Is All the Hype about Hybrid Cars Just Hype?

Hybrid cars have been around since 1999, when Honda introduced the Insight two-seater to breathlessly excited consumers. The Toyota Prius and Honda Civic Hybrid were soon to follow, but the idea of hybrids still hasn’t picked up steam among mainstream car buyers. Most purchases have been made by environmentally conscious people or people who just wanted to be among the first to own a hybrid.

The buying attitude toward hybrids began to change when Toyota improved upon the Prius and made it bigger and more powerful, just when gas prices were beginning to top #2 a gallon and higher. A year later, Ford brought out the small Ford Escape Hybrid SUV, and shortly thereafter Honda unveiled its hybrid version of the Accord, the first hybrid sedan with V6 power. Lexus and Mercury debuted hybrid cars, and GM’s Silverado and Sierra pickups are also available as hybrids. The coming years will bring the release of Nissan, Saturn, BMW, and Porsche hybrids.

About 200,000 hybrids are expected to be sold this year in the United States, a mere fraction of the approximately 17 million vehicles that consumers will purchase. But as car manufacturers are anticipating, that number is expected to increase rapidly. As Americans have become increasingly concerned about global warming and conserving fuel consumption, the idea of the benefits afforded by driving a hybrid vehicle seem to be overwhelmingly clear. Instead of selecting a car for its roominess, special features, and outward appearance, consumers are now beginning to choose vehicles based on fuel economy and emissions.

All the hype about hybrids seems to make sense for Americans looking to save money while saving the planet at the same time. But recent research is showing that neither claim is actually true.

Typically, the price tag for a hybrid car carries a premium of $3,000 to $5,000 versus a comparably equipped non-hybrid car. And some dealers take advantage of the hybrid hype by tacking on big markups. For some people, the prestige of driving a newfangled hybrid car is worth the extra money; for others, they feel it’s worth the extra cost to do their part for the environment. But in either case, the extra money will never be recouped.

Edmunds recently calculated the five-year ownership cost of 2005-model hybrid vehicles as compared to conventional gasoline-engine models. In order for the vehicles to cost the same to operate, gas would have to climb to at least $5.80 per gallon or even $10.10 per gallon, depending on the model of car. So even with today’s inflated pump prices, hybrids still won’t save you money at the pump.

Tax incentives may make the figures seem friendlier, because if you bought a hybrid last year, you could claim a $2,000 one-time deduction on your tax return. If you buy one this year, you’re eligible for a tax credit determined by a complex formula, with credits ranging from about $650 for the Accord Hybrid to about $3,150 for the Toyota Prius. But only buyers of the first 60,000 hybrids sold per car manufacturer will be able to take the full credit, and after that credit amounts will steadily decrease for the next 15 months, at which time the will end. So in order to take the full tax credit, you have to buy your hybrid early in the year.

CNW Marketing Research Inc., a research think tank in Bandon, OR, spent two years gathering data about the amount of energy necessary to plan, build, sell, drive, and dispose of a vehicle from initial concept to when it is scrapped. This data included even obscure information such as plant-to-dealer fuel costs and employee driving distances, electricity usage per pound of material used in every vehicle, and hundreds of other variables. The data was translated into a "dollars per lifetime mile" figure—the Energy Cost per mile driven.

The most Energy Expensive vehicle sold last year in the United States was the Maybach, which has an Energy Cost of $11.58 per mile. The least expensive was the Scion xB, which has an Energy Cost of only $0.48 per mile. Although the figures resulting from CNW’s research may not be surprising to most people, it is of considerable interest that a hybrid vehicle costs more in terms of overall energy consumed than comparable non-hybrid cars. As an example, the Energy Cost of the Honda Accord Hybrid is about $3.29, but the Energy Cost of the non-hybrid Honda Accord is $2.18. Therefore, during the lifetime of the Accord Hybrid, the vehicle will require about 50% more energy than the non-hybrid version.

"If a consumer is concerned about fuel economy because of family budgets or depleting oil supplies, it is perfectly logical to consider buying high- fuel-economy vehicles," says Art Spinella, president of CNW Marketing Research, Inc. "But if the concern is the broader issues such as environmental impact of energy usage, some high-mileage vehicles actually cost society more than conventional or even larger models over their lifetime."

When buying a vehicle, consumers should keep in mind the goal of overall worldwide energy conservation and the cost to society in general, but also be aware of the Energy Cost of an individual vehicle. "We believe this kind of data is important in a consumer's selection of transportation," says Spinella. "Basing purchase decisions solely on fuel economy or vehicle size does not get to the heart of the energy usage issue."