Social Econ Blog

Hmmm. The main headline on MSNBC's website right now reads "Green Fatigue: Hybrid sales slip as gas prices dip." Clicking on the article one learns:

sales of hybrid vehicles have fallen sharply since August as the price of gas has declined and Toyota has run up against a federal limit for tax credits that have helped fuel sales of the vehicles.

We further learn that sales of Toyota hybrids fell 22.4 percent between September and October.

Of course, in September a federal tax credit of $3600 (and some state credits like Oregon's of $1500) expired for Toyota's hybrids. So which of the two hypotheses for declining hybrid sales seems more likely to explain the decline? Temporary marginal changes in gas prices or increase in price of nearly 20%?

Sadly, the article doesn't get any better. It goes on to quote an "expert" who argues (based apparently on his gut -- Stephen Colbert would be proud) that "consumers are burned out on all the hybrid hoopla" and that:

“Some think a hybrid will get the stated EPA mileage returns of 50 or 60 miles per gallon all the time,” Rosten said. “But if you are using the hybrid on the highway you are using the gas engine, and cars like the Prius are much better-suited for around town driving in gridlock — they are not meant to be long-distance driving cars.”

While it is true that the hybrids EPA mileages are inflated (in fact, the EPA just changed its rules for computing these things to make them reflect how people really drive), the claim that the Prius really only provides better fuel efficiency for in-town driving is ridiculous. Last weekend on a 250 mile round trip to Forest Grove, OR, my (still new and not broken in) Prius got 50 miles to the gallon. When I drive the 140 miles south to my parent's house (over more mountainous terrain), I typically get 44 miles to the gallon. This is still substantially better than even the inflated EPA sticker MPGs for comparable cars.

Finally, the article points out (although I am not sure how accurately) that one needs to drive alot of miles to recoup the higher costs of hybrids. This is true. Right now, if saving money is your primary motivation for buying a hybrid, you'll need to drive it alot to break even. Eventually, though, the prices will likely fall to a point where the higher costs roughly equal the expected fuel savings from a more typical driver. I think this will occur for a couple of reasons. Right now, Toyota faces very little competition for its hybrids, and demand for hybrids among "green" consumers is high currently. As long as there is limited competition and excess demand for hybrids, dealers will command a premium for hybrids above their fuel savings.