Hybrid Cars Summary

Product: The #1 selling hybrid is the Toyota Prius Hybrid. Toyota is already on its third generation of the Prius. The gas/electric Prius hybrid retains its lock on this category for the fifth straight year. Despite lots of new hybrid models, the Toyota Prius’ 44 mpg (overall) is still the best in any five-passenger car. The interior is roomy and versatile, and the Prius has proven to be very reliable. Other Hybrid cars include the Honda Insight Hybrid, Toyota Camry Hybrid; SUV’s include the Ford Escape Hybrid and the Chevrolet Equinox Hybrid.

Luxury SUV’s included the Cadillac Escalade Hybrid and Lexus RX 400h. Current hybrid cars can get up to 60 miles to the gallon on the highway. In addition to fuel economy, they boast lower emissions and depreciation than gasoline-powered cars. Environmentalists embrace hybrid cars as a solution to today’s pollution problems. Despite tough economic times and a shrinking US vehicle market, demand for hybrids continues to outpace the overall market. Price: The 2010 Toyota Hybrid price ranges from $22,800 – $28,070. Toyota sold 271 of its $US38, 000 Prius cars in China last year.

Overall passenger-car sales in the nation totaled 10. 3 million. Hybrid sales; as a percentage of all new car sales—are likely to remain flat from 2008 levels at about 2. 5 percent. But considering the overall car market is shrinking in 2009, the total number of hybrid sales will drop to about 250,000. The Toyota Prius the third-generation version that debuted in January; will continue to be the biggest seller. Compared to the Prius, the Honda Insight Hybrid price is $19,800 – $23,100. And the Toyota Camry hybrid sells for $26,400

Demand for good is elastic: The Toyota Prius Hybrid would be very elastic because we don’t have to buy that brand of car – we have lots of substitutes such as the Honda Insight Hybrid or Ford Escape Hybrid. Determinants of Demand: 1. Substitutes (814,173 Toyota Prius units registered by December 2009) •Conventional cars, public transportation, trains •Only 7 percent of Americans take public transportation to work •Higher gas prices will help hybrid car sales •The 2009 Honda Insight, a compact which emphasizes affordability.

The Honda Insight, billed as the cheapest gasoline-electric hybrid on the market, ranked as the top-selling vehicle in Japan for April 2009 2. Overseas Markets: The Prius first went on sale in Japan in 1997, making it the first mass-produced hybrid vehicle. It was subsequently introduced worldwide in 2001. The Prius is sold in more than 40 countries and regions, with its largest markets being those of Japan and North America. In May 2008, global cumulative Prius sales reached the milestone 1 million vehicle mark, and by early 2010, the Prius reached worldwide cumulative sales of 1. 6 million units.

As the global top seller market, the U. S. made up more than half the Prius sold worldwide, with 814,173 units registered by December 2009. In Japan, it is reported that Toyota cut the price of Prius from 2. 331 million yen to 2. 05 million yen to compete with Honda Insight. Toyota’s goal is to sell about 400,000 units annually around the globe and 180,000 units in the U. S. by 2010. 3. Income: Hybrid drivers have higher income, much higher than the average car buyer. In 2004, J. D. Power reported that hybrid owner incomes are $100,000 a year versus $85,000 a year for the average buyer.

In a 2007 survey of 118 Prius drivers by Topline Strategy Group, 71 percent of respondents earned more than $100,000 per year. 4. Demographics: Hybrid drivers are a few years older than the average car buyer—closer to 50 rather than the average age of 40. J. D. Power’s 2007 review of auto industry marketing showed that only 2 percent of hybrid owners are 24 or younger; while 29 percent are between 45 and 54; and 33 percent are 55 and older. The 2007 Scarborough Research pegged the number of age 50+ hybrid drivers at 23 percent.

5. Consumer Preference: demand and gas prices for the most popular hybrid and best-known fuel-efficient compact car, the only U. S. model to exclusively offer every trim as a hybrid: the Toyota Prius. Prius leads the compact car segment in share of segment interest. The compact car segment has grown from 26% of the market in July of 2007 (peak summer gas prices) to over 33% today. 6. Convenience: Efficiency – Hybrid cars are electrically operated and are thus able to function well and consistently at any motor speed.

This is in contrast to conventional gas-powered engines, which tend to produce less power in low revolutions per minute episodes. Hybrid cars do not need to use transmissions to make their engines run at full capacity even at reduced speeds. Economy – One of the advantages of hybrid cars is that the feature called “regenerative braking”. Since a hybrid car works using both electric power and fuel power, each can function by itself or conjunction, depending on which is stronger at the time of use.

This means that both engines complement each other and do not simply bog one when one of them becomes weaker. Convenience – Because hybrid cars are part battery powered, they do not create huge holes on the pocket, compares to users of traditional cars who feel the pain of the continuing oil price increases. Determinants of Supply: 1. Resource Prices: In 2008, when oil hit $147 a barrel and the price of gasoline exceeded $4 a gallon, US buyers made a massive shift away from large SUVs to small fuel-efficient cars and hybrids.

But US consumers returned to larger vehicles, and driving more miles, when prices dropped. The return of triple-digit oil prices is expected to bring renewed interest in the most fuel-efficient vehicles on the market, such as hybrids and plug-in vehicles expected in late 2010. The percentage of hybrids COMPARED to auto sales is seen in the graph below. 2. Technological Changes: The varieties of hybrid electric designs can be differentiated by the structure of the hybrid vehicle drivetrain, the fuel type, and the mode of operation.

In 2007, several automobile manufacturers announced that future vehicles will use aspects of hybrid electric technology to reduce fuel consumption without the use of the hybrid drivetrain. Regenerative braking can be used to recapture energy and stored to power electrical accessories, such as air conditioning. Shutting down the engine at idle can also be used to reduce fuel consumption and reduce emissions without the addition of a hybrid drivetrain. In both cases, some of the advantages of hybrid electric technology are gained while additional cost and weight may be limited to the addition of larger batteries and starter motors.

3. Labor Costs: Most experts agree a replacement hybrid car battery can range anywhere from $1,000 to more than $6,000, depending on the year and model of car, and without including dealership or independent labor costs. While this may seem like a big expense, car makers are set on reducing prices. Basically, car manufacturers want their products to succeed. Failures in performance hinder that success, so most hybrid car batteries are designed to last the lifetime of the automobile.

The state of charge, temperature and longevity in each battery are carefully managed by automakers who know full well that any setback could throw a wrench into the growth of the still relatively nascent hybrid market. 4. Producer Expectations: Toyota Motor Corp. will invest in two U. S. plants to keep up with the growing demand for its eco-friendly stalwart. This is a major step for Toyota’s overall goal to reach 1 million hybrid vehicles annually for the global marketplace. It aims to hit this number within the next five to seven years. Honda has also ramped up its green car plans with an affordable small hybrid expected for next year.

The carmaker forecasts annual global sales in the 200,000 unit range, with half of those sales coming from the United States. Honda is striving to elevate its total global hybrid output number to 500,000, a significant boost over the 55,000 cars it produced in 2007. If-Then 1. If the price of gasoline increases then the demand of hybrid cars will increase 2. If the Toyota Prius Hybrid remains at #1, then other Hybrid automakers like Honda and Ford will have a decrease in Hybrid sales. 3. If the price of Hybrid cars increases, the demand will decrease. 4. If U. S income increases, Hybrid sales may increase for better fuel efficiency.

Elasticity Estimates: 1. As demand increases for hybrid cars, the technology should become more affordable, especially for subsequent model years. While it is unlikely that prices will decrease dramatically, prices probably will not increase either, as the cars will become more efficient to build. This will, in the long run, lead to more affordable hybrid cars. In the end, affordable hybrid vehicles could provide a big boost to the ailing automobile industry. 2. Higher production volumes may lead to lower hybrid vehicle costs and prices. Every little bit of supply will be needed with hybrids becoming hot sellers.

In the past automakers had limited supply with the increase of demand, but since there are so many automakers who make hybrids, supply is no longer an issue. It is much easier now to find the Toyota Prius versus in 2007. Supply and Demand Curves Incomes increase The price of gasoline decreases The graph below demonstrates the Hybrid market, car market, petrol market and the oil market. Market Structure: The automobile industry in the United States is an oligopoly because only six firms (General Motors, Ford, Chrysler, Honda, Toyota, and Nissan) account for almost 90% of U.

S. Automobile sales. Barriers to Entry: The recent economic crisis has provided an impetus to a massive structural change in the auto industry, setting the stage for growth over the next decade. Given the high barriers to entry and the need for scale economies, the global auto industry landscape is expected to be ruled by global automakers and suppliers based in the six major auto markets – China, India, Japan, Korea, Western Europe and the U. S. Foreign Competition: In the world of hybrid cars, there is Toyota and everybody else when it comes to sales.

Toyota sold 195,545 hybrids in the US in 2009, largely led by 139,682 Prius hybrid sales. Still, even without the Prius, Toyota still sold significantly more hybrids than did either Ford or Honda. The Toyota Prius II hybrid has the highest fuel economy of any comparable hybrid model. The Toyota Prius II hybrid gets 51 miles per gallon in the city and 48 miles per gallon on the highway. This far exceeds its competition, the Honda Insight, which gets 40/43 miles per gallon city and highway, and the Honda Civic hybrid, which gets 40/45 city and highway.

The MSRP for the Toyota Prius II is $23,150, which is about a little more than $2,000 higher than the Honda Insight but about $1,000 lower than the Honda Civic hybrid. Government: The purchase of hybrid electric cars qualifies for a federal income tax credit up to $3,150 on the purchaser’s Federal income taxes. The tax credit is to be phased out two calendar quarters after the manufacturer reaches 60,000 new cars sold in the following manner: it will be reduced to 50% ($1700) if delivered in either the third or fourth quarter after the threshold is reached, to 25% ($850) in the fifth and sixth quarters, and 0% thereafter.

Hybrid Tax Credit (bill): AB 174/SB 90 would create an income and franchise tax credit of up to $1,000 for the amount of sales and use tax paid on the purchase or lease of a hybrid vehicle that has an EPA rating of at least 40 mpg or an EPA rating that is at least 15 percent greater than the same non-hybrid model. The credit may be claimed for sales and use tax paid during the 2007 to 2011 taxable years. The senate bill would extend the credit to the purchase or lease of flex-fuel vehicles that are E85 capable.

Introduced and referred to committee 03/12/07. Failed to pass before the end of the legislative session. Sources: http://online. wsj. com/mdc/public/page/2_3022-autosales. html#autosalesD http://en. wikipedia. org/wiki/Toyota_Prius http://www. hybridcars. com/hybrid-drivers/profile-of-hybrid-drivers. html http://www. hybridcars. com/frontpage http://www. hybrid-car. org/ http://go. ucsusa. org/hybridcenter/incentives. cfm#WI http://en. wikipedia. org/wiki/Hybrid_tax_credit http://en. wikipedia. org/wiki/Hybrid_electric_vehicle