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The hybrid market is certainly making some interesting moves both in terms of products and promotion. Here’s my take on current happenings, and a tease for something new we’re about to unveil that DCN members can really help put in high gear.
Stay warm,
Scott Nathanson
UCS National Field Organizer &
HybridCenter.org Administrator
In this issue:
As expected, just two months into the New Year, we’ve already seen a few major developments in the hybrid vehicle market.
In February, the California Department of Motor Vehicles announced that it will no longer accept applications from qualified hybrid drivers seeking to drive solo in carpool lanes. Just last year, lawmakers made an additional 85,000 hybrid High Occupancy Vehicle (HOV) stickers available after the DMV ran out of the original 75,000 sticker allotment. The hybrid stickers are valid until 2010—so buyers of used hybrids (with permit stickers) may still benefit.
 In Virginia, drivers of hybrids purchased before July 1, 2006 will benefit from recently passed legislation extending the HOV exemption for hybrid and clean fuel vehicles using Interstate 95 until July 1, 2008. Arizona also decided to jumpstart their HOV program. On February 8, Governor Napolitano officially permitted owners of vehicles that achieve a 45 percent increase in combined city/highway fuel efficiency over their conventional equivalent (currently the Honda Insight, Honda Civic Hybrid, and Toyota Prius) to obtain an HOV exemption.
Some states, like Georgia and Colorado, have adopted hybrid HOV laws, but have been waiting for Environmental Protection Agency (EPA) guidance on the federal law that allows states to create hybrid HOV perks. The EPA has 180 days from the passage of a law to produce guidance, so technically they’re overdue, as the law was signed on August 8 of last year. It should be interesting to see what they have to say—whenever they say it—as the guidance could also have ramifications for existing programs, especially those that keep out larger hybrid vehicles. This will all depend on the EPA’s interpretation of the federal law.
Here are a few other potential perk proposals that we’ve heard about:
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Vermont: Governor Jim Douglas has proposed a percentage point reduction in the purchase and use tax on hybrid and fuel-efficient vehicles that meet or exceed 30 miles per gallon.
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Kansas: The state legislature has introduced a bill (HB 2222) that would establish a $2,500 refundable state income tax credit for the purchase of a hybrid vehicle.
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Canada: The Canadian province of Manitoba also unveiled a $2,000 rebate program for the purchase or long-term lease of eligible hybrid vehicles. The program will last until November 2008.
As always, we will keep updating our Hybrid Incentives page, and I encourage you to contact your state and local representatives and ask what they might do to help encourage hybrids and other fuel-efficient technologies for both private consumers and municipal fleets.
 Even more good news about the hybrid vehicle market is coming from the auto manufacturers themselves. For the first time, Toyota is offering zero-percent financing and lease deals to encourage sales of the Prius. Other automakers have announced consumer and dealership incentives for hybrids, including the Ford Escape Hybrid, Mercury Mariner Hybrid, and Honda Accord Hybrid. Remember, it’s more of a buyer’s market now than ever before, so don’t be afraid to haggle for that hybrid!
I checked-in with UCS Vehicles Engineer Don McKenzie to get his take on the trends. He noted that one shouldn’t attribute these developments to any one market factor. Indeed, Don McKenzie notes,
There are certainly more vehicle model and class choices now for consumers—SUVs, midsize cars, and smaller cars. This means increased competition, especially as the early adopter, pay-anything type of buyers dry up. The automakers will need to make the prices more attractive to wider segments of the market. It is likely that increased sales have driven down production costs for hybrid-specific components, especially for those manufacturers that are achieving economies of scale.
The phase-out of the tax credit on Toyotas is likely a factor for them to lower their prices, as they have to compete against competitors' products that are eligible for relatively larger tax breaks. As hybrids become more of a regular option in the marketplace, the price premium will likely stabilize and decrease further from where it is today, though it's hard to say exactly where it will end up.
Our Research Director David Friedman also piped in with this interesting tidbit:
Another factor to consider is regulations. Nissan, for example, is selling only in Zero Emissions Vehicles (ZEV) states and wants to undercut Toyota to make sure they meet their ZEV requirements easily. Our hybrid study shows that eventually the hybrid premium by itself should be only about $2,000 in large volumes for the average vehicle.
- More Auto Show News: At this month’s Chicago Motor Show, we got a glimpse of the second-generation 2008 Toyota Highlander Hybrid, which was redesigned to boost interior room and horsepower. You can expect even more hybrid hubbub at March’s Geneva Motor Show, where at least three new hybrid concepts will be unveiled. Honda will present its “boldly-styled” small hybrid sports concept, and Toyota will showcase its new “Hybrid X” concept, which is expected to reveal a new design direction for Toyota’s hybrid models. Kia will also display a hybrid version of its Rio that will be used in the South Korea Ministry of the Environment’s hybrid testing program later this year. For more information, visit the Hybrid News Center.
- Hybrid Price Mini-War Benefits Consumers: Savvy consumers can celebrate the latest pricing announcements for new hybrid models. The redesigned 2008 Ford Escape Hybrid SUV will be priced $580 less than the base price of the 2007 model, and the base price of the 2008 Mercury Mariner will drop $2,185. Nissan, seeking to undercut its hybrid competitors, has set the base price of the 2007 Nissan Hybrid at $25,015—over $1,800 less than the 2007 Toyota Camry Hybrid and at least $6,600 less than the 2007 Honda Accord Hybrid. Noting that consumers should be mindful that the different base prices may reflect differences in standard vehicle features, we say, let the games begin. To learn more, check out the Hybrid News Center.
- Hybrids Still Getting High Marks: The 2007 Toyota Prius, Honda Civic, Nissan Altima, and Toyota Camry hybrids are among the “greenest” vehicles on the market according to latest rankings by the American Council for an Energy-Efficient Economy. The natural gas powered Honda Civic GX, however, topped the list of the “greenest” vehicles for the environment. The rankings are based on each 2007 model’s fuel economy and tailpipe emissions in addition to other factors. To learn more, check out the Hybrid News Center.
As I noted on a recent HybridBlog post, 251,803 hybrids were sold in the U.S. last year, up 22 percent from 2005. The overall car and light truck market went down by 2.6 percent this past year. The fact that hybrid sales are growing, while overall vehicle sales are down is a good sign! Monthly hybrid sales in 2006 were higher than in the corresponding month in 2005, every month of the year. So we’re talking about sustained overall growth. Also, hybrid sales in 2005 took a similar three-month dip from September-November as they did last year, and then, just like this year, rebounded with a strong December.
We only had two new entries in the market last year, the highly touted Camry Hybrid and highly muscular Lexus GS 450h. I worked recently to fully update the HybridCenter's Hybrid Timeline and there are quite a few new interesting tidbits about what will, or may, come down the pike. On the redesign front, probably the best news is the Mercury Mariner Hybrid. In addition to reducing the price on the 2008 model and doing some interior redesign, Ford also gave this vehicle a more thrifty 2WD design. And if a reduced price wasn’t enough, it looks like the Fed is going to give more help as well. Tax credits on the 2008 2WD Escape and Mariner Hybrids have jumped to $3,000, an $800 jump over the 2007 models.
Don MacKenzie is checking into why this is the case, as the 2008 model did not significantly change the drivetrain. We’re guessing it might be an increase in weight that puts these vehicles up a class, which is certainly not the intention of the tax credit system. That said, these two vehicles are commendable uses of hybrid technologies, so with a bump in tax credit and competitive pricing, they may be well worth a look if you’re in the market for the most fuel-efficient SUV out there. You can get the full list of current tax credits on our incentives page.
Here are some other fun (or not so fun) facts we found in the timeline:
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There is no joy in Sienna-ville: First, and most depressing to me, is that the long-rumored hybridization of the Toyota Sienna Minivan has again been pushed back to 2008 or 2009. For those of us who have been (im)patiently waiting for a fuel-efficient seven-seater while the Japanese revel in their 40 miles per gallon Toyota Estima Hybrid Minivan, all I can say to Toyota is that they really seem to be missing the boat on a key market demand segment here. |
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Altima is nice if you can find it: If you live in New Hampshire, Massachusetts, Vermont, Connecticut, New York, New Jersey, Pennsylvania, or California, the new Nissan Altima Hybrid seems to be quite a nice vehicle. Its EPA-rated fuel economy is a bit better than the Camry, but at a lower sticker price (and a larger federal tax credit). With a car this nice, it will be interesting to see if sales are brisk enough to make Nissan reconsider its decision for only a limited release. |
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Here come the two-modes: The GM/DaimlerChrysler/BMW hybrid technology teamup will begin with the fall introduction of the Tahoe and Yukon Hybrids. As of the last report, GM was promising just a 25 percent fuel economy boost over the 17 miles per gallon conventional versions. However, using the same drivetrain, GM is promising a 40 percent fuel economy bump when it introduces its first real hybrid Vue model in 2008. |
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Generation 3 Prius-mania: Rumors are running wild about what the next version of the hybrid standard-bearer will be able to do. Will it be a plugin? Probably not, but it may well have some electric-only driving capacity given the redesigned Highlander Hybrid has an electric-only mode. (Unfortunately, it can only travel about a mile in this mode.) Will it get substantially better mileage than the Generation 2? Very likely, but how much higher is still all conjecture (a recent report from a UK magazine has it topping 100 miles per gallon, but others have it in the 70-80 range). And, most importantly, will you be able to see out the back a little better as you hear the incessant beeping when the car is in reverse? Signs point to yes there, too. Expect the new Prius to hit dealerships in the fall of 2008. |
There’s a whole bunch more in the Hybrid Timeline, so go check it out. While you’re at it, give me an email at hybridcenter@ucsusa.org and let me know which of the upcoming models intrigue you, or enrage you, and what’s not currently in the queue that you’d really like to see the automakers put on the roads. I’d be curious to hear, and I’ll put a bunch of your responses in the next newsletter, and up on HybridBlog, to help continue the conversation.
I know, it sounds a little cryptic, but UCS will be unveiling an exciting new clean vehicles campaign March 1, and we will have actions that everyone interested in getting cleaner cars on our roads can take to tell both the automakers, and decision makers, that clean car policies are practical, and profitable for auto sellers, buyers, and the environment. We’re quite excited about it here, so check our UCS homepage at noon tomorrow for the announcement.
That’s it for this month. Remember to go check out www.ucsusa.org on March 1!
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