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While dismal sales are predicted to continue well into 2009, automakers are betting that the way out of this mess lies in green, high-tech offerings.

Hybrid Heatmap

In this month’s version, we show the states where hybrids are the most popular. In other words, the heat map shows the number of hybrids per 1,000 residents—as a way to see if hybrids are only popular in the most populous states.

Analysis of December (and 2009) Sales Numbers

"Top 5 global hybrid markets" based on vehicle registrations CYTD October 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD October 2008.

Auto executives at the 2009 North American International Auto Show in Detroit this week repeatedly expressed relief that 2008 is behind them. In the past 12 months, the industry has lurched from crisis to crisis. In the summer, high gasoline prices choked demand for popular truck and SUV models. Then in the fall, tight credit and a faltering economy kept thousands of buyers out of showrooms. Finally this winter, federal lawmakers publicly scolded leaders of the Detroit Three as they pleaded for financial assistance. Overall, 2008 auto sales ended down 18 percent compared with 2007, with hybrid sales down by 10 percent. Most of the pain came in the fourth quarter, when sales of all vehicles (hybrids included) plummeted by more than a third to levels not seen since the early 1990s.

While dismal sales are predicted to continue well into 2009, automakers are betting that the way out of this mess lies in green, high-tech offerings. Nearly every major automaker showcased new electric-drive vehicles at the Detroit show, including hybrids (Toyota Prius, Honda Insight, and Ford Fusion), plug-in hybrids (Daimler E-Cell Plus, Cadillac Converj, and Chrysler Town & Country EV) and electric vehicles (Toyota FT-EV, Dodge Circuit EV, and Ford Focus EV). Finally, the auto industry seems to be getting the message that there is a market for more than just horsepower, towing capacity, and cup holders: electrification is widely accepted as the next big thing.

But the area to watch in 2009 is not vehicle launches or high-tech concepts: it’s production volumes. Introducing new hybrid and electric vehicle models is fine, but those vehicles will only have a real impact on oil consumption and emissions if they are produced and sold in large volumes.

Consider the relative hybrid “take rates” for three hybrid makers. Honda sold 1.4 million vehicles this year in the US, and roughly 31,500 hybrids—equal to 2.2 percent of the total. Almost 11 percent of the Toyota’s US sales were hybrids.

General Motors, offer an impressive number of hybrid models, but produce them in such small quantities that hybrids amount to an insignificant fraction of the companies’ overall vehicle offerings. If automakers like GM are truly betting their future on hybrids and other electric-drive technologies, they have put surprisingly few chips on the table to-date. Whether this changes in 2009 remains to be seen.

The way to tell will be to look beyond this week’s flashy product announcements and the slick advertising copy that follows. Instead, scrutinize next year’s production numbers, and you’ll be able to tell who is serious about electrification, and who is simply trying to steal momentum from the latest automotive trend.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the US (December 2008): 17,697

Regional Data

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November 2008 Hybrid Market Dashboard Summary: Car sales went from bad to worse. Even sales of fuel-efficient vehicles lagged as tight credit, recession fears, and falling gas prices eroded demand for small cars and hybrids.

Hybrid Heatmap

This month, we are pleased to introduce a new feature to our monthly hybrid market dashboard: a graphical and geographical look at hybrid trends. In this month’s version, we show where you can find the nearly 1.2 million hybrids in use in the United States (viewed on a state basis). This is a snapshot view of the total number of hybrids in use in July. In future months, we’ll look at hybrid popularity, growth rates and other geo-based stats. See more regional data below.

Analysis of November Sales Numbers

"Top 5 global hybrid markets" based on vehicle registrations CYTD September 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD September 2008.

In November, car sales went from bad to worse as sales volumes fell a bruising 37 percent from a year earlier. Even sales of small, fuel efficient vehicles lagged as tight credit, recession fears, and falling gas prices eroded demand for small cars that had surged just months earlier. Hybrids, which generally have outperformed the overall car market in recent months, fell faster than conventional vehicles in November, posting a 50 percent sales decline from a year earlier.

With sales volumes at their lowest levels in decades, gas prices racing toward $1.50 per gallon, and automotive CEOs begging for federal financial assistance, the short-term prospects for hybrids have diminished. Yet in this challenging environment, automakers are more committed to hybrids than ever. Toyota and Honda are moving forward with planned vehicle launches next spring, and have confirmed their plans for new hybrid models.

Detroit Three also have announced plans to move aggressively into hybrids and electric-drive vehicles. GM promises 15 hybrids by 2012 as well as additional plug-in hybrid models like the Chevrolet Volt. Ford has committed to launching a family of electric drive vehicles by 2012 that includes hybrids, plug-in hybrids, and battery-electric vehicles (including an all-electric commercial van). And Chrysler reaffirmed its commitment to a hybrid Dodge Ram pickup and detailed plans for a freeway-capable electric vehicle produced in large volumes by 2010.

These announcements signal a shift in strategy for the Detroit Three, who have placed electric-drive technologies at the heart of their recovery plans. Perhaps these automakers now realize that advanced vehicles (including hybrids) can be a key way to differentiate their products and attract consumers who, in time, will return to the market.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the US (November 2008): 16,5365

Regional Data

"Top 5 global hybrid markets" based on vehicle registrations CYTD August 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD August 2008.

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Last month, total sales of cars and trucks fell to 838,592 units, a 32 percent decline from October 2007. With sales hitting levels not seen since the early-1980s recession, the industry is in serious trouble.

All three domestic automakers now face potential cash crises in 2009, and even traditionally strong players like Toyota and BMW are reporting staggering drops in sales and profits. Despite the challenging sales environment, hybrid sales were up slightly from September. In October, 21,978 hybrids were sold in the US—that’s 2.6 percent of total vehicle sales. But hybrids are not immune from the industry downturn: sales have dropped 10 percent from last year, and many models—including the Honda Civic Hybrid and Toyota Camry Hybrid—have seen declines of more than 20 percent.

As the industry strains to cope with lower consumer demand, hybrids face two threats. The first is reduced consumer interest in the face of lower gasoline prices. In October, Edmunds.com, a leading automotive website, reported that hybrid interest had fallen 86 percent since the summer, driven largely by the fall in gasoline prices. By the end of October, the average gas price in the United States was $2.72, nearly a dollar less per gallon than in September. Certainly there are more reasons to buy a hybrid than just the fuel savings, but mainstream consumers’ interest in hybrid technology tends to rise and fall with gas prices. At the moment, interest is low, making it harder for automakers to justify increasing production volumes in the near-term.

The second threat hybrids face is reduced investment by automakers. Currently the Detroit Three are operating in survival mode. Not only are they distracted by their financial issues, they are also actively cutting investment in vehicle programs and R&D efforts. While they insist this cost-cutting will not impact high-profile products such as the Chevrolet Volt, we are already seeing hybrid casualties. Last month, Chrysler announced it would remove its large SUVs, the Chrysler Aspen and Dodge Durango, from its product lineup. Gone too are the hybrid versions, which just began production in August and have yet to reach dealers’ lots. Surely Chrysler would have liked to have preserved its only hybrid offerings, if for no other reason than the positive PR value these vehicles bring. But auto companies are now forced into making hard choices that may include delaying or eliminating some advanced vehicles.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the U.S. (October 2008): 21,978

Regional Data

"Top 5 global hybrid markets" based on vehicle registrations CYTD June 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD July 2008.

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In September, auto sales continued their grim downward trend. Overall, the car market shrank by 27 percent relative to last year. Hybrids fared better, falling just 9 percent from September 2007 levels, but the message was clear—tight credit, reluctant consumers, and an economy plunging into recession have begun to affect all types of vehicles, hybrids included. Our question—from January of this year—if hybrids are “recession proof” is now answered.

Demand remained strong last month for the Toyota Prius, but demand slowed for many models, leading nearly every hybrid nameplate to show a sales decline. The shortage of popular Toyota models, coupled with slow sales for other hybrids, means that this year’s total hybrid sales for 2008 are likely to remain flat or even slightly fall below last year’s levels.

Another bad sign for hybrids is falling oil prices. In September, crude fell far below the $145 per barrel peak reached this past July. Gas prices are already trending downward, averaging roughly $3.60 at the end of September, and falling another 15 cents per gallon in the first week of October. While cheaper gasoline is welcomed by most American drivers, the reality is that lower gas prices translate into less consumer interest in hybrid vehicles. If the economy worsens, we can expect to see further declines in the cost of crude, and continued moderation in gas prices.

There are many looming unanswered questions: What happened to the Prius waiting lists? What about all those people wanting a Ford Escape Hybrid but Ford couldn’t supply them because of battery shortages? Did folks on waiting lists back out?

And what does the recession mean for future hybrids? Will the 2010 Honda Insight—hitting showrooms at $19,000 in April—have trouble reaching 100,000 sales next year, as Honda is targeting? Will Toyota still continue to march toward 1 million global hybrid sales per year? And what does the recession mean for more expensive models including the Chevrolet Volt, expected in late 2010 at close to $40,000?

Despite the bad news in September, long-time hybrid stalwarts Toyota and Honda are unlikely to slow down hybrid plans. They operated hybrid programs for years before the rest of the market saw the writing on the wall—and before hybrid profits were attainable. Could the economic downturn be the respite needed by the hybrid leaders, and others, to catch up on supply of models (and essential battery production)? Let’s not forget that new stricter fuel economy and carbon standards in the US and Europe will put pressure on global automakers to introduce hybrid technology. In this respect, late 2008 and early 2009 could be a fallow period before another big growth spurt in the hybrid market.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the U.S. (September 2008): 20,836

Regional Data

"Top 5 global hybrid markets" based on vehicle registrations CYTD June 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD June 2008.

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The auto market’s gloom continued last month, although August brought slightly higher overall sales than July. In total, 1.25 million cars and trucks left dealerships in August, a 10 percent increase over the previous month but down 15 percent from August 2007. Car sales were buoyed somewhat by heavy incentives, including fire-sale prices at GM dealerships as “Employee Discount for Everyone” returned after a three-year hiatus. In general, the deals were best on the least fuel-efficient vehicles—although some automakers also put cash on the hood of their hybrid models, including the Nissan Altima Hybrid and GMC Yukon Hybrid.

While great deals on conventional vehicles pushed sales up, hybrid sales fell. In August, 26,045 hybrids were sold, accounting for just above 2 percent of all new vehicles. A $0.25/gallon drop in average gas prices during the month may have been a factor, but the main issue continued to be availability of the most popular hybrid models. With inventories of the Prius and Camry Hybrid largely exhausted, Toyota has been unable to respond to heightened consumer demand for high-efficiency vehicles. As a result, sales of both models still remain below last year’s levels, and thin inventories seem likely to continue for the next several months.

Undersupply, lackluster growth, and discouraged buyers will be the themes of the hybrid market this fall. New models, including the Chevrolet Silverado Hybrid and Ford Fusion Hybrid, will enter the market, but sales of these models will be modest in the near term. Things will really get interesting next spring when new models from Honda and Toyota come on the scene. Honda offered a preview last week of its new hybrid vehicle, a second-generation Honda Insight that will offer Prius-like styling and fuel economy at a lower cost. The Insight’s launch is planned for April 2009, roughly the same time that Toyota plans to put its next-generation Prius in dealerships. Both vehicles are planned as high-volume models, each selling more than 100,000 units annually in the United States. Both are also the first of several new hybrid model launches for the two automakers. If high gas prices and consumer interest in fuel economy persist, the new Insight and next-generation Prius will lead a wave of growth for hybrid vehicles in the United States. In the meantime, we can only watch today’s lackluster hybrid sales and wonder what the market might have looked like if those two models had been available for this year’s gas price spikes.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the U.S. (August 2008): 26,045

Regional Data

"Top 5 global hybrid markets" based on vehicle registrations CYTD May 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD May 2008.

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It’s been a tough summer for the car business. In July, US auto sales fell to 1,136,539 units—13 percent below July 2007. Analysts are now predicting that the US market will shrink below 13 million vehicles annually, a level not seen since the recession of the early 1990s. Although hybrids fared better than most vehicles, their performance wasn’t stellar. Weak inventories of the Prius led to sales 8 percent below last year. The Camry Hybrid and Ford Escape Hybrid also posted declines from previous year’s levels. Last month’s winners included the Honda Civic Hybrid and Highlander Hybrid —up 38 percent and 14 percent respectively. But neither sells in large enough volumes to move hybrid sales into the black. Overall, hybrid sales fell 7 percent from July 2007, and hybrid models accounted for a modest 2.4 percent of the vehicle market.

By now it’s obvious that carmakers weren’t ready for the major changes that occurred in the economy, fuel prices, and consumer preferences. It’s unclear how long it will take them to adjust. It’s also unclear how hard they are trying. Sales of compact cars like the Toyota Yaris, Honda Fit, Nissan Versa, and Ford Focus have risen dramatically, and automakers have done what it takes to keep up with demand. Are hybrids that different?

Sure, hybrids require high-technology components, including expensive nickel-metal-hydride battery packs. But who says extra shifts can’t be added to battery manufacturing lines to increase production, just as overtime has been added at factories that produce fuel-efficient four-cylinder engines in order to put more Yarises, Fits, Versas, and Focuses on dealer lots. Is there something so special about batteries that we can’t make more of them when demand is high?

The underlying issue is that hybrids are not big money-makers for most automakers, so there’s little incentive to ramp up production substantially. GM is a case in point: the company acknowledged last year that it cannot recoup the costs of the two-mode hybrid system used in its Yukon and Tahoe hybrids. Last month in an era of shrinking wealth and rising gas prices, more Bentleys left US showroom than Yukon Hybrids, a testament to GM’s lack of interest in mass-marketing its hybrid SUVs.

But hybrid economics are beginning to change. Honda recently announced that it dramatically lowered the cost of its next-generation hybrid powertrain, and plans much higher production volumes as a result. Toyota, too, may be improving the economics of its hybrid offerings—the company’s decision to use nickel-metal hydride batteries in the next-generation Prius has been criticized by some, but it is a move that will help limit the vehicle’s powertrain cost.

With all the discussion of new technologies like plug-in hybrids and electric vehicles, we tend to forget that hybrid vehicles account for a tiny fraction of the vehicles sold in the US. For that to change, supply and demand must converge: consumers must show interest in the vehicles, and manufacturers must be able to sell hybrids profitably. At the moment, consumer interest is healthy, but improvement is needed in hybrid profitability before hybrid sales can really take off.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the U.S. (July 2008): 26,877

Regional Data

"Top 5 global hybrid markets" based on vehicle registrations CYTD April 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD April 2008.

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As gasoline prices climbed further and economic conditions worsened, fewer Americans considered putting a new car in the garage last month. Overall automobile sales fell by 18% compared with last June, a sales environment that many industry executives characterized as the worst they’ve seen in a decade. Buyers who were in the market for new vehicles were thinking about fuel efficiency, which should have fueled hybrid sales growth. But instead every hybrid model saw sales declines from last month, and nearly all hybrids (with the exception of the Nissan Altima Hybrid) saw sales fall below June 2007 levels. The main culprit was availability—precisely at the time that customers were demanding fuel-efficient hybrid cars, hybrid inventories were reaching new lows. Toyota reported just a one-day supply of the Prius and a two-and-a-half-day supply of the Camry hybrid (60 days is the industry average). Dealers are now reporting waiting lists as long as six months for new Priuses, and Toyota acknowledged that production may not catch up with demand until early 2009.

Automakers are blaming hybrid shortages on the limited supply of batteries and hybrid powertrain components. But this month’s results also illustrate automakers’ overly-cautious outlooks regarding future hybrid sales. Case in point is Toyota: after record sales in 2007, it would have seemed logical for Toyota to initiate at least modest production increases for its hybrid models. Instead, in 2008 Toyota has produced roughly the same number of Camry Hybrids as it did last year, and slightly fewer Priuses. The situation is similar for Ford: this year’s production of Escape and Mariner hybrids trails last year’s output by 15%. The immediate problem may be that suppliers can’t churn out more battery packs, but the larger issue is that automakers didn’t forecast much hybrid growth in 2008, so suppliers didn’t expand their production capabilities. That was the wrong bet, and automakers are now seeing red for two reasons: the North American car market is contracting, and those models that are in demand (including hybrids) are the ones the industry hadn’t planned on building.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the U.S. (June 2008): 24,917

Regional Data

"Top 5 global hybrid markets" based on vehicle registrations CYTD March 2008.

and "Top 5 US hybrid markets" based on vehicle registrations CYTD March 2008.

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May hybrid sales were a mystery. Gas prices soared, so you would expect the most fuel-efficient vehicles to be selling at record numbers. Instead, May 2008 hybrid sales fell by nearly 25 percent compared to last year. Didn’t Toyota and the other hybrid makers see that oil broke past $100 per barrel on the first business day of the year? Didn’t they expect gas prices to spike at the beginning of driving season? Aren’t they doing scenario planning to prepare for golden opportunities like $4 gas? Isn’t Toyota trying to reach global sales of 1 million hybrids per year, as a way to reach economies of scale and lower the hybrid premium?

The only reasonable answer to these questions is: Yeah, but Toyota prefers to be very cautious. The company would rather neglect a short-term opportunity to pump up hybrid sales—in favor of slow and steady growth according to well-established plans. The result? Prius sales were down 38 percent compared to last year and Camry Hybrid sales dropped by 13 percent. Bear in mind that last year at this time, gas prices were relatively low, and industry pundits were declaring the death of hybrids as Toyota put consumer incentives on hybrids for the first time.

Honda, Ford, and General Motors were also locked into a pattern of limited availability. High oil and gas prices didn’t budge their lackluster commitment to hybrids. The general malaise in the car market didn’t help. Year-to-year sales of all vehicles were down 11 percent as fewer buyers visit showrooms in tough economic times.

Although the carmakers are unable to capitalize on this year’s hybrid fever, they used the opportunity to announce new future hybrids in the works. Honda’s global compact hybrid is due in 2009. The redesigned Prius is also expected in 2009, with two new hybrids also in the works. And all varieties of gas-electric, plug-in hybrid, diesel, and all-electric models are promised in 2010 and beyond. This will further stimulate the saliva glands of consumer thirsty for groundbreaking fuel-efficient options during the current oil shock.

In the meanwhile, where will consumers go to satisfy their appetites? For those who can’t wait and those on a tight budget, the answer is small conventional cars. In May, the Honda Civic beat out the F-150 pickup truck to become the top-selling vehicle in America. Small cars will remain hot throughout the year. And for those with patience, get to the back of the hybrid waiting list and expected to wait for several months.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2008 volumes based on sales-to-date.

Hybrids sold in the U.S. (May 2008): 35,661

Regional Data