption. Buyers in the US would have to want to help the environment, not just save money. In Japan and Europe, the extra costs were approximately balanced by fuel savings.

"When you just use the argument of fuel efficiency, the purchase of a hybrid car is not justified. But this car has other interests, for instance environmental protection."

The $4000 rebate proposed by President Bush last week would help shift the economic equation for HEVs, but I'd personally like to see such a federal giveaway made available to other fuel-efficient technologies, such as diesel. Then we'd have not only an incentive to develop higher-mileage vehicles, but a level playing field.

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