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Thursday, January 26, 2012

Hybrids Losing To Efficient IC Engines

In today's Detroit News is a well written piece about the struggles of hybrids in the marketplace.  Bottom line: most people would rather pay a lot less money for somewhat less efficiency.  

A fascinating insight comes from Mike Jackson, CEO of AutoNation, the largest multi-brand car retailer.

Mike Jackson, chief executive of the retail chain AutoNation Inc., said that 75 percent of customers come into his showrooms and want to talk about hybrids. Only about 2.5 percent of AutoNation sales are hybrids.
"What happens from the 75 percent consideration to the 2.5 percent commitment?" Jackson said.
"They look at the price premium for the technology, which is already subsidized and discounted, and say, 'The payback period is too long; not for me.'"

At the point of purchase decision, people notice that the payback time for the hybrid-electric powertrain is on the order of 5 or more years, and the practicality of the vehicle is reduced because of the packaging of the batteries.  They also notice that one of the more efficient non-hybrid vehicles, while not as efficient as a hybrid, is pushing 40mpg on the highway.  

As a result, hybrid sales are not growing very quickly, even though gasoline prices in the U.S. remain stubbornly near $3.50/gal.    

Hybrid sales slowed last year to 2.2 percent of U.S. sales, from 2.4 percent in 2010, according to researcher LMC Automotive.

Without widespread adoption, there is less hope for economies of scale in battery production.

For hybrids to really compete, the cost of batteries, and their energy density, must improve dramatically, or the price of fuel must go so high that the payback time will approach a few years--like $5/gal.  

1 comment:

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