Declining Hybrid Sales Put Automakers In A Jam

According to a report in the Financial Times, hybrid sales in the month of November fell sharply as consumers reacted to a similarly sharp drop in the price of gasoline. Hybrid sales dropped by more than 53% from the same period in 2007. Overall, auto sales were off 37% for November, when compared to auto sales in November 2007.

US sales of Toyota's Prius were off by nearly 50%. Sales of the Camry hybrid were off by 57% and sales of the Ford Escape were off by 35%. Larger hybrid models suffered significant declines. Sales of the Lexus RX400 SUV are off by two-thirds from the same period one year ago.

Edmunds.com reports that the number of consumers doing research on hybrid vehicles has dropped by 75% from a peak in May. With gas prices at their current levels, the break-even point for many hybrids is stretching into the ten-year range. At this point, car buyers are extremely cost-conscious, and the extra few thousand dollars added to the price tag of a hybrid is driving customers away.

The pronounced lack of consumer interest poses a major problem for the automakers, who have invested significantly in the development and production of hybrid vehicles. Ford just introduced the Fusion Hybrid, which will be assembled in Mexico. The vehicle delivers a best-in-class 40-mpg, but the Blue Oval has not yet put a sticker price on the vehicle.

Last month, Toyota shelved plans to open a brand new assembly facility in Blue Springs, MS. The plant, originally built to produce the Highlander, was refitted to produce the Prius. According to the company, the plant is about 90 percent complete, but will not open on schedule due to the soft demand for vehicles, and there is no current timetable to begin production at that facility.

Also in December, Audi axed its hybrid vehicle program for the Q5, and likely for all hybrids currently in development there. The company cited concerns over the crash performance of nickel-metal-hydride batteries, and the overall efficiency of its developmental hybrid vehicles.

Further complicating the matter, automakers are under legislative pressure to increase the rate at which hybrid models are being introduced, in part to address concerns about high gasoline prices, carbon emissions and the overall fuel economy of the automakers' current fleets. The increased cost of hybrid production and the sharp decrease in consumer demand has put the automakers in the difficult spot of being encouraged to produce expensive vehicles for which there is little consumer demand.

Photo Credit: Lonnie Bradley