Hybrid Demand Sags

Hybrid Demand Sags

It's no secret that the automobile industry is in the tank. Virtually across the board, vehicle manufacturers are reporting steep declines in demand for new vehicles in most markets around the world. Hybrid vehicles, which the manufacturers are being pushed to build, are faring even worse. Hybrid vehicle sales are falling faster than even the overall sales figures, which are off by 50% or more over this time last year.

Now Kelly Blue Book and AutoNation are both saying that demand for used hybrid vehicles is way off, too. The reason: cost. Most hybrid vehicles, even used ones, come with a premium price tag. In most cases, the vehicle manufacturers aren't willing to discount the product too much because they're already priced near their manufacturing costs.

Toyota says that the company makes about $100 per Prius sold, once all of the automakers costs are factored into the deal. The automakers' other option is to sell their hybrid vehicles at a loss, which few manufacturers are willing to do right now. With gasoline prices averaging around $2 per gallon nationally and an exceptionally weak economy, there is little incentive for consumers to spend additional money on a hybrid vehicle.

Ford is hoping that the mileage estimates for its newly introduced Fusion Hybrid will lure consumers back into its showrooms. The vehicle is scheduled to arrive at Ford dealerships beginning this month, and the four-door sedan is priced at about $28,000. At 41 mpg, which is nearly 20 mpg better than the standard Ford Fusion (MSRP $19,270), buyers wouldn't hit the break-even point for nearly eight years under the best circumstances, and assuming that the price of gasoline stayed relatively constant at $4 per gallon. At the current average per-gallon price, the break-even point is a hefty 15 years at the earliest.

Still, automakers are hoping to see an increase in demand for hybrid vehicles as the summer approaches. Gasoline prices typically climb in the summer, due mainly to fuel reformulations required by states and the Federal government once the mercury starts to rise. Toyota says it expects to see a year-over-year increase of about 15 percent in sales of its Prius hybrid. Other automakers are not as optimistic and are building hybrids only when they've been pre-sold by a dealer.

Photo Credit: Ford Motor Co.