Wow, Manny. You need to get with the program bro’. Dissing hybrids is not gonna make you any friends. Not in DC. And not with your hometown homies, who know that global warming is a crock of “I can’t believe it’s not Toyota” with which to butter their bailout bread. What are they gonna say when they read this? “They cost more than most people can — or will — pay; they provide fuel efficiency benefits only for specific and limited driving conditions; and the technology isn’t going to solve America’s oil issues. Sure, they’re still somewhat trendy, and select members of Congress as well as Hollywood hypocrites regularly remind people that they drive the so-called green machines. Good for them and for the few others in America who are all hopped up on hybrids, but they are the few and the proud. And the declining.” Yeah, we know that Manny. But what if gas prices go back up? You know; if there’s a sudden disruption of oil supplies due to tensions in the Middle East or another speculative bubble? It could happen. Not in Manny’s world. And the News’ Auto Editor wants to point out– again– that consumers are friggin’ hypocrites…
“That’s not to suggest that hybrids don’t have a place in the market. They do, but it’s a niche, where it belongs. Don’t blame me for that. Blame consumers. There’s a difference in what people say they want and what they buy. And when people put their money on the table, most high-tail it away from the $3,000 or more premium for a hybrid.”
Shoulder chip much? You don’t know the half of it. So here’s the other half:
“Unfortunately, in the end, legislators and activists have been better at grandstanding and casting aspersions at those who don’t play their game, but if the car companies are smart and follow the market’s lead, they’ll keep building what people buy, not what others tell them to build.”
I think GM and Chrysler lost that option when they went bankrupt and hoovered-up $32.4b (not including GMAC) form Uncle Sugar. He who owns the gold Manny.
With energy issues people tend to make it all or nothing. If drilling offshore won’t provide infinite oil, it isn’t worth it. If hybrids don’t end oil dependency on their own, they are stupid.
What a caveman. Should be in the Geico ads.
Finally, The Truth About Hype-rids.
he should begin to look for crow recepies now. he will need them. i hear that crow is nasty meat unless disuised properly.
In the recent C/D magazine (I know, I know), the new Fusion hybrid creams the others tested, and pushes damn near 40mpg during the test. It’s an impressive show. Clearly, it is a hybrid that does not suck. Unfortunately, availability will likely be limited.
Do hybrids currently sell at a price that fully recovers the costs of their R&D or added components?
The reason I ask is that a lot of industry critics are concerned about the profitability of automakers these days. Many hybrids models are built at a loss, which has been the case even with the Toyota Prius.
Let’s see – if every car and truck had a hybrid drivetrain, it could cut the nation’s fuel usage by 15-20% (worst case).
If that’s not a hammer in the “Screw Chavez and OPEC” toolbox, I don’t know what is.
To all of the “Hybrid Haters” out there – here’s a new word for your toolbox to describe the pride that someone feels when they spend the extra money to leave a smaller footprint on the planet and its resources:
“Hybris”
Do hybrids currently sell at a price that fully recovers the costs of their R&D or added components?
I have little doubt that Toyota is making a profit on hybrids. It would be quite something for them to sell over a million units of any vehicle and not turn a profit on it.
Just so long as they can pass on the cost of the battery, they should be able to profit from it. Their wholesale prices suggest that they have generally been able to do that.
Well, here’s my truth about Prius. I’ve had two; a 2005 and a 2008. I’ve enjoyed them both, and in fact, my “payoff” started immediately in the sense that instead of buying a car with leather, bells & whistles, I opted for a car with a battery, Atkinson cycle engine and futuristic appeal. My money, my choice.
Then came the fly in the ointment. As of a few months ago, here in northwestern Michigan, the last gas stations selling “real” gasoline switched over to selling E10 exclusively.
Winter MPG went from 44 (average over tens of thousands of miles on two different Prius’s), to 37 mpg. That’s a 19% increase in fuel consumption due to 10% ethanol, for the math challenged.
I’ve managed to drive like granny and switch to Tier One fuel (Shell, the only Teir One fuel sold in my area) and I’m now running about 39 mpg. That’s “only” a 13% increase in fuel consumption from E10 (10% ethanol polluting the gasoline).
I’ve researched it and I’m seeing others who say the same thing.
I also think it’s highly suspicious that the “gummint” decided in their infinite wisdom, to “alter” the EPA MPG figures for hybrids specifically. They obviously knew damn well that with E10, hybrid MPG plummets.
As noted previously by myself here at TTAC, I’ve tested virtually every car I’ve owned since 1979, on E10 and generally have found that they use more fuel compared to pure gasoline use. As much as a 25% increase in fuel consumption, whether hybrid or not. The “best” car for E10 seems to be my wife’s 2007 Hyundai Sonata, which “only” uses 6% more fuel when using E10 compared to pure gasoline (which is now as dead as the dodo in the US, apparently).
I’m switching to Shell for the Sonata in hopes of obtaining a little back of that efficiency loss.
As for the Prius…. I’m 99% sure I’m going to sell it. Just as soon as the gas prices go up another 50 cents or more.
Hey, I’m 1/2 way there. Gas prices jumped 7 cents a gallon about a week ago, another 19 cents a few days later, and yesterday, another 19 cents. I paid $1.48 a gallon less than two weeks ago, in my folks’s home town 40 miles south of here, and as of now, their prices are matching ours here in my town, at $1.93.
I’m dead seriously thinking of getting another conventional Hyundai if/when someone buys the Prius due to the huge uptick in gas prices. I can lower my car payment by a couple hundred per month, and even at $4.50 a gallon and at 20,000 miles per year, I won’t be hurt. As for oil imports, well, my government doesn’t care; why should I any more?
I’ll revisit the hybrids if and when it makes mathematical sense, taking into account the E10.
Thanks, Washington; you screwed me yet again (as well as the general public – because I’m dead cert that our oil imports INCREASE with this stupid E10 bullcrap).
Better to run E85 cars on E85 and leave gasoline cars to run on pure gasoline. But, nobody ever seems to listen to me so why am I wasting my time?
Ok so it is bad when people spend an extra $3k on a hybrid. Yes it is more complex and requires more energy to manufacture but it does use less fuel.
Toyota is cheerfully offers SUVs in every size class in addition to their lineup of eco-mobiles.
Now what about the much larger “niche” that uses SUVs ie lieu of commuter cars minivans, wagons?
If you’re going to run the Nordscliffe, get a 911 or a GTR. If you’re going to drive the Rubicon, get a jeep or 4×4 of your choice. If you’re going to spend a couple hours a day in stop and go traffic, a hybrid or an electric is the way to go. Different cars for different uses.
I’ve yet to see really serious traffic delays in Detroit – unless I suppose you commute back and forth to Windsor. Lopez needs to sit in traffic in LA, Boston, NY, or any other city with an actual economy to understand why people some buy these cars. Maybe while he’s in LA he should check out the smog. If Detroit’s fumes didn’t blow away toward the east coast, maybe he’d be singing a different tune.
Well, the hybrid premium on the Insight is reported to be $2K or less, which I’d believe: Honda did a lot of little things that makes the design a lot cheaper than a Prius.
And I’ll argue you want your next car to be a hybrid, because you want it to be future proof.
Gas prices are likely to go up once the economy recovers.
And although battery technology isn’t here yet for plug-ins (sorry GM), it may very well be here two or three years from now. So if you get a Prius or Insight now, three years from now you can do a plug-in conversion if gas prices do go up.
To OldandSlow: No.
We’ve had this discussion in multiple posts in the past. People who defend hybrid profitability use some twisted logic that says Toyota would not be dumb enough to sell a hybrid at a loss. But where the logic falls apart is that these message-board-posters rarely understand the all-in cost of developing the technology and then implementing it in a car. So then they usually just twist the definition of “a loss.” They just declare in a sophomoric manner that the variable margin is positive so the car is profitable.
The amount extra you pay for a hybrid car versus its regular-ICE variant has nothing to do with the amount that it took the automaker to put the hybrid kit into the vehicle. Almost all analysts who really understand the industry (they don’t just read blogs, but they have very intimate knowledge with suppliers and OEMs) peg the Prius to have about 5% profit margins for Toyota. And this is Toyota… with their huge volume of worldwide Prius sales. Variable cost goes up the fewer hybrids that you produce, which makes the situation for other OEMs rather bleak.
So yes, the variable margin of a Prius is positive… so if Toyota were able to sell enough of them, they’d probably break even. The problem is that the auto industry works in the magnitude of many billions of dollars for each vehicle. 5% margins just don’t cut it. Given time and cost improvements, Toyota is best poised to make total (not risk adjusted for net present value) positive cash flow out of this whole mess. But the other OEMs are getting crushed by playing in the hybrid game.
The bill of material is huge to pull of a hybrid variant of what was a regular gasoline car. And yet, when they charge $4K more for a hybrid, they get blasted by the media and customers for making the hybrid too expensive. $4K isn’t even close to cover the incremental cost for carmakers not named Toyota.
Really, people can trick themselves into thinking that the Escalade hybrid, Fusion hybrid, Aura hybrid, or Durango hybrid make money. After all, it makes them feel better about buying the hybrid. But if you’re seeking the truth – then go work for a carmaker in their hybrid group. If you’re just a customer, feel happy knowing how much you’re screwing GM and Ford when you buy one of their hybrids.
Memmo, you are partially correct concerning E10 affecting fuel mileage. I’m seeing a 10% decrease in highway mileage using E10 with my older carburated vehicles. We made the switch a couple of years ago and I noticed the mileage varying between tanks.
I’ve also noticed that the E10 accelerates the deterioration of my float needle and seats. Ethanol is slightly corrosive to your fuel system, as it has a bit of water in it, as well. Methanol is better suited for use in internal combustion engines, but we’re suppose to be subsidizing those ethanol plants.
But where the logic falls apart is that nobody fully understands the all-in cost of developing the technology and then implementing it in a car.
The R&D costs for the Prius were estimated to be about $1 billion, which is not considerably different than the cost of development of other vehicles.
Not only has the Prius itself sold in large numbers, but the drivetrain development has also ended in up other vehicles, which also sell in reasonable volumes.
It’s a profitable car. I know that you are convinced that it can’t be, but it makes absolutely no sense that they couldn’t turn a profit when amortizing R&D costs of less than $1,000 per unit and with the car selling at a price that captures the cost of the battery.
Well, there we go.
A complex, nuanced, problem requires a complex, nuanced solution.
That’s a whole lotta different than flaming every car / journalist / industry leader from Detroit.
If it sounds to good (or easy or simple) to be true, it is.
Guaranteed.
Stephan Wilkinson :
January 7th, 2009 at 10:39 am
What a caveman. Should be in the Geico ads.
I would suggest you go to a dealer. Ask them what the public wants to buy — today. (Hint — it’ ain’t Hybrids.)
@ Pch101:
What about tooling investment and plant investment?
What about marketing dollars?
What about the guys working on the seats inside the car? They were doing R&D but not included in the $1B hybrid research budget.
What about the fact that a hybrid is much more than ‘just a battery?’
$1,000 times 1,000,000 units is … $1B. Where’s the rest of the money coming from to pay off everything?
Anyway, this is Toyota. What should we do about the other OEMs? OldandSlow’s concern was that it’s not profitable for the other guys to try and play the hybrid game… and in an era of epic losses, maybe hybrids aren’t the way to go.
““I can’t believe it’s not Toyota” with which to butter their bailout bread.”
Robert,
It’s a loan.
And “bailout” is an officially banned word for 2009. Just thought you’d want to know…
http://www.wdsu.com/education/18387406/detail.html
What about tooling investment and plant investment?
What about marketing dollars?
All cars have tooling and marketing costs. You don’t think that a Ford Mustang has marketing costs?
The main challenge that Toyota has is that it needs to always sell hybrids at some sort of premium because the cost of the battery doesn’t scale well. Since a lot of the battery cost is in the materials, making more batteries doesn’t necessarily lower their production costs very much.
Otherwise, you’re chasing your tail on this one. I’m sure GM is losing money big time on hybrids because they also get stuck with the battery costs **and** nobody is buying them.
But Toyota is certainly making money on them. They hurdled the development costs a long time ago. You need very fuzzy math and a lot of overreaching to believe otherwise.
” … if the car companies are smart and follow the market’s lead, they’ll keep building what people buy, not what others tell them to build.”
Shhh, don’t tell all of those high dollar marketing gurus that it is impossible to create or shape consumer demand. Those are the guys who buy advertising and keep you employed!
Why is anyone sneering at this article? Hybrids do come at a cost premium and, so far at least, they also come at a severe performance penalty. Honda and Ford could well change my opinion on that count, but the proof is in the pudding, and I haven’t tasted it yet (or read about someone else tasting it). I wouldn’t call LA buyers hypocrites maybe, as they’re some of the very few who’ll see an actual milage benefit from their hybrids as opposed to a light or turbo’d fwd’er.
Where I think he’s way wrong is in assigning no significance to dual powertrains. This set-up makes great sense for city cabs and should be industry standard in all limos and luxo-barges. However, slamming it as a vainglorious waste of money for the average commuter car is entirely appropriate.
Redstapler is correct though in pointing out that by far the largest group of idiots are those that buy SUV’s and trucks for light commuter duty.
holydonut, anoldbikeguy
I have worked with Japanese manufacturers for over 15 years. They tend to make products that make money, in general. The Prius may have had a ton of developement costs and sustaining the battery supply/manufacturing may be a narrow margin, but they are making money on them, guarranteed. They are masters at cost savings techniques. They are great at streamlining processes.
Why would the myopic details of the Prius profits be any different than that of the larger Japanese auto manufacturer picture? I don’t see the Prius as the standalone Toyota product that loses money compared to everything else they make…I am sure they applied the same profit/loss techniques, albeit less profit, as the other vehicles they make.
Hey, don’t forget the exchange rate in your profitability calculation….
Seriously, developed in yen, produced in yen, bought in dollars and converted back to yen. They likely are taking a loss on each vehicle if it weren’t for the artifically lowered yen. Yen gets stronger and *poof* there goes the profit.
Yet another reason Japan finds their strong yen a big big big problem….
I do think its great if you want a hybrid. I think its great to use less oil. But I’m still a skeptic. 1) people won’t pay extra for “green” if the economy keeps sucking. 2) until I see some sort of comprehensive study that shows that hybrids overall do save oil/energy over a gas-only model, I’ll be skeptical. Something tells me the fuel/energy required to mine the metals and produce the batteries is enormous. What if more fuel is burned making the hybrid components than if you just used fuel without the hybrid part? Is it ok because the end consumer isn’t burning the oil…its the supply chain somewhere that is? Seems like a big waste if the whole point is to reduce oil and save energy. And something tells me it might be the case since we haven’t seen even one automaker come out and advertise that their car, cradle to grave, uses X% less overall oil and energy than a conventional vehicle. We all blast ethanol/E10 because it uses more fuel/energy to make than if we just burned 100% gasoline. Hybrids should be viewed with the same skepicism….
My big thing? meh. Get one if you want one. But if you do, please don’t blab on about how great you are and how you’re “doing your part”. Unless you know its true and can show the rest of us you’re saving energy, just keep your mouth shut and your smug bottled up.
Jerome10: … has a yen to talk currency conversion…
You think that’s special to hybrids, somehow? The yen also causes problems for Corollas built in Japan. This part of the reason why Toyota operates factories here.
Prior to the economic meltdown, Toyota planned to build Prii here, for the same reason. That’s on hold.
—
I agree with PCH101…
If the Prius isn’t profitable for Toyota, it’s a real mystery how Toyota as a whole remains so profitable. An article I read not too long ago mentioned Toyota even beat Honda on key economic profitability measures. The Prius alone is 7% of their US sales… an unprofitable Prius would be a significant problem.
Toyota said their unit cost was lower than invoice back in December 2002 and they’ve been relentlessly pursuing cost reduction ever since. They’re making money on it. Not as much, perhaps, as they’d make selling Tundras at MSRP at full volume but enough.
TheRealAutoGuy :
I would suggest you go to a dealer. Ask them what the public wants to buy — today. (Hint — it’ ain’t Hybrids.)
Agreed! The correct answer is, of course, “nothing.”
The pictured version of Ford Fusion works on both gasoline and tax dollars.
autonut-
works on tax dollars??
1. I own a Civic Hybrid and I’ve noticed the same thing. Back around ’05 my milage averaged in the mid-40’s and occasionally got into the high 40’s per tank. Then about a year ago I started not being able to get it past the high 30’s and I’ve actually had it under 37/tank once. I wasn’t sure if it was the E10 I was using but it seemed plausible when I crunched the numbers.
2. IMO my Civic is a disappointment. I think the EPA mileage was totally oversold. That said, I think there is a cheap way to improve everyone’s mileage: mpg displays. The avg and instant mpg displays in my car taught me how to drive more efficiently – I’m able to average over 23mpg in my T&C minivan with the 3.8L V6.
Toyota is making money on their hybrid program…no one else is.
Ford should have spent a little more $$$ to make their hybrid program profitable. However, as it stands, their hybrid program is useless because of the lack of $$$ (and batteries).
GoTerps is right. I never used anything but the average-mpg display until a couple of weeks ago when I started leaving the instant-mpg gauge up. Very educational, especially in such situations as anticipating stoplights and coasting.
No, I’m not a hypermiler and I can’t bear to hold anybody up, so I’m not an obstructionist. Just do it when there’s nobody behind me or when they have their own lane to use.
I don’t understand how any TRUE car enthusiast can hate a hybrid car. While I have not always been a supporter, there are two undeniable facts about hybrids that appeal to the enthusiast: The use of high technology in its powertrain and that it uses less fuel in daily operation that leaves MORE fuel for us to use in our high horsepower cars.
Re: E-10 mileage. I know ethanol has less energy than regular gasoline, but I don’t see how it could hurt fuel economy more than a few percentage points, and it should affect hybrid MPG even less since they don’t always run off a gas engine. Just intuitively, even if the ethanol was giving you zero energy, it’s only 10% of the fuel and could only take away 10% of your MPG…right?
nino…I agree that there is nothing wrong with the IDEA of a hybrid car, but the reality of hybrid cars on the market is very dissapointing for enthusiasts. I’d also say that some of the best enthusiast cars are the most mechanically simple, and can have very low power outputs.
Tedward,
By “high technology”, I mean it in the same sense that exotic supercars appeal to the enthusiast.
I agree with you about simple cars. I even rant about that on another thread here that cars have become overweight with needless complications.
A second for you Stephan Wilkinson, what a caveman. I’m not sure what Geico ads are however.
Maybe the Atkinson Cycle used in the Prius (and other hybrids) is more sensitive to the percentage of ethanol than a “standard” ICE (?)
PeteMoran, they’re the TV commercials–hugely popular–for an insurance company, Geico, with the tagline that it’s so easy to buy that “even a caveman could do it.” And then you see a hirsute “caveman” in contemporary dress griping about this bit of chauvinism.
They became so popular that there was even talk of a major film being done around the caveman character.
I suspect that, like most other things, the technology will continue to improve. The idea of getting energy from braking is just too good to pass up. Even if you hate hybrids, it would seem that getting back that energy should be something we should take advantage of somehow.
what I dont understand is why people have to either be on one side or the other?if you like the idea of hybrids buy one.
If you dont beleive in the technology or cost savings dont buy one.Simple. As far as the big 2.3 building hybrids goes…..
If we only left it up to offshore owned companies and energy costs rose again to 2008 levels and people decided to purchase hybrids and detroit didnt make any,how big would that bailout be?
@ pch101…
All cars have tooling and marketing costs. You don’t think that a Ford Mustang has marketing costs?
Thank you for re-affirming my prior notion that most people do not care to understand all-in costs for a vehicle. The common belief is that cars just show up because someone dreams them up. It’s silly to think that way and you know it. Volume automakers sink billions so you can go into a showroom and buy that car. And all this investment needs to be paid back. You are asserting that because all cars have tooling and advertising, then it doesn’t matter what car you sell since these costs magically get paid back when you sell cars.
Here’s a word of advice – when you are running your car company, you cannot just set your ad budget to whatever you feel like because you think the costs will take care of itself.
I think you really have a shot at running a failing automaker. You obviously have some notion in your mind that you know what is right – and in light of actual numbers and math you just ignore those things. Then you have fun logic (well things that are good have to make money – ergo we must make good things).
In my prior posts – I showed how the capex spending for Toyota (converted to US dollars) was multiple billion dollars per year. Assuming how many product and powertrain launches they go through per year, you’re talking many billions of spending to pull of each car. These costs don’t go away just because you want them to.
As I mentioned in my first post, Toyota is the most promising company to make this hybrid thing work from an all-in perspective. The industry already knows their variable margin is positive; and they also know it cost them many billions to execute a unique program. The other OEMs are not having such a fun time at it, and at the end of the day the pursuit of hybrid is costing Detroit dearly.
I showed how the capex spending for Toyota (converted to US dollars) was multiple billion dollars per year.
You’ve never once proven that costs associated with the Prius were exceptional in comparison to other new vehicle launches. You’ve offered a lot of terse speculation and lengthy expositions of guesswork, but your data has been sorely lacking.
I know that the R&D costs were about $1 billion because I’ve seen sources that confirm it. Here’s one example:
http://money.cnn.com/magazines/fortune/fortune_archive/2006/03/06/8370702/index.htm
If you have trustworthy sources that you can use to prove your position, I’d like to see it. But if you are simply going to continue your argument based upon a hope that expenses associated with the Prius are considerably different from that of other vehicles, I’m going to want to see some evidence of it.