Do Rising Hybrid Sales in 2012 Reflect a Temporary Fad or Something More?
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Mention “Prius” and just about everyone will know instantly that you are talking about Toyota’s (NYSE: TM) industry leading hybrid car. Back in 2000 when Toyota introduced the Prius worldwide, it was practically alone in the hybrid space but here in 2012, just about every major manufacturer has a hybrid on the market. Examples are the Ford (NYSE: F) Fusion Hybrid, the Honda (NYSE: HMC) Insight Hybrid, the Nissan (NASDAQOTH: NSANY.PK) Altima Hybrid, and the Chevy (General Motors (NYSE: GM) Volt. These were just some of the small and mid size sedans. Look close at that next GMC Yukon or Chevy Tahoe on the road. It just may be a hybrid. Even Audi, BMW and Mercedes are offering hybrid versions of their luxury lines.
Data obtained from the US Department of Transportation shows that hybrid sales spiked to 352,862 in 2007. Coincidently or not, that was the last full year of spiking oil prices (oil peaked in July 2008 at over $145 per barrel and dropped to around $40 a barrell by year-end 2008) during the oil panic of 2005 through 2008. From 2008 through 2011 hybrid sales cooled off a bit to 269,178 sales. This trend may be reversing higher here once again in 2012.
Source: US Department of Transportation
According to Edmunds.com, hybrid sales are up 381 percent through the first half of 2012. (Oil is back near $100 per barrel which may be a catalyst). In fact, March 2012 has been the best month on record with over 48,000 hybrids sold. (The previous record was set in May 2007 with just over 47,000 hybrids sold). Potentially a positive sign for hybrids, it remains to be seen whether those who went for a first hybrid with the spike in oil will again purchase hybrids for their next vehicles. Repeat sales will ultimately determine whether hybrids are here to stay or are just a fad.
What is a hybrid? – A hybrid vehicle is a vehicle with two motors – one electric and one gas or diesel. Hybrids are not to be confused with fully electric cars such as the Chevy Volt plug in. This write up does not intend to discuss fully electric vehicles other than to state that they are much less popular (probably due to difficulty in finding recharging stations) with only 4,100 units sold through the first half of 2012 according to Edmunds.
Benefits of Hybrid Vehicles (according to the proponents) – According to the proponents, the benefits of hybrid vehicles, regardless of the price of oil, are a reduction in oil consumption which will result in reduced dependency on foreign oil sources along with the added benefit of reduced carbon emissions. If research fully validates these claims once enough data is accumulated these will be great reasons to own a hybrid.
Cons of Hybrid Vehicles (according to the critics) – According to critics the major drawbacks to owning a hybrid car are the higher purchase price (which can be several thousand dollars higher compared to similar gas only cars) will never be recouped by the gas savings and the additional maintenance cost of maintaining two motors. Secondly, critics argue that hybrids are a transition technology that will be obsolete as we move toward hydrogen and methane fuel cell cars. Additionally at least one critic disputes the idea that hybrids will reduce oil consumption. According to J. Marshall Adkins and Pavel Molchanov, analysts for the financial services firm Raymond James, in a January 10, 2011 article in the New York Times, “Hybrid cars may be as popular as ever, but they may not have much effect on the nation’s – or the world’s – oil consumption over the next two decades…… No matter how ‘cool’ and popular the concept might be, from the oil market’s standpoint, hybrids will be irrelevant as far as the eye can see.”
What are the top rated hybrids? - The top selling hybrid for the past several years has been the Toyota Prius (51/48 mpg, MSRP $24,000). Other top selling hybrids are the Ford Fusion (41/36 mpg, MSRP $28,775), Honda Sonota (35/40 MSRP $42,585), Kia Optima (35/40 MSRP $25,700) and Chevy Volt (95/93 MSRP $39,145)
Hybrids Under $20K - There are also available choices for consumers looking to spend under $20,000. There is the Honda CRZ-Hatchback ( MSRP $19,695), The Honda Insight Hatchback (MSRP $18,500) and the Toyota Prius-c Hatchback (MSRP $18,950).
Other Hybrids – Hybrids are also available in the SUV and luxury spaces as well. There is the Ford Escape (34/31 mpg; MSRP $30,570), and bigger SUV’s such as the Chevy Tahoe Hybrid(20/23 mpg; MSRP $51,970) and GMC Yukon(20/23 mpg; MSRP $52,470). Luxury hybrids include the BMW Activehybrid 7 Sedan (17/24 mpg; MSRP $97,000) and the Mercedes Benx S Class Hybrid (19/25 mpg; MSRP- $91,850).
Bottom Line – While sales are increasing and major car companies are continuing to increase hybrid production, there is likely not yet enough data to conclude whether this is a lasting trend or just a fad. In the end Hybrid cars may simply go away or prove to be merely a transition technology as the auto industry moves toward hydrogen, methane fuel cell, or possibly even a technology we have not even heard of yet. In the meantime, whatever the final outcome may ultimately prove to be, Toyota, Ford, GM, Honda and the others look at least to have found a way to profit while we await the auto market’s final verdict.
PjKoz has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
