Saturday, April 23, 2005

Hybrids & Subsidies

This is an article from the Cato Institute I intended to reference in Hybrids, Once More into the Niche, but mislaid the link. Although several years old, (May, 2001. Wow...pre-Sept 11th. Fire and Ice ages past.)

There are currently two on the “market” (more on that later): Toyota’s four-passenger Prius, a fairly conventional car, and Honda’s two-seater Insight, a futuristic machine from which you expect George Jetson to emerge. Rather than cite somewhat misleading EPA figures, the real fuel economies observed by owners of these vehicles appears to average around 46 miles per gallon for the Prius and 62 mpg for the Insight. Those are big numbers. I’m averaging 68.8 mpg over the 14,000 lifetime miles on my Insight, and I enjoy it immensely.

So where are these cars? I doubt most people can recall seeing one, even though the Insight’s profile is as striking as an old Citroen. You haven’t seen them because there aren’t many being produced. They’re hemorrhaging money for both Toyota and Honda. My best guess is that Honda has already lost about $80 million on the 8,000 Insights it has shipped to the U.S. over the 18 months of its availability. Last spring, the Washington Post estimated Toyota is losing even more—$17,000 per copy—on each Prius.

It is only anecdotal, but I have not seen ads for these cars. And I see lots of cars ads though watch relatively little TV. but the pertinent fact here is the subsidies for these cars. This underlines my previous thoughts about the motives for manufacture: to pull up mile per gallon averages for the fleet and PR. That a subsidized vehicle makes business sense for the former says something both about what people are buying, and either how difficult it is to increase mileage by others means, or how critical to sales the mileage figures are to the buyers. (My technical knowledge is not profound here, but I know decreasing both weight and/or power will give increased miles per gallon. Why are MPG's the Holy Grail?) Sure hybrids are great toys; the Prius is a beauty, until you need 60 2x6's for the new deck. Then what really looks good is a friend with a Dodge Durango diesel pick-up. Because as long as these cars are propped up with a subsidy, they needn't stand on their own merits.

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