The Green Car revolution is dying...and taking US car manufacturers with it

Was reading an article today showing that the demand for hybrids is pretty well dying in the US…and at a time when the Big Three manufacturers have whole new lines of hybrids and high mileage or alternative fuel vehicles coming to the market. Toyota and Honda are reporting the same things.

Some of this undoubtedly has to do with the fact that no cars are selling very well. Also, hybrids are more expensive. And the price of oil has dropped through the floor and doesn’t really show signs of rising up again any time soon. Both China and India have cut imports fairly dramatically as they go through financial problems of their own. Demand is down in the US and in Europe too (IIRC). At this point it seems unlikely that demand is going to rise again to what it was a year ago, at least not any time soon…which means the price of oil is probably going to stay fairly low for some time to come. What does this bode for the future of greener cars, especially hybrids? If the Big Three get soaked on this because no one is buying their cars, if Toyota and Honda also get soaked as they ramped up production on cars that aren’t selling now, how will this effect the future of green cars?

How are they selling in Europe and Japan these days btw? How are any cars selling there? What about in China?

-XT

I wouldn’t take this as evidence that the revolution is dying, only that people who are paying $ 15000 for a Camry like my Uncle did are amoritizing the cost while accounting for the current price at the pump.

The price of oil is volatile. I wouldn’t make any predictions about how long it will stay at a particular price.

If you can afford a car, now is the time to buy one.

If GM, for instance, brings out a new line of hybrids but only sells a few of them, how likely would they be to continue making the things…or to start producing them again once people start buying again?

As for the price of oil, while I agree that it’s volatile I don’t see the demand shooting back up again soon, even though several oil producing nations are cutting back production. YMMV…so to speak.

-XT

It is actually surprising that they are not being hurt more than they are. Some context.

And hybrids are, for the year, a record 2.4% of all light duty vehicles sold. But indeed October through December was brutal, as gas prices fell dramatically, few could afford the hybrid premium, and many are deciding to wait for the newer generations to be released.

I know that sales of all cars are down in the EU too but I cannot find numbers specific for hybrids for there or Asia.

Oil will not always be this low , it will go back up. It would be short sighted to think that because it is low now you should buy a Hummer. Besides it is wasteful and people are more aware of money wasting now.

Sure, but a couple of things. First off, we aren’t talking Hummers here exactly…people are buying cheaper cars instead of more expensive hybrids (when they are buying any cars at all of course). So…your statement is pure hyperbole and also a strawman (a twofer for you gonzo…congrats). Secondly WHEN will the price of oil go back up…and how high will it go? If it takes 6 months or 9 months then what will happen?

That’s the question.

-XT

Again, your premise is faulty. The market share of hybrids went up for the year, not down, even counting for a bad last quarter.

How fast will oil go back up? Obviously no one knows but few expect that it will stay too low for too long. What we do know is that oil prices have shown themselves to be extremely volitile and extremely sensitive to marginal changes in demand.

How much will various governments find keepiing that demand low enough that prices stay on the lower side is in their best interests? How much will they subsidize the cost of the purchase of hybrids/PHEVs/EREVs/BEVs etc.? Big unknowns.

If they subsidize then it helps keep demand for oil from increasing much as the economy recovers and pent-up demand for auto purchases are acted upon. If they do not then as the economy recovers then demand likely goes up as well. If the economy never recovers, well then we are all screwed aren’t we?

The price of oil has certainly dropped from its peak but to say that it’s gone through the floor is simply not true.

The current price is somewhere between $30-$40 a barrel…down from a high of aprox. $140 a barrel less than a year ago. I’d say that qualifies as dropping through the floor. YMMV of course.

-XT

That’s not my premise so I’m not sure what you are getting at. I’m not question that hybrid sales are up for the year…or even that they have steadily risen for the past several years. However, auto manufacturers were gearing up for a massive increase and that is certainly not going to happen now. It’s possible that sales for 2009 will be flat or even decrease as well…we don’t know yet. But they won’t be a massive increase which means that companies who were bringing new hybrids to market will probably not sell them all, nor will companies who ramped up to produce more of existing models meet their own sales goals…which will have an impact on the industry.

-XT

I agree with most of your points, save one, the price of oil not going back up. Auto manufacturers have made some big plans for hy-brids, and I can only imagine that this will cost them in the short run. Even though the price of oil has dropped I believe that with the cuts by OPEC and the catching up of demand with supply it will level out. I don’t think for a second it will happen overnight, but the 4.00 a gallon price tag won’t be soon forgotten by consumers and once it starts heading back up, hy-brids will seem like a better choice.

Whether the big three will survive, only time will tell. I do know that if cars don’t get sold, their will be buttload of people in the shit, up to and including people who already own cars. It’s a 20,000 dollar paperwieght if it doesn’t run.

I’m not saying the price of oil isn’t going to rise. I’m pretty confident it will rise again eventually. Assuming the dollar continues to strengthen though it will only rise so high and probably not all that fast, even with production cuts by OPEC. India and China have cut their own demand and are unlikely to ramp it back up any time soon either.

Even if the price of oil does rise again (as well as the price of refined fuel) that’s only part of the problem for the car manufacturers and hybrids…the other parts are credit and recession. Taken all together I think there will be a big impact on green type cars as people go for cheap or decide to make due with what they have.

-XT

A new generation of cars is an inevitability, whether it is hybrid gas/electric or not remains to be seen, but it’s still an inevitability.

Irrelevant, there is an economic downturn, the next upturn where China and India experience more growth, they’ll be buying more cars and there will be a massive market for it. Right now people are not buying new cars generally, and that’s just the bottom line.

Are there hybrids sitting on the lot, or is this a supply issue?

Relevant editorial cartoon on the subject

Sorry, I read

and somehow believed that you meant the demand for hybrids was, well, dying. Silly me.

In terms of the prospects for the new vehicles in the pipeline, due to be released in smallish numbers in late 2010 and gradually increasing over the next several years. (These are the vehicles that you mean when you mention the “new hybrids”, yes?) - the issue for them will be the total cost of ownership comparison between these new vehicles and other vehicles. Factored into that is the price of gas (which very few experts or amateurs expect to do anything than return to moderately high levels by then, but hey, predicting oil prices is a dark art that most fail at, so who knows?), the cost of the technology (which will have some premium to be sure), and the tax incentives (likely to be substantial).

Without question, if gas prices stay at this level for the next two or so years then the new hybrids will have a hard time being the car of choice for many. The successful uptake of these vehicles is indeed predicated upon moderately high gas prices or higher. But pretty much the only way that is going to happen is if the world’s economy stays in the bottom of the toilet for the next two plus years. And if that happens the market for hybrids is the least of our problems. OTOH if the world’s economies recover significantly by then, especially if it does with infrastructure investments (which use up petroleum), then prices will very likely come back up with some rapidity.

It’s not irrelevant if it causes manufacturers to either go out of business or to rethink manufacturing hybrids. That’s pretty much what we are debating here after all…WILL it cause such an effect? I don’t know…if I did know I wouldn’t have asked the question.

It’s true that people aren’t buying cars right now in large quantities. It’s true that there are a variety of reasons for this that have nothing to do with hybrids being priced higher than conventional cars of the same feature set. However, if people spend this entire year buying cars based mostly on price (or simply don’t buy any cars at all and wait) then this my have a significant impact on the direction of US (and other countries) auto manufacturing companies.

Let’s say, for instance, that you are right…that India and China do experience more growth later in the year and that they start ramping up their demand again for oil. And that this in turn causes the price of oil to go up as well. I don’t THINK it will happen this year, but let’s say it does (my powers of prediction are pretty poor after all). Will this magically cause people to buy more hybrid cars in the current economic environment? I doubt it unless things turn around fairly quickly (most recessions last at least 18 months and this seems to be a pretty nasty one). If people decide to go with conventional IC cars that get better gas mileage but are cheaper than hybrids what effect might this have on manufacturers? After all it takes a not insignificant amount of time to tool up to manufacture a new vehicle.

My guess is that the market for hybrids is slowing down (I base this on several articles, including one in Time, to this effect) but the same would be true for all types of cars. However, the difference I think (read: speculate) is that many car manufacturers (including the Big Three) have recently ramped up design, development and manufacturing of hybrids in the expectation that these cars would be the new hot item. Having done so and invested so much in advertising, design, tooling, etc, they are going to get burned more (seemingly…perception becomes reality at the corporate level) and thus perhaps be more reluctant to continue production and future development.

Anyway, that’s the theory. Is it true? Stay tuned…that’s what this debate is supposed to be about and I have no idea.

-XT

Well inevitably we are going to move off of a petroleum based fuel economy, so I think the answer is that we will replace gasoline powered cars eventually.

I really don’t expect GM or Chrysler to last much longer. That’s regardless of their commitment to hybrids. Also hybrids may at some point become cheap enough that the difference in price is negligible, or maybe ALL cars will become hybrid.

This one may last a few years. Eventually, and this is within the next twenty years or so it will just not be feasible to get cheap gas. Also, it doesn’t seem like the clean air desire is going away at all. Now that they are tooled up they’ll probably keep producing them. Maybe less for the next few years, but I don’t see hybrids as being just a fad that will suddenly go away.

Thought I’d post this brief article as it has some impact on the discussion:

-XT

Meanwhile, Europe is without natural gas…