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The Honolulu Advertiser
Posted on: Wednesday, March 18, 2009

More hybrids coming despite falling demand

Advertiser Staff and News Services

Hawaii news photo - The Honolulu Advertiser

Toyota dealers are working hard to sell the Prius as demand dwindles for hybrids.

Associated Press library photo

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The Ford and Honda hybrids due out this month are among dozens planned for the coming years as automakers try to meet new fuel-efficiency standards and please politicians overseeing the industry's multibillion-dollar bailout.

Unfortunately for the automakers, hybrids are a tough sell these days.

Americans have cut back on buying vehicles of all types as the economy continues its slide. But the slowdown has been particularly brutal for hybrids, which use electricity and gasoline as power sources. They were the industry's darling just last summer, but sales have collapsed as consumers refuse to pay a premium for a fuel-efficient vehicle now that the average cost of a gallon of gasoline nationwide has slipped below $2.

Last month, only 15,144 hybrids sold nationwide, down almost two-thirds from April, when the segment's sales peaked and gas averaged $3.57 a gallon. That's far larger than the drop in industry sales for the period.

In Hawai'i, the story is similar. When gas was $4.51 a gallon, there were waiting lists for hybrid products, said Morrie Stoebner, Honda Windward owner. Now with gas prices hovering at $2.40 a gallon, the demand has dropped off, he said.

"We had people waiting in line for two or three months," Stoebner said. "Now it's just completely the opposite. This is what happens when there's no floor on fuel prices. There's just not enough green people around, those who buy just for the sake of environment."

Toyota dealers in Hawai'i said they've seen a steady supply and demand for hybrid vehicles. The demand, however, does fluctuate when the price of gas goes down from "the historic highs," said Rick Ching, Servco executive vice president.

In July, Toyota dealers nationwide didn't have enough Prius models in stock to last two days, and many were charging thousands of dollars above the sticker price for the few they had.

Today, 80 days' worth are on hand, and dealers are working much harder even with the help of a $500 factory rebate to move the egg-shaped gas-savers off lots.

This month, Honda is offering $2,000 in cash, financing and leasing incentives to buyers of the formerly sold-out Civic hybrid, and a dealer in northern Michigan is dangling $6,000 cash back to those willing to purchase a Chevy Tahoe hybrid.

EXPECTED DELIVERIES

Regardless of demand, automakers feel they have little choice but to make more hybrids. Politicians are pushing the vehicles as key to reducing U.S. dependence on foreign oil and limiting the global-warming gases released into the atmosphere.

In January, President Obama called on the industry to "thrive by building the cars of tomorrow" and told leaders to prepare for federal and state regulations that could push average fuel economy above 40 miles per gallon by 2020.

"The automakers are in the situation of needing to pacify politicians that are in the position to bail them out with expensive fuel-efficient cars," said Rebecca Lindland, auto analyst with IHS Global Insight. "But shouldn't it be more about satisfying the needs of the American consumer?"

Dubbed the Prius-fighter because of its similar looks and performance, the Honda Insight hybrid is set to arrive on dealer lots in the next few weeks.

In Hawai'i, the Honda Windward dealership is expecting to get delivery of the new Insight by the end of the month.

Next year, the Japanese automaker will make a sporty hybrid coupe. Hyundai and Audi will deliver their first hybrids in 2010, and Toyota has a redesigned Prius and a new Lexus hybrid coming this spring. Toyota said Friday that it would make a subcompact hybrid priced below $20,000 in 2011.

Ford plans to follow its new 41-mile-per-gallon Fusion and Mercury Milan hybrids with a battery-powered van in 2010 and a family of hybrids by 2012. Last month, in their request to the Obama administration for $21.6 billion in additional bailout cash, both General Motors and Chrysler announced a hybrid onslaught.

Chrysler promised eight new hybrids or electric vehicles by 2015, and GM, which already sells eight hybrids, said 26 of the 33 cars it sells in 2015 won't run on gas alone, including the Chevrolet Volt, a plug-in hybrid due out next year.

NOT VERY PROFITABLE

The hybrid flood marks a lasting commitment to a powertrain technology that currently represents about 2 percent of U.S. vehicle sales and, by most accounts, is deeply unprofitable.

Toyota said last year that it was finally making money on the Prius after nearly a decade producing it, but executives at other automakers concede they lose money on every hybrid sold. "If we were making money on the Civic hybrid, we weren't making a lot," Honda spokesman Chris Martin said.

That might explain why Ford priced its new hybrid Fusion, which dealers expect to start receiving this month, $8,000 above the gasoline-only version.

Ford expects to produce about 20,000 Fusion and Milan hybrids this year, amounting to about 1 percent of its total production.

"It's a tough time to bring out almost any product right now," said George Pipas, the company's chief sales analyst. "But getting hybrids out right now is as much about image as anything else."