Hybrid cars and Gas costs: Still a huge misunderstanding

Fortune Magazine is publishing an article on the development of the Toyota Prius in its March 6th issue. As a preview, Alex Taylor III wrote the article, Toyota's recipe for success.

Taylor doesn't seem critical of hybrid cars and appears to try to be objective in touching on the major hybrid issues. He is, ultimately, laying down the foundation for how Toyota's hybrids might completely dominate the future of automobile sales after all.

Still, he notes, "Critics complain that hybrids are inherently uneconomical because the $3,000 or more the technology adds to the cost of the vehicle can't be recouped with greater gas mileage; that they didn't improve fuel efficiency that much; and that some American models were being built more for performance than to benefit the environment."

To which Taylor states, "The knocks against hybrids are all true. But what the critics didn't put a price on was the value of being seen as eco-sensitive without giving up performance."

"Does it save enough money to pay for itself?" asks Jim Press, president of Toyota Motor Sales in the U.S. "That's not the idea. What's the true cost of a gallon of gas, if you factor in foreign aid, Middle Eastern wars, and so on? The truth is on our side."

While I agree with Mr. Press about real cost of gasoline, I have a bigger issue. Are hybrid vehicles "inherently uneconomical"?

There is simply no way that you can argue that a Toyota Prius is "inherently uneconomical", even without the current hybrid tax credit, and I'd say that the Honda Civic hybrid is close to this category as well. These vehicles are cost effective and do recover their costs for many drivers, especially those that drive in urban areas.

But let's just run a few simple numbers. In Southern California, where I live, it isn't uncommon to spend $100.00 per week on gasoline. That would add up to $4800.00 per year. Let's say a hybrid saves 20% - even though many save more - on your fuel needs. That would be roughly a $1000.00 per year. In 5 years you've saved $5000.00? What's the problem?

O.K., let's cut that it in half. $50.00 per week, $2500.00 per year and after 5 years you've saved $2500.00. Still not bad, and on the Civic and Prius you've recouped your costs. That's at current gas prices, which could go up significantly in the next 5 years. So, what's wrong with this bet, especially if protecting the environment is an important concern? This isn't treehugger craziness, it's just common sense.

To describe hybrids as simply "inherently uneconomical", is simply "inherently ignorant." Hybrids like the Prius recover their costs, while significantly reducing emissions. You're not losing money to be green. In fact, for many drivers it is a cost benefit to own a Prius.

Yes, cost-effectiveness isn't true for all hybrids, but it will be true for most hybrids in the future based on emerging hybrid technology. Most hybrid buyers understand this investment in the future angle, in addition to the real cost of gasoline and oil dependence.

That's why we shouldn't have capped tax credits for hybrid vehicles. Instead, we simply should have ended the $25,000 + tax deductions for the Detroit's worse gas-guzzlers.

That's "inherently uneconomical" for the welfare of the United States.