This article is fantastic. I am kind of shocked that the LA Times would print it. It does a good job of illustrating why the government shouldn't be involved in the car business. The industry has sank billions of dollars into developing cars that no one is going to buy. What happens when automakers build this overpriced junk to meet government standards for fleet fuel economy and no one is there to buy it. That is the important part of the equation that the fools in Washington seem to miss...people don't HAVE to buy this shit.
Hybrid car sales go from 60 to 0 at breakneck speed
The gas-electric vehicles are piling up on dealers' lots as anxiety over gasoline prices evaporates. But more hybrid models are on the way.
By Ken Bensinger
March 17, 2009
The Ford and Honda hybrids due out this month are among dozens planned for the coming years as automakers try to meet new fuel-efficiency standards and please politicians overseeing the industry's multibillion-dollar bailout.
Unfortunately for the automakers, hybrids are a tough sell these days.
Americans have cut back on buying vehicles of all types as the economy continues its slide. But the slowdown has been particularly brutal for hybrids, which use electricity and gasoline as power sources. They were the industry's darling just last summer, but sales have collapsed as consumers refuse to pay a premium for a fuel-efficient vehicle now that the average price of a gallon of gasoline nationally has slipped below $2.
"When gas prices came down, the priority of buying a hybrid fell off quite quickly," said Wes Brown, a partner at Los Angeles-based market research firm Iceology. "Yet even as consumer interest declined, the manufacturers have continued to pump them out."
Last month, only 15,144 hybrids sold nationwide, down almost two-thirds from April, when the segment's sales peaked and gas averaged $3.57 a gallon. That's far larger than the drop in industry sales for the period and scarcely a better showing than January, when hybrid sales were at their lowest since early 2005.
In July, U.S. Toyota dealers didn't have enough Prius models in stock to last two days, and many were charging thousands of dollars above sticker price for the few they had.
Today there are about 80 days' worth on hand, and dealers are working much harder -- even with the help of $500 factory rebates -- to move the egg-shaped gas-savers off lots from Santa Monica to Miami.
This month, Honda is offering $2,000 in cash, financing and leasing incentives to buyers of the formerly sold-out Civic hybrid, while a dealer in northern Michigan is dangling $6,000 cash back to those willing to buy a hulking Chevy Tahoe hybrid.
Yet automakers believe they have little choice but to make more hybrids. Though car buyers are losing interest, politicians are pushing them as key to reducing U.S. dependence on foreign oil and limiting the global-warming gases that cars emit into the atmosphere.
In January, President Obama called on the industry to "thrive by building the cars of tomorrow" and prepare for federal and state regulations that could push average fuel economy above 40 miles per gallon by 2020.
"The automakers are in the situation of needing to pacify politicians that are in the position to bail them out with expensive fuel-efficient cars," said Rebecca Lindland, auto analyst with IHS Global Insight. "But shouldn't it be more about satisfying the needs of the American consumer?"
Dubbed the Prius-fighter because of its similar looks and performance, the new Honda Insight hybrid is set to arrive on dealer lots in the next few weeks. Next year, the Japanese automaker will make a sporty hybrid coupe. Hyundai and Audi will deliver their first hybrids in 2010, and Toyota has a redesigned Prius and a new Lexus hybrid coming this spring. Toyota said Friday that it would make a subcompact hybrid priced below $20,000 in 2011.
The biggest push is coming from Detroit. Ford plans to follow its new 41-mile-per-gallon Fusion and Mercury Milan hybrids with a battery-powered van in 2010 and a "family" of hybrids by 2012. And last month, in their request to the Obama administration for $21.6 billion in additional bailout cash, both General Motors and Chrysler announced a hybrid onslaught.
Chrysler promised eight new hybrids or electric vehicles by 2015, and GM, which already sells eight hybrids, said 26 of the 33 cars it sells in 2015 won't run on gas alone, including the Chevrolet Volt, a plug-in hybrid due out next year.
The hybrid flood marks a lasting commitment to a powertrain technology that currently represents only about 2% of U.S. vehicle sales and, by most accounts, is deeply unprofitable.
Toyota said last year that it was finally making money on the Prius after nearly a decade producing it, but executives at other automakers acknowledge that they lose money on every hybrid sold. "If we were making money on the Civic hybrid, we weren't making a lot," Honda spokesman Chris Martin said.
That may help explain why fewer than 2 of every 100 Chevy Malibus sold last month had the hybrid powertrain and why Ford priced its new hybrid Fusion, which dealers expect to start receiving this month, $8,000 above the gasoline-only version.
Ford expects to produce about 20,000 Fusion and Milan hybrids this year, or about 1% of its total production.
"It's a tough time to bring out almost any product right now," said George Pipas, the company's chief sales analyst. "But getting hybrids out right now is as much about image as anything else."
In November, months before Honda even announced the price of its new Insight, Jim Johnson of Eagan, Minn., plunked down a $500 deposit for one.
"I asked to be on the waiting list, and the salesman said he didn't have one," said Johnson, who works in investments. "So I said, 'OK, I want you to start a waiting list.' "
As evident on the streets of cities such as Los Angeles and San Francisco, hybrids have an almost cult-like following, but getting the masses to buy them with any consistency is another matter. In their zeal to meet what seemed an insatiable appetite for hybrids in the middle of last year, carmakers may have gone too far, said IHS Global Insight's Lindland.
At the end of June, AutoNation, the country's largest chain of new-car dealerships, had only a two-day supply of Honda Civic hybrids and a 14-day supply of the non-hybrid Civic. By year's end, the picture had flipped, with AutoNation holding 107 days' worth of regular Civics, compared with 148 days' stock of the hybrid version.
In December, Toyota terminated plans to build the Prius in a $1.3-billion plant it had built in Mississippi, and Chrysler closed its only hybrid-producing factory.
"The price of gasoline dictates what people buy," AutoNation Chief Executive Mike Jackson said. "Gas fell to $2, and now my lots are filled up with fuel-efficient cars that aren't moving."
Consumers who do buy these days tend to focus more on present-day arithmetic than long-term commodity speculation.
Three weeks ago, Jerome Haig, a lawyer in Torrance, put down a $500 deposit on a Fusion hybrid, even though he hasn't even test-driven one because they have yet to hit lots. "I do like the idea of getting a hybrid," Haig said.
But he concedes that he might not have considered the car had it not been for a $3,400 tax credit on Ford hybrids and a deduction on new-car sales tax. The latter was part of the $787-billion federal stimulus package. "The tax advantages are a pretty big incentive."
A sales-tax deduction does little to move vehicles like the $74,085 Cadillac Escalade hybrid or the Lexus LS600h, which starts at $105,885. Neither gets better than 21 mpg, and buyers pay a premium over similar gasoline-only vehicles that would take decades for owners to equal in fuel savings even if gas hit $5 a gallon. So far this year, only 415 of the pair have sold nationwide.
Still, some consumers see the depressed hybrid market as a buying opportunity.
Chad Gallagher, a lawyer in Berkeley, took advantage of a Presidents Day promotion, plus a healthy measure of dealer desperation, to buy a fully loaded Prius last month for $5,000 under sticker price.
"We got the touring package, leather seats, navigation, Bluetooth, everything," Gallagher said.
"I think they were just happy to sell the thing."