NCPA - National Center for Policy Analysis


September 14, 2004

Hybrids may offer better gas mileage than traditional cars, but consumers buying such vehicles will end up paying more in the long term, say observers.

The reason, say industry analysts, is that conventional cars with their economies of scale can be produced more cheaply, offsetting much of the advantage of higher fuel efficiency. For example:

  • Most hybrid cars are $4,000 more expensive than a conventional vehicle, with some models costing several thousands more, such as the upper-scale Toyota Prius.
  • The Toyota Prius can get as high as 60 mpg in the city, while its closest conventional competitor, the Honda Civic, gets about 29 mpg but costs $6,000 less.
  • Thus, it would take more than 21 years at current gas prices to recoup the extra purchase cost between a Toyota Prius and a non-hybrid Honda Civic.

Moreover, while Toyota reportedly has been able to make its hybrid vehicle program profitable, the same cannot be said about many other manufacturers, whose investment in hybrid technologies cannot be completely recouped through higher sticker prices.

Some car makers, such as General Motors, are taking a different approach: making "mild" hybrid cars. Such technologies promise to raise fuel efficiency by 5 percent to 13 percent versus comparable traditional vehicles, while adding only a few hundred dollars to the price.

Source: Donna Howell, "Hybrids Use Less Gas But High Sticker Price Outweighs Any Saving," Investor's Business Daily, September 8, 2004.


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