Hybrid demand falls with gas prices

Automakers are ramping up plans for more gas/electric vehicles, just as consumer interest appears to be waning. Demand for hybrids has fallen as fuel prices have eased off historic highs.

CNW Marketing Research says that a year ago about 30 percent of car shoppers considered buying a hybrid, and they were willing to pay a premium of nearly $2,500 more than they would have for a conventional vehicle.


This month, however, hybrid consideration is at 12 percent, and shoppers are willing to fork out only an additional $1,152.

"People aren't as driven by fuel prices when there isn't a scare factor," CNW President Art Spinella said, adding that there are nice, fuel-efficient "vehicles in the market that cost a lot less than a hybrid."


Compact cars such as the Toyota Corolla and Honda Civic, priced in the $16,000 to $20,000 range, are rated at more than 30 mpg, and there are more fuel-efficient subcompacts that start at less than $15,000. The Toyota Prius, the most popular hybrid, starts at $22,175.

After rising most of this year, hybrid sales dwindled to 19,000 in November from nearly 32,000 in August, when gas prices nationally peaked at more than $3 a gallon.

Industry sales also have fallen in a seasonal pattern, with hybrids accounting for 1.6 percent of new-vehicle sales last month, down from 2.1 percent in August.

"Sales of hybrids tend to rise and fall with gas prices. Consumers seem to be more aware of them when it impacts their pocketbook," said Kevin Riddell, a researcher with J.D. Power and Associates.

Despite the recent decline, Toyota expects its U.S. hybrid sales to jump 50 percent in 2007, to nearly 300,000, because Prius and the Camry Hybrid will be in greater supply. Power expects hybrid sales to total about 330,000 next year, about 2 percent of industry sales, and Global Insight pegs them at 450,000, or about 2.75 percent.

"We're still very bullish on hybrids," Toyota spokesman John Hanson said.

In November, Toyota raised Prius production in Japan for the United States and started building Camry Hybrids in Georgetown, Ky. Before that, Prius and Camry Hybrid were built on the same line in Japan, so increasing production of one reduced that of the other.

The Prius was in such short supply until recently that buyers often waited months for one, and some opted for something else because they couldn't find a Prius with the color or features they wanted, Hanson said. Now, many Toyota dealers are advertising several Prius models in stock. Ward's AutoInfoBank shows Prius inventory at 14,641 at the end of November, up from 3,686 a year earlier and 9,078 at the end of October. Sales are down 1,047 the last two months, but inventory has gone way up with the production increase.


"With more availability, we think Prius sales will go up," Hanson said.

And Toyota is hardly alone. Nissan will launch its first hybrid in January, a version of the Altima sedan. General Motors plans to add hybrids to four models in 2007: the Saturn Aura and Chevrolet Malibu sedans and the Chevy Tahoe and GMC Yukon sport utility vehicles. All have been in the works for a few years.

Neither GM nor Nissan has released sales projections, and Nissan initially will offer the hybrid Altima only in California and seven northeastern states.

Still, their timing may work. Gas prices are inching up, and a jump next year could pump up interest in hybrids.

"Some consumers just buy for the moment. They react to immediate stuff," said John Wolkonowicz, an analyst with industry forecaster Global Insight.

GM spokesman Brian Corbett says uncertainty over hybrid demand is one reason it is offering two hybrid systems and flexible-fuel models that can run on 85 percent ethanol, plus fuel-saving features such as cylinder deactivation.


"It highlights our strategy that there is no one solution or silver bullet," he said.

And though GM and Nissan may not find great demand, Spinella says hybrids go a long way toward meeting mandates for lower vehicle emissions in California.

"It's one of those things where they really don't have a choice. If consumers don't buy them, they'll have to sell them to fleet customers," he said. "That's what you have to do in the auto industry when there isn't enough demand."

And because you can't predict which way gas prices will be headed, Nissan spokesman Tony Pearson said: "We're kind of putting our toe in the water to see how it goes. If there is demand, we can expand into other areas."

Wolkonowicz says the realities of fuel economy have caught up to the hype of hybrids.

The Prius, for example, has an EPA city mileage rating of 60 miles per gallon. But few owners come close to that because they do little city driving, where the hybrid technology is at its best.


"There's been a lot of publicity that hybrids don't get the mileage they're supposed to," he said. "If you drive it out in the country all the time, you're going to be disappointed. I think the word's getting around on that."

But Wolkonowicz is reluctant to dismiss Toyota's sales projections. The reason: Toyota has sold more hybrids than expected before.

Global Insight forecasts Toyota will sell 227,000 hybrids in 2007, half the industry total of 450,000, and 288,000 in 2008. But after hearing Toyota's ambitious plans, Wolkonowicz says Global Insight may revise its outlook.

It "depends on the price of gas," he said. "Toyota has turned it into a marketing exercise extraordinaire. It's done wonders for their reputation, and they have gotten so much good publicity out of it.

"They saw something before the others did, and they're being rewarded for it."

Rick Popely writes for the Chicago Tribune.