The Bush Administration is considering offering a $4,000 tax credit to anyone who buys a hybrid. But even if you knock that off the price, it would still take 18 years to makeup the cost difference.
You've got to hand it to Toyota Motor Corp. and Honda Motor Co. Ltd. They're the only ones in the world that have hybrid-electric cars on sale to the public. This, at a time when the public is screaming for fuel efficiency. Not only are the Toyota Prius and Honda Insight the most fuel efficient gasoline-powered cars available, they are beautifully engineered. But they have one small problem. They don't sell very well.
What's even more amazing is that they don't sell very well anywhere in the world. Sales of the Prius in Japan have dropped every year since 1998, the first full year they were available. They're off 30% in three years, and will be down this year, too.
The same goes for the Honda Insight. It doesn't sell very well, either. Sales in Japan are down nearly 90% this year. Of course, one reason is that Honda has diverted sales of those cars to the United States. But it did so because it wasn't selling many in Japan. Last year only 1,400 Insights were sold there.
What's going on here? Why can't you sell the most fuel efficient cars in a country where gasoline costs $5 a gallon? The answer is easy: These cars are not cost-effective.
They're even less cost effective in the United States, where the price of gasoline is much lower. That's why Honda will struggle to sell 5,000 Insights in the American market this year, and why Toyota will only sell about 14,000 Priuses. Toyota says demand is higher than expected, but that's still not too many.
The numbers tell the story. Let's compare the hybrid-electric Toyota Prius against the gasoline-powered Toyota Echo, because they're virtually the same car. The Echo, with destination charge and popular options, costs about $12,700. The Prius costs $20,450, a difference of $7,750, which is a lot. The Echo, with an automatic transmission, gets a combined 34 mpg (6.9L/100 km). That will cost most drivers about $730 in annual fuel costs, based on $1.70 a gallon. The Prius gets a combined 48 mpg, which translates into an annual fuel cost of $530, which represents a $200 a year savings. But remember the Prius costs $7,750 more than the Echo, so it would take you 38 years to make up the price difference in fuel economy savings.
Even at $5 a gallon it would take 12 years to make up the price difference, so it's no surprise that Japanese consumers have largely ignored these cars.
Of course, you can argue that these are early versions of hybrids and that the cost will come down. That's probably true, but I don't think the cost will come down very much. Toyota and Honda argue that as they produce more of these cars, the economies of scale will force costs down. That would be a good argument if sales were going up, but they're not. They're going down.
The Bush Administration is considering offering a $4,000 tax credit to anyone who buys a hybrid. But even if you knock that off the price, it would still take 18 years to make up the cost difference.
Wait, it gets worse. These two hybrids don't deliver the fuel economy that the Environmental Protection Agency label promises. Anyone who has driven these cars, even if they baby them, can tell you they don't get the advertised fuel economy.
A quick call to the EPA confirmed that their test procedure overstates the fuel economy of hybrids by about 15%, which is a significant margin of error. The reason is that the EPA tests cars on a chassis dynamometer, where the driven wheels turn freely on a set of rotating drums. In the real world, when you brake, energy is dissipated at the brakes at all four wheels. But on a chassis dyno, when you brake, all the energy is dissipated at the brakes of the driven wheels. The non-driven wheels are not turning. On these hybrids, which use regenerative braking to recharge their batteries, all the braking during the EPA driving cycle is feeding more energy back into the system than it would realize in the real world. That allows more electric assist than you would get in the real world, and that's why the fuel economy label is off by 15%.
Now, if you knock 15% off the Prius's fuel economy in the cost comparison above, it would take 85 years in real-world driving to make up the cost difference over the Echo. Ouch!
Another thing you have to remember is that these two hybrids are small, slow cars. The Prius accelerates from 0 to 60 mph (96 km/h) in 13 seconds, the Insight takes nearly 11 seconds. Compare that to the Toyota Echo which takes about 8.5 seconds, according to the leadfoots at Car and Driver. If you replaced the Echo's 1.5L engine with, say a 1L engine, to slow it down to the level of the hybrids' performance, it would get better fuel economy still, thus driving the payback period back even longer.
Here's another quick comparison. A turbodiesel VW Golf versus a gasoline-powered Golf translates into a 2.5-year payback, with virtually no tradeoff in performance. In Europe, where fuel taxes favor diesel, the payback is even quicker.
Hybrids are a wonderful engineering exercise, but they don't make sense to most consumers. A colleague of mine calls them the 8-track player technology of the 21st century. They're simply not going to be around for very long.
John McElroy is editorial director of Blue Sky Productions and producer of “Autoline Detroit” and “American Driver” for WTVS-Channel 56, Detroit.