In an April 4, 2012 New York Times article entitled Payoff for Efficient Cars Takes Years[i] author Nick Bunkley reports on data compiled for the Times by TrueCar.com, an automotive research group. Bunkley says “Except for two hybrids, the Prius and Lincoln MKZ and the diesel-powered Volkswagen Jetta, the added cost of the fuel-efficient technologies is so high that it would take the average driver many years – in some cases more than a decade – to save money over comparable new models with conventional internal-combustion engines.” Bunkley probably meant “payback” as in “payback period” rather than payoff.
The title and the quoted statement told me this article was repeating a familiar inaccurate charge against hybrids. The TrueCar report is not the first one that has analyzed hybrids and the difference in costs and MPG between a hybrid and its conventional versions. When I use this terminology I mean a car that has a standard ICE engine version as well as a hybrid version, such as the Toyota Camry and the Toyota Camry Hybrid. The first article I read was in the October 2008 issue of Consumer Reports. It was entitled Which Hybrids Save You Money.[ii] Six hybrids were identified that had a one year payback. The Union of Concerned Scientists (UCS) first published a report on hybrids in early 2010[iii] and continues to maintain its Hybrid ScoreCard on the website hybridcenter.org [iv]. The British Columbia Automobile Association (BCAA) published a 2010 Annual HEV Cost Analysis[v] in July 2010 and a 2011 Annual HEV Cost Analysis in July 2011 [vi]. In February, 2012 Oak Ridge National Laboratory produced its 2011 Vehicle Technologies Market Report[vii] which compared hybrids with their conventional versions. This report used May 2011 data. An updated version with more recent data was published on April 7, 2012 on the Vehicle Technologies Program Fact of the Week website as fact number 722 entitled Hybrids Can Save Money Over Time. [viii] This version used March 2012 data.
These reports have different formats and methodologies. The Consumer Report article shows the Prius, Malibu, and Camry having a payback period of one year with some other vehicles having more than an eight year payback. The Union of Concerned Scientist gives a letter grade to the 33 hybrids it analyzed distributed as follows: 3 A’s, 7 B’s, 13 C’s, 6 D’s, and 4F’s. The BCAA reports show 5 year costs savings of several hybrids along with the percent reduction in CO2 emissions between a conventional car and its hybrid counterpart. The two most recent reports from Oak Ridge show payback periods based on the cost of gasoline along with a comparison of MPG for hybrid and conventional mode.
The Toyota Prius has a 51% share of the hybrid market. In his article Bunkley notes that the payback for the Prius is two years, presumably referencing his TrueCar source. The Prius does not have a conventional counterpart – it is available only in a hybrid version. This is not the case with other hybrids, such as the Toyota Camry or Toyota Highlander which have conventional and hybrid counterparts, making it easy to measure the difference. But the Prius is too important to be ignored so reports compare it with some other conventional car that the authors think is close. In the Consumer Report article, the Prius is compared to a Toyota Corolla. The BCAA report compares it to a Toyota Matrix. The UCS report does not say what car it is compared against. The 2011 Vehicle Technologies Market Report compares the Prius to a Camry while the update from Fact of the Week compares it to a Matrix. This is very important because more than half of the hybrids in the U.S. are Priuses (or Prii – the word Toyota has coined as a plural for Prius). This confusion results in widely different Prius paybacks. Should one use the one year payback from Consumer Reports (compared to a Corolla), the two year payback from the 2011 Vehicle Tech report (compared to a Camry), or the four year payback from Fact of the Week (compared to a Matrix)?
The thirty seven other hybrid cars that have been built divide the remaining 49% of the market. Table 1 is a summary of hybrid sales from 1999 through 2011. It is taken from a report entitled The Priuseqv Proposal [ix] which uses government data as well as information from the website hybrid.com. The MPG is given in the left most column following the manufacturer and the car model.
Table 1: The Priuseqv Proposal
In determining payback, it is important to use the weighted average of the sales of the different models rather than simply comparing the different models irrespective of their position in the market. Thus the Prius is representative of one-half of the market, not 1/38th of the market. To simplify the market analysis I created a much smaller table from the entries in Table 1 using seven cars from the total of 38 which represent the higher MPG cars from Table 3 (see Table 2). These are the most popular hybrids. This is not surprising since most people buy hybrids for their high MPG numbers and their low CO2 emissions. These seven cars represent 75% of all hybrids built to date, pointing out that most of the available models have mediocre sales and may have short product lives.
Table 2: Subset of Table 1
I decided to review the models from the most recent analysis of payback, which is the April 9, 2012 Fact of the Week source. Table 3 contains data from this source reordered by sales rank rather then payback period. I have added the units sold of each model from Table 1.
Table 3: Facts of the Week Report – April 2012
This report includes 14 of the 38 models in Table 1. Of this group, the Toyota Prius represents 62.8% of the total shipments. The next five cars (Honda Civic, Toyota Camry, Toyota Highlander, Honda Insight, Ford Fusion) represent 35.7% of shipments and the last eight represent 1.5% of shipments (see table 4).
Table 4: Distribution of sales for 14 hybrids
From these different studies a pattern emerges that shows that a common set of high MPG hybrids from the various studies. The seven models from Table 2 are the Insight, Prius, Civic, Camry, Fusion, Lincoln MKZ, and Lexus CT 200h. The first seven entries from Table 3 are Insight, Prius, Civic, Camry, Fusion, Lincoln MKZ, and Highlander, The second set replaces the Lexus CT 200h (total units sold – 20,226) with the Highlander (total units sold 114,058). Otherwise there is significant overlap.
The previous discussion covers the hybrid cars over the relatively brief life of the technology. More useful information can be obtained from reviewing the 2011 sales. Table 5 lists the top selling ten hybrids in the U.S. in that year ordered by unit sales.
Table 5: Top Ten Sales Models – 2011
Two new models were added in 2011 which are on this best selling list, the Sonata from Hyundai and the Lexus CT 200h from Toyota. The Sonata is the first hybrid offering from Hyundai. The total sales of these ten models was 244,474 units. Total sales for 2011 were 268,501 units for all hybrid models – thus these ten represent 91% of that year’s sales. The average MPG of the ten models is 39 MPG. But the weighted average incorporating the units sold is 45 MPG reflecting continued Prius dominance. Eight new hybrid models were introduced in 2011 and nine hybrid models were no longer being sold.
It is important to understand that the comparison of hybrid models changes over time. In the 2008 Consumers Report paper, the Camry had a one year payback with hybrid fuel economy of 34 MPG compared to the conventional Camry with a fuel economy of 24 MPG. The sales price differential was $1,740. In the latest 2012 Facts of the Week report the Camry hybrid obtained 40 MPG and the conventional Camry gets 26 MPG. The payback period for the hybrid over its conventional counterpart is 2.3 years.
Mr. Bunkley could have provided a different perspective. He could have said “The vast majority of all the hybrids sold (not the vast majority of hybrid models offered) have a payback (payoff) period of two to four years. Six models out of 38 built to date account for 75% of hybrids sold and on average have a weighted payback period of three years.”
Bundley quotes Jesse Toprak, vice president for market intelligence at TrueCar as saying: “The point where a car can actually go after a mass-market audience is when the pricing starts making sense on paper,” said. “If they want these technologies to be mainstream, pricing still needs to come down.” This is a simplistic view. More and more people are starting to understand the value of the high MPG hybrids in life cycle economic terms. If resale value is included in a conventional 5 year analysis, the Prius is one of the best cars on the road. It saves money while cutting CO2. Toyota has four Prii models now and has developed more hybrid counterparts to its conventional product line. Sales have jumped significantly. People have waited to see if the plug-in cars will be successful. After 18 months plug-in limitations are clear and conventional hybrids are a better deal by almost any measure.
John German is a Senior Fellow at the International Council on Clean Transportation (ICCT) and a frequent testifier before Congress. He projects a manufacturing cost difference between conventional and hybrid versions of the same model to be about $1,200 by 2020, only eight years away [x]. He sees a period of rapid mass market acceptance with roughly 70% sales penetration by 2030 for conventional hybrids. Unless there is some unforeseen breakthrough with plug-ins like the PHEV and BEVs, they will languish until the hybrid takes off. 2012 could be the key year as Toyota now has four models to offer versus one only a year ago. That’s why their unit sales were up 46% in March 2012 from March 2011.
It is counterproductive to try to evaluate all the hybrids that have been developed and manufactured. Of the thirty eight made to date, no more than a dozen have had reasonable success in the market and the most successful cars number less than ten. This is a relatively new technology so there will be more failures than normal. Throwing out the marginal products gives a very different perspective.
[i] Payoff for Efficient Cars Takes Years, by Nick Bunkley, New York Times April 4, 2012 http://www.nytimes.com/2012/04/05/business/energy-environment/for-hybrid-and-electric-cars-to-pay-off-owners-must-wait.html?ref=electricvehicles&pagewanted=all
[ii] Which Hybrids Save You Money? Consumer Reports, October 2008, page 40.
[iii] UCS “Hybrid ScoreCard” Dings Automakers for Forced Features in Hybrid Offerings Green Car Congress, January 28, 2010. http://www.greencarcongress.com/2010/01/ucs-20100128.html
[v] BCAA 2010 Five-year Hybrid Vehicle Cost Analysis http://www.bcaa.com/learning-centre/bcaa-newsroom/news-releases-2010/hybrid-cost-analysis#
[vi] BCAA 2011 Five-year Hybrid Vehicle Cost Analysis http://www.bcaa.com/-/media/BCAA/files/brochures/BCAA_Backgrounder_BCAA_Hybrid_Cost_Analysis_2011_FINAL.ashx
[vii] 2011 Vehicle Technologies Market Report by Stacy C. Davis, Robert G. Boundy, Susan W. Diegel Oak Ridge National Laboratory February 2012 http://cta.ornl.gov/vtmarketreport/pdf/2011_vtmarketreport_full_doc.pdf
[viii] Fact #722: April 9, 2012 Hybrid Vehicles Can Save Money over Time, compiled by Robert Boundy, Roltek, Inc. http://www1.eere.energy.gov/vehiclesandfuels/facts/2012_fotw722.html
[ix] The Priuseqv Proposal by Pat Murphy, Research Director, Community Solutions, April 2012 http://www.pluginscam.org/wp-content/uploads/2011/11/Prius-Paridym-Plan-April-2012.pdf
[x] ICCT Senior Fellow projects incremental manufacturing cost of hybrids can drop to ~$1,200 by 2020; subsequent surge in adoption to ~70% of new vehicle sales by 2030, Green Car Congress, February 27, 2012
Posted in Alternatives |