$8.00 gas - The key to mass plug-in adoption?
VW's Up electric carMost Americans are not willing to pay much extra for improved fuel economy, especially when gas prices are below $3.00 per gallon. Even at $4.00 or $5.00, most Americans would rather downsize a bit than convert to hybrids. Despite the long term savings on gasoline, most Americans simply avoid hybrid cars because of the extra upfront costs.
And this dilemma could be worse for plug-in hybrids and EVs.
"It's going to be very difficult, unless you have $8-a-gallon gasoline, for any normal consumer to look at a Volt or a Nissan Leaf," John O'Dell, the senior editor of Edmunds' Green Car Advisor, recently told Forbes.
Yet, ironically, some studies have suggested that once gas starts rising far above $5.00 a gallon, Americans start thinking a little less about fuel efficiency, and a little more about paying as little as possible for a new vehicle to offset the increased costs of energy - which affect more than just transportation. So, if gas prices rise too high, interest in plug-ins could actually be stymied rather than increased.
Inevitably, despite the long term value of hybrids and EVs, most Americans are simply not willing to pay more up front to save more in the long term. Are gas prices the only thing that can change this mentality?
Labels: electric cars, gas prices, Hybrid Vehicles, plug-in hybrid vehicles
posted by Dahcredyns at
9:00 AM
12 Comments:
If it all boils down to cost, how about cheaper hybrids and EVs made in China?
That's what BYD seems to have in mind.
Most Americans live month to month and have a car payment. With that in mind...
If the monthly cost of the car payment, plus the monthly cost of gasoline becomes cheaper for a hybrid than for a traditional vehicle, people will choose the hybrid option.
Example:
My Honda Civic Hybrid saves me about 10 gallons of gas per month compared to a regular Honda Civic. At $3.00 per gallon that equals $30 per month in gas savings. That equates to an extra $1500 on a 60 month car loan, while keeping your total monthly expenses the same. That's still not enough to cover the extra cost of the hybrid option.
At $4.00/gallon I save $40 which equals about $2000 more on a car payment. At $6.00/gallon I save $60 which equals $3000 more on car payment. At $8.00 I save $80 which equals $4000.
So for a Honda Civic, the break-even point for total monthly expenses is somewhere between $4.00 & $6.00 per gallon. At $8.00 a person is definitely saving money.
Using this example, the $8.00 estimate looks pretty accurate.
Now with other vehicles, the base model may not be as fuel efficient as a Honda Civic, resulting in more than 10 gallons of savings per month from the hybrid option. For those vehicles the break-even point may be even lower......
It's just crazy to think about the idea of $8.00 gas, yet I wouldn't be surprised to see numbers like that, even if just temporary, within the next decade, minimally. In fact, I'd bet we touch $6.00 or $7.00, at least in places like California, within the next 5 years.
And that's the whole problem with hybrid cars and plug-ins. They don't make a strong economic case, particularly if you think month-to-month, as do most US consumers.
But that's because we can't envision $6.00 gas. It's too unreal, yet it's coming far faster than most consumers are prepared, I believe. Far faster.
A few years from now a lot of consumers will be saying, "I shoulda bought a hybrid", and a lot of automakers will be saying, "We shoulda built more hybrids".
The other side of the economic model is the cost of the hybrid. If automakers are able to reduce the manufacturing costs over time, it will bring the break-even point a lot lower.
Maybe the economics will change to the point where the break-even number is only $4.00 per gallon.
sorry.. they have $6 and $7 gasoline in Europe and I've seen no ramp up in hybrids.
What happens is people buy cheap, few-efficient conventional vehicles... smaller...
how this.. I know some of you guys are pretty good with data..
how about coming up with a charge of gasoline price verses hybrid sales....
I still think if gasoline goes to 6, 7, $8 and TaTa is selling a 15K car that gets 35mph.. it's got to be a fierce competitor to any/all hybrids including it's own version if that model is $2-3K more.
thoughts?
Nice review.
This post has been removed by the author.
Larry,
In Europe, they have altered the tax rates so that Diesel and CNG cost significantly less than gasoline. As a result, you can get the same fuel cost savings from buying a diesel vehicle that you can from buying a hybrid and at a much lower vehicle cost.
This is the main reason why hybrids have not taken off yet in Europe yet despite having $6 & $7 gasline prices.
It could be that in Europe, hybrids came along after the prices went up and they never developed a hybrid "culture" but (there's always a "but", eh?) folks who are not well off with extra money are probably going to go for the low cost econobox and if among those choices is also a low cost hybrid then it will be a competitor but I still think we have folks over here that equate a hybrid with a mentality that we can "buy green".
In other words, you can be "green" if you buy "green" which means you are willing to kick a couple extra thousand into the deal so you can be "green".
When we have folks in this country that see the hybrid as THE low-cost econo-box - those cars (that are competitive in price) will go mainstream.
so I'll leave folks with my customer question...
what the heck is a Yarus in the general scheme of things - especially relative to a Prius?
what happens to Prius when/if the Yarus goes hybrid if it stays under 20K?
does anyone here remember the Toyota Echo? Can you tell me what this car was supposed to be?
thanks!
It could be that in Europe, hybrids came along after the prices went up and they never developed a hybrid "culture" but (there's always a "but", eh?) folks who are not well off with extra money are probably going to go for the low cost econobox and if among those choices is also a low cost hybrid then it will be a competitor but I still think we have folks over here that equate a hybrid with a mentality that we can "buy green".
In other words, you can be "green" if you buy "green" which means you are willing to kick a couple extra thousand into the deal so you can be "green".
When we have folks in this country that see the hybrid as THE low-cost econo-box - those cars (that are competitive in price) will go mainstream.
so I'll leave folks with my customer question...
what the heck is a Yarus in the general scheme of things - especially relative to a Prius?
what happens to Prius when/if the Yarus goes hybrid if it stays under 20K?
does anyone here remember the Toyota Echo? Can you tell me what this car was supposed to be?
thanks!
Smurf gives a great breakdown on the cost incentive, however, one or two things everyone has forgotten are these:
1) If the price of gasoline goes up to $4.00+ a gallon, hybrid car dealers start requesting higher prices for you to purchase (has and will be done again), thereby increasing your "break even" threshold.
2) If the price of gasoline increases well over $4.00 a gallon the economy will go in the toilet even further than it is and your normal "wanna own a hybrid" customer, like myself, will not have a job, or if working, have enough free money to afford the extra cost of a hybrid. Remember when the price of oil and gasoline increase, so does the cost of everything made or transported with the use of these products...food, plastics, steel, tires. Yes everything goes up but the wages to account for the inflation! So what you have is a Catch 22. And not a good one for the consumer.
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