July 2008 Dashboard: Hybrid Profitability Plaguing Carmakers

in partnership with Polk

Hybrids Worldwide

"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.

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

US hybrid sales for July 2008

Model Units vs. last month vs. July 2007 CYTD vs. CYTD 2007
Prius 14,785 25.7% -8.0% 106,225 -3.9%
Camry 2,645 -13.4% -38.9% 30,994 -4.3%
Highlander 1,371 -9.3% 13.8% 14,424 -7.0%
RX400h 1,439 8.2% 3.9% 10,477 4.3%
LS600hL 83 13.7% -25.9% 720 n/a
GS450h 40 -45.2% -71.8% 499 -56.1%
Civic 3,440 26.9% 38.0% 22,472 12.9%
Accord 3 -57.1% -98.8% 194 -91.6%
Escape 1,011 -41.2% -28.1% 11,139 -13.3%
Mariner 254 32.2% 47.7% 1,548 -29.6%
Yukon 144* -36.6% n/a 985 n/a
Malibu 349 18.3% n/a 644 n/a
Vue 362 30.7% 104.5% 1,187 -39.2%
Tahoe 207* -35.3% n/a 1,275 n/a
Aura 29 -3.3% -78.2% 128 -72.6%
Altima 715 -46.4% -36.8% 6,290 61.0%
All hybrids 26,877 7.9% -7.3% 207,752 -2.6%
All vehicles 1,136,539 -4.4% -13.2% 8,550,127 -10.5%

* Estimated sales

U.S. hybrid sales for July 2008 by manufacturer and model

United States Sales by Make

U.S. hybrid market historical sales (1999 – 2007 with 2008 forecast)

United States Yearly Sales

Regional Data

Source: R. L. Polk & Co.

Curious where hybrid buyers live? We present the data in two ways. First, we list the 15 cities and states that boast the largest numbers of new hybrids on their roads within the past year. For example, residents in the New York City area put over 19,000 new hybrids on the road in 2007. Second, we adjust for population and look at hybrids per person (in states) or per household (in metro areas.) This lets us include cities like Portland, OR: a city that has fewer overall vehicles (and thus fewer hybrids) but has more hybrids per capita than anywhere else.

States with the Highest Hybrid Sales

Rank State New Hybrids*
1 California 39,830
2 New York 8,810
3 Florida 8,612
4 Texas 8,255
5 Illinois 6,107
6 Washington 5,481
7 Virginia 5,480
8 Pennsylvania 5,055
9 Arizona 4,881
10 Massachusetts 4,673
11 New Jersey 4,628
12 Maryland 3,993
13 North Carolina 3,696
14 Ohio 3,656
15 Colorado 3,236

*Registrations CYTD May 2008

States where hybrids are most popular

Rank State New Hybrids per 1000 Residents*
1 District of Columbia 1.173
2 California 1.102
3 Oregon 0.883
4 Washington 0.872
5 Vermont 0.825
6 Arizona 0.822
7 Connecticut 0.789
8 Massachusetts 0.730
9 Virginia 0.724
10 Maryland 0.713
11 Colorado 0.694
12 New Hampshire 0.678
13 Nevada 0.669
14 Hawaii 0.587
15 Minnesota 0.574
US State Average 0.500

*Registrations CYTD May 2008

Metropolitan areas with the highest hybrid sales

Rank Metropolitan Area New Hybrids*
1 Los Angeles 17,638
2 San Francisco 11,155
3 New York 10,419
4 Washington, DC 5,828
5 Chicago 4,862
6 Boston 4,710
7 Seattle 4,502
8 Phoenix 4,187
9 Philadelphia 4,113
10 Sacramento 3,584
11 San Diego 3,520
12 Denver 2,854
13 Portland, OR 2,748
14 Minneapolis-St. Paul 2,689
15 Dallas-Ft. Worth 2,586

*Registrations CYTD May 2008

Metropolitan areas where hybrids are most popular

Rank Metropolitan Area New Hybrids per 1000 Households*
1 Portland, OR 6.751
2 San Francisco 4.735
3 Monterrey, CA 3.811
4 Santa Barbara, CA 3.776
5 San Diego 3.430
6 Los Angeles 3.186
7 Charlottesville, VA 2.738
8 Sacramento, CA 2.663
9 Seattle 2.645
10 Washington, DC 2.587
11 Phoenix 2.522
12 Palm Springs, CA 2.501
13 Helena, MT 2.170
14 Eugene, OR 2.128
15 Eureka, CA 2.091
  US Metro Area Average 1.103

*Registrations CYTD May 2008


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