Signs of a Future Hybrid Car Rebound

Hybrid car sales may currently be in the doldrums, but the forces for a major hybrid takeover of the auto market in about three to five years are already in the works.

Mike Jackson />

Mike Jackson, CEO of AutoNation, said that he has 600,000 hybrids “no one wants,” because of low gas prices.

This week, Mike Jackson, the CEO of AutoNation complained that he has 600,000 hybrids “that no one wants”—an exaggerated figure—sitting on car lots across his company’s network of 300 auto dealerships. Hybrids were red-hot sellers in the first half of 2008, but are now caught in the auto industry meltdown. The American car market has dropped to an annual pace of nine million sales. That represents a slicing of the auto market almost in half compared to 2007.

Hybrids are generally faring better than the overall car market, but the slowdown comes on the heels of a meteoric rise in hybrid popularity in recent years. From 2000 to 2005, hybrid sales doubled almost every year. Toyota and other hybrid makers couldn’t keep up with demand, especially when gas price spiked in 2005 after Hurricane Katrina and mid-2008 when the price of oil jumped to $145 a barrel.

Betting on Higher Gas Prices

Jim Lentz />

“Oil prices will have peaks and valleys, but over time the general trend direction is going to be up,” said Jim Lentz, president of Toyota Motor Sales USA.

Carmakers apparently learned from that experience. Despite the current downturn in hybrid sales—and the first annual drop (by about 10 percent) of the hybrid market in 2008—nearly every major car company in the world is moving rapidly toward greener vehicles.

Toyota has committed to 10 new hybrids globally by 2012. GM is planning to introduce 26 new hybrids by 2014, according to Automotive News, a trade publication. Every major car company, without exception, has outlined aggressive timelines for hybrids, plug-in hybrids, electric cars, fuel cell vehicles and more efficient small gas-burning cars.

Toyota is intensifying its move toward hybrids because it believes that today’s low gas prices are temporary. “We know that oil prices will have peaks and valleys, but over time the general trend direction is going to be up,” said Jim Lentz, president of Toyota Motor Sales USA, in an interview with HybridCars.com. “That trend will be up to a lesser degree in the next four to five years, but starting 2015 and beyond, that peak will increase at an accelerating rate.”

Countdown to the Next Energy Crunch

OPEC Secretary Abdalla el-Badri />

“The failure of the industry to invest will result in a supply crunch by 2013 and beyond,” said OPEC Secretary Abdalla el-Badri.

The current downturn in the auto industry and energy markets may in fact help set up the conditions for a major takeover of hybrids when the economy improves. The Houston Chronicle reported this week that the number of oil rigs actively exploring for oil and natural gas in the United States dropped by 73 this week to 1,170, as weak energy demand hampers oilfield activity. The US oilfield count is down more than 40 percent since the end of August. There have been similar decreases in investment in all types of automotive fuel sources, from tar sands to ethanol.

Also this week: OPEC, the supplier of 40 percent of the world’s crude oil, said lower energy prices may lead to a supply crunch by 2013. “The failure of the industry to invest will result in a supply crunch by 2013 and beyond,” said OPEC Secretary Abdalla el-Badri.

We may be already seeing glimpses of Mr. Lentz’s predicted peak and Mr. el-Badri’s supply crunch. Light, sweet crude for April delivery rose $1.91 to settle at $45.52 Friday on the New York Mercantile Exchange. It was the second time crude settled above $45 in one week, which hasn’t happened since the first week of the year.

Interdependence of Jobs, Oil and Hybrids

The increase was set in motion by more bad economic news. The Labor Department reported this week that the US economy shed about 650,000 non-farm sector jobs in February. (Fifty-thousand Americans are already out of work due to the closing of about 1,000 auto dealerships.)

T. Boone Pickens />

Texas billionaire oilman T. Boone Pickens predicts US crude oil prices will hit $75 by the end of 2009.

With this news, the value of the dollar dropped against global currencies. Oil is traded in US dollars, so buyers armed with more valuable euros, yen and yuan traded up the price of oil. Analysts believe OPEC will call for more production cuts at its meeting on March 15, which could lead to slightly higher prices at the pumps. On Thursday, Texas billionaire oilman T. Boone Pickens predicted US crude oil prices will hit $75 by the end of 2009.

Gas prices moved in step with oil markets this week when the average price of a gallon on unleaded self-serve regular moved to $1.94, up from $1.88 last Friday, according to AAA. California’s average price of gas is $2.23 a gallon. “There are a lot of projections that this summer, gas will be back to $2.50 a gallon,” said Lentz. “At $2.50 a gallon, we’re selling [hybrids] at a very high rate again.”

If hybrid sales do indeed pick up with $2.50 gas and a dismal economy, imagine what happens in 2013 if consumer confidence and credit has returned, the price of a barrel of oil is back to triple digits—and carmakers are prepared with full production capacity for conventional hybrids, plug-in hybrids and electric vehicles.


  • Anonymous

    The opec secretary can fantasize about the imaginary oil crunch of 2013, but there is a fundamental shift occuring in the technologies, petroleum substitutes, political will and general mindset that is unstoppable regardless of the current economic climate. The days of oil are numbered.

  • jvoelcker

    Nice dissection of that faux factoid of “600,000 hybrids sitting on AutoNation lots”, here:

    http://blogs.edmunds.com/greencaradvisor/2009/03/unsold-hybrids-stretch-far-as-the-eye-can-see-at-autonation-or-do-they.html

  • Bryce

    And thats why I will be buying a Volt or similar electric car.

  • Samie

    Amen Bruce

    I’m a little worried that we direct too much of our distrust at OPEC. We also drive up the price of oil from dumb hedge funds, that is it could be in your 401K or in many state investment portfolios.

    “Supply crunch by 2013 and beyond,” said OPEC Secretary Abdalla el-Badri. Not sure about that but at low market prices it does make oil extraction less profitable often decreasing the need for production which takes time to get to a market. But who knows Abdalla el-Badri could be right….

  • Chip Daigle

    I noticed that in your discussion of Gasoline prices rising again, I cannot believe that you failed to mention the President Obama’s plan to increase taxes on Oil, Coal and Natural Gas with his Carbon credits. Gasoline at $2.50/Gallon would actually be a fair price to the Oil Industry considering that everything in the consumer price index has doubled or tripled from 1983-84. After the NeoCommunist Obamanistas are done raising the “Carbon Fees,” America will be looking at $6 – $10/Gallon if we are lucky. I noticed that you didn’t even mention that the Dems are back tracking on allowing off-shore drilling that was promised to the Oil Companies right before the Election to get the issue of High Gasoline prices off the table. Even though Oil Field safety and efficiency has increased exponentially, the NeoCom Dems are more regulatory than ever doing everything they can to shut down new drilling and force people to buy their Greenie Weenie cars and Windmills.

    If the Obama had his act together, he would use some of the TARP Money to give people coupons to convert their cars to E85. Talk about light a fire under the Auto Industry. Union workers could be sent out to different dealerships to convert cars and vans into E85 compliance. Then we could laugh at the Mid East when they cut off the Gasoline supply.

    If Obama really had his act together, he would use some of the TARP Money to create a Civilian Petroleum Reserve that would store Oil and Ethanol at both end of the country. This way we could buy Oil and Ethanol when its really cheap and store it for when the price spikes like every Summer. Note by making a separate Civilian Petroleum Reserve, we wouldn’t leave our country defenseless like the stupid Democrats keep proposing every Summer. Again, talk about spur Economic growth and out of the Fannie Mae, Freddie Mac Recession Caused by the Irresponsible Community Reinvestment Act of Jimmy Carter and Bill Clinton.

    I think even Republicans see that Oil and Gas will eventually run out and that we will have to start converting to higher and higher blends of Ethanol. That’s where the E85 Conversion and the Civilian Petroleum Reserves come into play.

  • Samie

    Wow that takes the cake of all Hybrid.com comments I ever seen… Do you respond or do you just laugh…. or is it sad that talk radio and cable conform people into narrow ideas/thoughts like the one above.

  • Anonymous

    Could it be that the the prices at Carmax are too high???

  • Michael Comeau

    Hybrid cars remain the most practical alternative engine technology and for that reason they will take significant share over the long term. Hybrids are a much smoother transition than hydrogen, plug-ins, etc.

    Hopefully, the cost of production will come down over time so the payback period for gas savings will shorten.

  • Fibb222

    There isn’t any payback period for a Prius. It’s the most affordable/reliable car out there in its class. You have to take the media comparisons between it and gas only cars with a grain of salt as they always compare it to a far lesser/cheaper car. EVs and PHEVs are coming sooner than the average person has any idea about. Soon hybrids will be the norm.

    Oh and about the raising of carbon tax via cap and trade permits. Go for it Obama! ICEs and oil are last centuries technology and should have died a long time ago. There are better and cheaper alternatives just waiting for their time to dominate.

  • The Matrix

    I believe hybrid will be the matrix for future technologies for long time to come. Gas and electric today, maybe hydrogen and electric tomorrow. Hybrid will likely be the bridge to most future technologies (e.g. full hydrogen, full electric, and perhaps one day even safe nuclear power!). At least until the future tech can mature (e.g batteries) and function independently.

  • Rock Star II

    I’m afraid you folks are sadly deluded. Hybrids are OK for city driving, but if you do mostly suburban, or highway driving, you’re much better off with a diesel or just a very efficient gas powered vehicle. And someone said that there’s no payback time for a Prius? Wow. It costs how much more than a Corolla or Civic or Fit or Yaris? $5-10K! I think the Honda Insight will pretty much knock out the Prius. Honda has already raised the Insight price by $1K because it is still several grand cheaper than a Prius.

    And what about natural gas? Why isn’t somebody working on that ??

  • zero emissions boss

    why dont they put those new printable efficient solar panels on the car then combined with regenerative braking system i think that whoud provide enough power to run gass free

  • Anonymous

    did you know that it takes 6 gallens of gas to produce 1 gallen of ethinal

  • RW Cole

    Almost any car can be converted to natural gas- for a price. Some cities already do this with some of their fleet.

    Hybrids are ready for prime time- The new Prius will get 50 mipg and will sell in the low 20s. The most important breakthrough will be cheaper hybrids. If a Prius can sell at the same price as a four cylinder Camry, they they have won the battle.

  • Ed

    I paid $15,750 new for my 2008 Honda Fit about 15 months ago. I average 39 mpg overall (5 spd manual transmission) city (granted I live in an inland western town with mild traffic compared to the coasts) and 39 to 42 on the highway (depends mostly on posted speed limits). Hard to justify buying a Prius @ 49 mpg for what was then $8+k more money. The pay back just didn’t work out – not even close. Due to large distances between towns here, a hybrid on the highway is primarily a small car with a small engine anyway.
    I do like the Prius and think its a great car in heavy city traffic but the hybrid concept is not a one size fits all solutions at this time. Price reductions and new innovations will make them better but we are not quite there yet in terms of being overall cost competitive with a small fuel efficient car.

  • masonic secrets

    Many Hybrid Cars have double systems; a gasoline motor and battery system. This means more potential things to go wrong and therefore potentially more work for automotive shops and service companies.