Hybrid Sales Aren’t Keeping Automakers Afloat

January auto sales figures show that hybrid cars are just as vulnerable to the downturn as their conventional cousins. Most major automakers reported sharp declines in sales in January, compared to the same period last year. Ford Motor Company reported a 41.6% decline in sales. General Motors' sales were off by 48.5% and Chrysler reported sales that were 54.8% lower than the same period last year. Toyota reported a 31.7% drop in sales figures. Honda's sales dropped by 27.9% and Nissan's sales were off 29.7%. Hyundai and Subaru both reported modest increases in sales.

Average gas prices in January remained below $2 in most parts of the US, reducing consumer drive for hybrid vehicles even farther. Automakers are now increasing buyer incentives to purchase hybrid vehicles, something not seen as late as last summer, when dealer inventories of hybrid vehicles were non-existent. Currently, consumers are seeing average incentives on hybrid vehicles of about $1,000, while average incentives on conventional vehicles are declining. So far, that approach hasn't worked very well. Most manufacturers reported even sharper-than-overall declines in sales of hybrid vehicles during the month of January.

Most of the major automakers have reported steep production cuts and have idled factories in an effort to soak up excess inventory of new vehicles. In addition, the automakers are partnering with banks and credit unions to extend low-interest financing on new car purchases.

One element of the stimulus plan may help. The Senate briefly considered adding a provision that would offer vouchers to car buyers who trade in any vehicle older than 10 years for a newer car that achieves at least 25 mpg, and would have to get at least 5 miles more per gallon than the trade-in. The provision was subject to income limitations of $75,000 and excluded households that owned more than two vehicles. The proposal, originally offered by Sen. Debbie Stabenow of Michigan and Sen. Tom Harkin of Iowa, was pulled amid concerns of the mushrooming bailout bill, now said to exceed $900 billion.

Another proposal still under consideration offers vouchers of up to $4,500 for owners who trade in less fuel-efficient vehicles for ones that achieve substantially better fuel economy. That proposal has come under fire by the UAW, which says that the proposal promotes the sale of foreign vehicles.

Photo Credit: Tracy Apps, via Flickr