March 2007 Looking Ahead

The leap in Toyota Prius sales during the past two months makes us wonder about the potential of hybrids in the U.S. market. Is there a latent market for hybrids that is just now being tapped through Toyota’s marketing efforts? Two summers ago, the Polk Center for Automotive Studies explored consumer attitudes toward hybrid technology. Polk’s findings suggest that this may be the case.

In Polk’s sample of 307 U.S. consumers, awareness of hybrid technology was high: 97% had heard of hybrid vehicles. More importantly, 78% said they were willing to consider buying a hybrid. For most potential buyers, saving money on gasoline was the primary reason for considering hybrid technology. This means that before many people get serious about hybrids, the cost of hybrid technology must come down or the price of gas must go up.

But 30% of the group said they were attracted to hybrids for other reasons, including the environmental benefits and the appeal of new technology. This may not sound like a substantial amount, but a 30% “hybrid segment” represents a significant portion of the new vehicle market. If 30% of U.S. carbuyers opted for a hybrid last year, hybrid sales would have hit almost five million units. So even without major changes in gasoline prices or cost reductions in hybrid technology, the potential hybrid vehicle market may be much larger than many analysts have predicted.

Of course, the number of hybrid offerings must expand before this market can be realized: nearly 60% of participants in the Polk study recommended that every vehicle model also offer a hybrid version. This advice seems to fit well with Toyota’s long-term plans of incorporating hybrid drivetrains across all of its popular vehicle offerings. In the meantime, the company’s aggressive marketing of its current hybrid models seems to be drawing in more of the buyers in the 30% “hybrid segment” of the market. With just 2.25% of buyers currently opting for hybrids, there is plenty of room for growth.