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Toyota: No Financial Justification in US for Buying Hybrids

16 June 2005

Financial Times. Toyota executives acknowledge that because of the still relatively low price of gasoline in the US, there is currently no financial incentive to purchase hybrids.

Kazuo Okamoto, who takes over as head of research and development at Toyota next month, said the extra costs of hybrid cars more than wiped out any financial gains of lower fuel consumption. Buyers in the US would have to want to help the environment, not just save money. In Japan and Europe, the extra costs were approximately balanced by fuel savings.

Toyota had set a target of reducing the extra cost of the hybrid to a level where it could compete on value with ordinary cars by 2010 at the current US petrol price of just over $2 a gallon, he said.

“The major barrier to wider acceptance is cost,” he said during a visit to Europe.

“When you just use the argument of fuel efficiency, the purchase of a hybrid car is not justified. But this car has other interests, for instance environmental protection.”

Another Toyota executive was more blunt in his analysis: “Buying a hybrid is about political correctness, it is not about the money,” he said.

Nonetheless, Toyota is targeting selling 1 million hybrids in 2010, even with gasoline prices at their current levels. (Increases in gasoline prices could, of course, accelerate that.)

The FT reports separately on the focus Toyota is putting on cost reduction in order to hit that figure of 1 million hybrids.

June 16, 2005 in Hybrids | Permalink | Comments (11) | TrackBack (6)

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Comments

There is another reason to buy a hybrid today:  future-proofing against fuel prices and sliding resale values.

(What happened to the "driving on fumes" post?)

re: fumes. Removed until I can repost coherently. :-)

So why are they selling out months ahead of time?

Perhaps it's the cool factor?

I guess these guys won't be recruited by the marketing department :)

Just like any capitalist they ignore anything that can't be put in terms of dollars and cents. What about having a cool car? What about limiting the amount of money going to prop up oppressive regimes? What about furthering the energy independence of your home country? What about protecting the environment? None of those things can easily be put into an equation and figured out, but they do factor into the purchase of a hybrid vehicle.

^ Relax guys, that's exactly Toyota's point. Include those factors, and the Prius is a great deal. Additionally, I'm not so sure their analysis is correct in all cases:
* travelling salesmen types
* some states (plus Fed) offer tax rebates
* some cities (New Haven, CT and a few in CA IIRC) offer free city parking for the Prius. This is a big perk.
* some regions (Northern VA, etc) allow hybrid drivers to use HOV lanes. This is also a big perk.

So -- it you drive 40 miles a week and live in Nebraska, its about external issues. However, if you drive quite a bit in traffic and HOV lanes add value, or if you drive many many miles, or if you really like access to free city parking, than the hybrid might make sense before considering the externalities. Furthermore, as somebody mentioned above, if you only buy a new car every 10 years or so and want to defend against high fuel prices, the Prius is a way to do that, too.

I'll say it again - hybrids are being panned by financial institutions and powerful interests, because their potential is a threat. Once the plug-in hybrid technology is perfected, the average motorist can avoid the gas station altogether by driving less, limiting their motoring trips by patronizing local businesses rather than the Walmart Superstore and big box outlets, the gala venues on the far side of the freeways; by instituting their workplaces, occupation and other services in less distant locations. The Financial Times has a vested interest in maintaining car-dependency and exploiting automaton motorists. "Shut up, pay up and drive, now".

I don't understand why anyone would think that the FT would wish for the status quo.  Given inelastic demand, high oil prices can easily induce recession.

If we suddenly found a way to eliminate half of our transport fuel consumption (35% of the total, more than half of US imports) it would have an economic effect like $15 oil did during the Asian financial crisis.  All that money would stay at home, and would be chasing other goods and services or stocks.  It would create a boom.

The only way that makes sense is if people's interests are tied to the oil industry alone, and I'm sure FT is far more diversified than that (though the Bush administration is not).

This paper on sustainable consumption covers a lot of ground, but it has good stuff, both on the relation between consumption and happiness, and the "social motivations" for consumption. It's from an online journal which has been referenced on several of our blogs:

pdf article here

I mention it, to respond to the phrase "Buying a hybrid is about political correctness, it is not about the money,"

I think that is a very one-dimensional measure of non-financial motivations. In my mind, "correctness" is about a fear of censure by our peers. It is much more complex than that. See the pdf. (and I don't know of any sub cultures which at this point demand hybrids for correctness)

E-P is right RE economics: the economy would undergo a natural expansion if fuel efficiencies increased by a large margin for little cost, and it wouldn't really hurt energy companies as badly as some folks believe. After all, there's much more to the energy business than petrol for our automobiles.

For the life of me, I don't understand why in Dec 2000 (or Dec 2004) the President and GOP leaders in Congress didn't go to GM and Ford with a secret proposal: GM & Ford make a bunch of weak-hybrids, to be used for government consumption such as police cars, USPS, etc as well as regulated industry vehicles (such as taxis) and promised to buy $texas hybrid cars from Ford and $texas hybrid cars from GM 3.5 years later at premium prices -- or instead buy some from Toyota.

It would be a boon for the US auto industry, which is facing hard times. It would be a boon for energy efficiency, which would be good for the US economy in the short term and position the US to consume less gasoline in the long term. It would help keep gas prices low, which Americans love. And, it would be paid for out of general taxation, which isn't so bad.


$texas == a freaking lot

I would say that income isn’ t really passive if you have to work at it constantly, even if it’ s considerably less work than a part time job. You definitely do need to put a lot of effort in up front to set up a passive income stream. I still receive (small and diminishing!) royalty checks from a book I wrote 7 years ago. If I sold a piece of software through my website, then it might continue to generate sales (and income) for me long after I stopped updating the site and running advertising campaigns.

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