Hyundai Takes Hybrid Risk

March 13, 2007: Marketplace—Risky Hybrid Business

Summary: All that sells does not a profit make. Not at first, anyway. But if you have a guaranteed market and a product that’s in demand, it seems likely that profit will be forthcoming eventually. And if it doesn’t, well, that risk is part of doing business, isn’t it? These analysts seem to forget that.

"SCOTT JAGOW: Today, Hyundai said it’s gonna start mass producing hybrids in 2009. It’s a bit of a risky move, getting into the hybrid business. It’s costly, and even though U.S. sales boomed last year, now they’re starting to slow down. David Welch of BusinessWeek Magazine is with us. David, why aren’t the hybrids moving as fast?

"DAVID WELCH: Well it’s still a very small niche. There’s a core buyer who really loves hybrids but penetrating the mass market has been incredibly difficult because economically they just don’t make sense yet. You buy a hybrid Honda Accord, there’s a $3,300 premium over a V6- powered regular old Honda Accord and you even have some pretty aggressive incentives. Toyota started offering lease deals as cheap as $219 a month to move the Prius, which has been the hottest hybrid."

Hybrids don’t make sense yet? Ay, ay, ay. To prove that point, Welch had to choose a poorly selling muscle hybrid that gets about 20 mpg less than the best-selling Prius. In the very next sentence, he contradicts himself with the great deals Toyota is now offering on Prius leases.

Good for Hyundai, making an effort to provide cleaner vehicles. But note that South Korea’s public policy leans heavily toward requiring deep cuts in pollution. If the US were to encourage government agencies to replace Crown Vics in the fleet with Escape Hybrids (or even muscular Honda Accord Hybrids), analysts might be singing a different tune.


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  • Alex

    The Prius was the eighth best sold car in the U.S in winter. That is fairly big chunk of the market. Hybrids have only been around in the U.S for seven years. That is an incredibly small amount of time for such a new technology. It took nearly twenty years for cell phones to become more powerful than land lines. Companies still focus too much on the daily stock report. Toyota forgot the daily profit and focused on long-term development through engineering innovation. Now look at them. Docs beat stocks.

  • vince

    Superb news for the industry and the planet. Anybody know what type of technology they are going to be using in this new hybrid?

  • Robert

    Does anyone know if David’s prior position involved marketing for GM?

  • Cherie

    Good for Hundai! Do people not know it is time to get away from dependency on oil? besides, hybrids make for a cleaner environment!! :grin

  • Alice

    Toyota is in the lead so far.

    I believe people are more concious these days and will go for hybrids in the next 20 years.

    There is a reason for it, but prices are not reasonable yet.