No More Waiting for a Hybrid

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Everything wasn’t green on St. Patrick’s Day, when The LA Times printed a long article articulating the rapid fall from grace of hybrid vehicles. It seems that their draw was more connected to the price of gasoline than to the buyer’s environmental values.

In July, U.S. Toyota dealers didn’t have enough Prius models in stock to last two days, and many were charging thousands of dollars above sticker price for the few they had… Today there are about 80 days’ worth on hand, and dealers are working much harder — even with the help of $500 factory rebates — to move the egg-shaped gas-savers off lots from Santa Monica to Miami.

At the end of June, AutoNation, the country’s largest chain of new-car dealerships, had only a two-day supply of Honda Civic hybrids and a 14-day supply of the non-hybrid Civic. By year’s end, the picture had flipped, with AutoNation holding 107 days’ worth of regular Civics, compared with 148 days’ stock of the hybrid version…

“The price of gasoline dictates what people buy,” AutoNation Chief Executive Mike Jackson said. “Gas fell to $2, and now my lots are filled up with fuel-efficient cars that aren’t moving.”

I did a little checking to make sure that these reports were not correlated with the general reduction in consumption associated with the current recession. The facts do indicate that this change was largely independent of the general poor state of the auto industry. The auto makers are between a rock and a hard place. The public has stopped buying these vehicles just as they stopped buying SUV’s when the price of gas arose, but the makers are committed to alternate vehicles under the conditions of the bail-out and the political aura that surrounds Detroit and the industry everywhere.

“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?”

Rebecca’s question is, perhaps, the most interesting line in the article. What indeed do American buyers “need” in a car? Maybe they do “want” to have certain features, but cost is a very major factor in their decision. There is nothing new or shocking in this finding. What is new is the lack of green or environmental values connected to what has been widely advertised as a green vehicle. This finding mirrors what public opinion pollsters often find: a large discrepancy between the actual buying behavior and the espoused values as stated in surveys. Sometimes only a few cents can shift the purchase from a “green” product to a more familiar alternative. With hybrids hundreds of dollars of lost savings as gas price falls are involved. The article points out that even large cash incentives has not maintained the previous level of interest in hybrids of all brands. Does all this mean the Hummer is on the way back?

This finding is quite consistent with my argument that underlying cultural values must change before we will see any substantial change in patterns of consumption. As long as products are designed and advertised to appeal to the perceived “needs” of the customer ascertained through tradition market research, it will be no surprise that that is how they will respond. The self that is interested in buying something has been socialized to believe that its satisfaction depends on the things it acquires. Cheaper means more things can be acquired.

But if caring for the environment is perceived as part of one’s identity, then it is more likely even models based on self-interest will allow for more weight given to values outside of the narrow band presumably at play in the standard utility maximizing model. The shift from a need for things (having) to one based on caring (being) can power a change in fundamental consumption patterns that might be able to insulate “green” products from the vagaries of the cost of gasoline or the attraction of a cheaper, less green item. I do plan to buy the 2010 version of the Prius when it shows up later this year, no matter what the price of gas is at the time. (Secretly, I expect the price of gas to rise as the recession draws to a close.)

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1 Comments

Kevin said:

Good on ya John... I'm looking at the 2011 for my wife and (soon to be) newborn... how are you liking the 2010?

I'm also hoping that SUVs go the way of the dinosaur sooner than later... the hypocrisy is killing us...