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With gas prices soaring and the summer driving season upon us, you'd think fuel-sipping hybrids would be all the rage on the road. And you'd be wrong. Just ask Wilmington, Del., Honda dealer Frank Ursomarso. His customers are so turned off by the pricey Honda Accord hybrid, he doesn't even keep the model in stock. "When customers come in looking for the Accord hybrid," he explains, "they either get deflected to another model or they leave." The story is similar at Kent Ritchey's Memphis Toyota dealership, where Highlander hybrids languish on the lot, while the regular version of the SUV sells briskly—for three grand less. "Not a lot of people are jumping up to pay $3,000 extra for a hybrid," says Ritchey. "For $3,000, you can buy a lot of gas."
As 31 million of us hit the road this holiday weekend prepared to suffer at the pump, we've begun to rethink the conventional wisdom that hybrids are the solution to our oil addiction. It turns out that last year's "it" car is losing some of its megawatt buzz. Despite those runaway gas prices, some hybrids are crashing at the intersection of fashionable and rational reasons for purchasing the costly gas-electric models. The price premium you pay for a hybrid—$3,000 to $8,000 above a regular model—takes years to pay off at the pump, even with $3 a gallon gas. That hasn't stopped celebs like Leonardo DiCaprio or Susan Sarandon from buying them. But for the rest of us, the cost of being hybrid hip is just too steep, and paying that premium just doesn't add up. "To reach the next group of hybrid buyers," says George Pipas, market analyst for Ford, which just resorted to zero percent financing to jack up sales of its Escape hybrid, "you've got to have a price premium that pencils [adds up]."
There are still plenty of folks who are driven to buy hybrids for purely green reasons. They're out to save the planet and reduce our dependence on foreign oil. And these are laudable motivations. But many of those green-leaning initial hybrid buyers have been wealthy and well educated—in other words, the consumers who are least affected by high gas prices. If your motivation is to pinch pennies at the pump, though, there are actually regular cars that deliver better gas mileage than some hybrids. The new $16,000 Honda Civic—the regular one, not the hybrid one—is rated at 30mpg city and 38mpg highway. And even though those EPA ratings on the window sticker overestimate real-world mileage, the regular Civic still gets better fuel economy than the hybrid Accord and all the hybrid SUVs on the market. And there's nothing that closes up that hole in the ozone faster than burning less gas.
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Now before all you hybrid enthusiasts start sharpening your poison pens, let's look at the numbers. (I'm hoping to avoid more of the kind of angry mail I received after reporting recently that Accord hybrid sales plunged 69 percent in April, while the new Cadillac Escalade shot up 127 percent). Sure, the Toyota Prius is still a sellout, and, yes, hybrid sales doubled last year (thanks mostly to that white-hot Prius). But hybrids still account for only 1.2 percent of the U.S. car market, and they're outsold by SUVs 23 to 1. Plus, if you look on dealer lots lately, you'll notice hybrids are starting to stack up. On average, the Accord hybrid sits on the lot for more than three months before it is sold, compared to just over a month for a regular Accord, according Power Information Network's dealer-sales data. It's taking 44 days to move a Highlander hybrid, while the regular version is out the door 10 days faster. And despite that zero percent deal, the Escape hybrid also is moving slower than its conventionally powered sibling—67 days versus 61 days. That all adds up to hybrids becoming a harder sell even with gas prices that are 75 cents a gallon higher than last summer.
Still dubious? Well, I had the independent automotive researchers at Edmunds.com run the math on a couple of models and here's what they found: The Highlander hybrid stickers at $33,635 versus $27,045 for its comparable nonhybrid sibling. When you factor in a $2,600 tax credit for the hybrid and a $1,000 rebate on the nonhybrid—plus some price haggling—you end up with a hybrid premium of $4,912. If you drive that hybrid 15,000 miles a year and pay $2.93 a gallon, it will take you 8.8 years to see that payoff at the pump, according to Edmunds. The wait is even longer for the $31,540 Accord hybrid: 12.6 years. That's because Honda engineered the Accord hybrid to be a have-your-cake-and-eat-it "horsepower hybrid," with a more fuel-thirsty V-6 engine. The Accord's electric motor is geared to both boost power and save on gas. The result: the four-door sedan gets an unspectacular 29.5mpg—just a half mile per gallon better than a regular four-cylinder Accord. In fact, if you compare the Accord hybrid to the regular four-cylinder model, the payback takes 296.2 years, according to Edmunds. I'm sure your great-great-great granddaughter will appreciate the savings.
Honda now realizes the horsepower hybrid strategy is a bust, and they're cutting production of the Accord hybrid. This week, Honda revealed that it is developing a new hybrid coming in 2009 that will be cheaper than a $22,000 Prius and smaller than a Honda Civic (though it is still expected to seat five). What has Honda learned from the sputtering Accord hybrid? "It's about fuel economy, stupid," says Honda senior vice president John Mendel. "A hybrid is not about performance. If I'm going to pay the hybrid up-charge, I want better fuel economy."
Toyota officials insist there's nothing wrong with its hybrid strategy, even though they've also slapped a cut-rate financing deal on the Highlander hybrid to get it moving. But they do acknowledge they're considering tinkering with the Highlander's styling to make it stand out more as a hybrid. Other than the Prius, most hybrids are nearly indistinguishable from other cars on the road, with nothing more than a small badge on the back or perhaps a special spoiler to denote it's a green car. Well, it turns out that hybrid drivers would like everyone else on the road to know that they are saving the planet (even if they're not saving that much at the pump). So future hybrids will be customized to look different than their nonhybrid counterparts. "The Prius makes a statement that gives people a feeling of pride in owning a hybrid vehicle," says Toyota spokesman John Hanson. "We've learned the Highlander hybrid owner wants to make that statement, too."
Besides the cosmetics and economics, there's another complicating factor for calculating whether a hybrid is worth it: the Environmental Protection Agency's mileage mythology. As many drivers have discovered, the EPA mileage on the window sticker of a new car is miles from reality. For example, the Prius promises 60mpg, but Consumer Reports found it only gets 44 mpg. Another source of real-world hybrid mileage can be found at greenhybrid.com. The EPA is now rejiggering its outdated methods for estimating mileage—which, among other things, don't factor in using the air conditioner or driving above 40mph. But until those come out next year, the stickers on the windows of hybrids will continue to be off by 30 percent or more. (The EPA says its mileage estimates for regular cars are off, too, but only by 5 to 20 percent because the hybrid's high-tech propulsion systems are more sensitive to changes in driving conditions and power-draining features like air conditioning.)
Despite all these hybrid headwinds, Americans still say they want them in survey after survey. Consumer Reports this week released a new poll showing that one third of car buyers say that high gas prices are driving them into more fuel-efficient cars, primarily hybrids. The problem, say dealers, is that once consumers get to the showroom, they realize hybrids aren't such a good way to save on gas after all. "Hybrids have gone soft because people are doing the math," says Toyota dealer Gordon Stewart. "They're saying, 'Does it make sense to pay a premium for a hybrid when I'm only saving this much a week in gas?' And for now, the answer is no."
So will hybrids ever be a good deal? When the price premium falls below $2,000, analysts say the payoff will come quicker (if you factor in the hybrid tax credit you receive which ranges from $650 to $3,150, depending on the model). For now, the new Toyota Camry hybrid has the lowest premium of about $2,600, and dealers say buyers are lining up for it. Honda says it is working to radically shrink the size of its batteries and other hybrid components, which will vastly improve gas mileage. And as more hybrid models hit the market, prices are bound to drop as the competition heats up. That's why analysts project that hybrid sales will nearly quadruple to 750,000 units by 2010. Still, even at those lofty sales, hybrids will only account for 4 percent of U.S. auto sales. SUVs, by then, will still represent about one fifth of the market.
If you're really interested in saving money at the pump this summer, there is a far cheaper way. Go out and buy one of the new little gas-sippers hitting the market now. The Honda Fit, Toyota Yaris and Nissan Versa get up to 40mpg and start at less than $15,000—at least five grand cheaper than the least expensive hybrid. If you want to buy American (sort of), consider the Chevy Aveo (built in Korea), which gets 35mpg on the highway and starts at under $10,000. These cars might not dazzle your friends with their sci-fi technology. But the payoff at the pump comes right away, not a long way down the road.
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