Monday, July 03, 2006

Snob Appeal

Last Friday's posting about Ford's canceled hybrid car target generated some interesting comments. They go to the heart of how consumers choose cars, and they raise important questions about whether hybrids are just another car fad, or have the staying power necessary to contribute meaningfully towards improving overall fleet fuel economy.

One reader suggested that the main appeal of the Toyota Prius is social: driving one is seen to be cool and "with it", while the other hybrids that aren't doing so well don't carry that cachet. Rival automakers have made some very different choices in this area. Toyota chose to build its flagship hybrid as an all-new model, available only as a hybrid. If you see a Prius, you know it's a hybrid; if you see a hybrid Honda Accord or Ford Escape, you have to look hard for the badge identifying it as such. Not much potential snob appeal there. But is a hybrid a car or a feature? Even Toyota seems of two minds, pushing the Prius and its "hybrid synergy drive", but also touting the hybrid Camry (to be introduced shortly,) Highlander, and Lexus RX400h and GS450h, all variants of existing conventional models.

And if snob appeal or some form of "early adopter" behavior isn't the main driver, what is? The economics of hybrids are still shaky, though as another reader reminded us, the resale value of Priuses has held up very well. If we want economics to guide us, then we have to look beyond fuel costs and compare cars on their annual cost of ownership, which includes fuel, maintenance, depreciation and insurance. I'm not sure how many folks actually choose cars on that basis, however. If they did, would SUVs have ever become quite so popular?

I have enormous respect for the way Toyota has managed the Prius project, which must be viewed as a success, even though it will probably never turn a profit. However, for hybrids to matter, their future must be as a feature, rather than as the raison d'etre of a car. The jury is still out on whether consumers will adopt it on that basis, as they have things like air conditioning and automatic transmissions in the past.

Energy Outlook will observe Independence Day tomorrow. I wish my American readers a happy Fourth.

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