Monday, May 03, 2004

Fast Lane for Hybrids
This recent article from the San Francisco Chronicle does an excellent job of cataloging the motivations of those who buy hybrid cars, which are becoming especially popular in the Bay Area.

It also highlights the apparent economic inconsistencies that some of these buyers display. Hybrids such as Toyota's Prius and Honda's Insight claim fuel economy in excess of 50 miles per gallon. But even at current high gasoline prices, this will only generate about $300-400 dollars per year of savings, when compared to comparable vehicles, such as the standard Honda Accord. (EPA ratings of 24 city/34 highway). This is not enough to compensate for the $3500 difference in the prices of the two cars, even after factoring in the Federal tax incentives that are being phased out.

So for those who claim to be buying these cars for economic reasons, something else must be at work, too. Among the other reasons cited in the article were environmental concern and the way these cars have attained critical mass in the local market. At one Toyota dealership mentioned in the article, hybrids account for over 20% of total sales. Other factors include a sort of techno-cool image related to higher incomes (and perhaps to the proximity of Silicon Valley.)

It's interesting that a new vehicle type that wasn't technically possible a few years ago is taking off now, with relatively little fanfare. Some experts have even suggested that while public attention is focused on the potential of fuel cell cars in the future, hybrids are the revolution that is here today.

The article provides hints at the kind of things that might make hybrids take off in a much bigger way, including the potential for carpool lane treatment. Having driven in rush hour in the Bay Area many times, the latter could be a powerful motivator, even though it's not yet law. Among issues not mentioned are possible future increases in federally mandated corporate average fuel economy standards and state-by-state legislation under consideration to limit greenhouse gas emission. If the mainstream projections of J.D. Power are for 1 million hybrids in 10 years, what is the upside case, were these other issue to become more prominent?

The beauty of hybrids is that they are completely compatible with current infrastructure, including both fueling and repair networks. With low barriers and solid benefits, we could be at the very early stages of a classic s-curve takeoff.

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