Skilled Trades Association, CAW Local 199 St. Catharines (General Motors Unit) | |||||||||||||||||||||||||||||||||||||
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The Extra Cost of Buying a Hybrid By JEREMY CATO The surging cost of a fill-up is figuring into the car-buying decisions of Canadians, but it's not the only reason Toyota is expanding its fuel-conscious fleet of gasoline-electric hybrid vehicles with the introduction of the station wagon-like 2006 Toyota Highlander Hybrid SUV. The environment is also weighing on the minds of many consumers who want to drive a larger vehicle but also want to be socially responsible. Gasoline-electric hybrids pollute less than comparably sized non-hybrids. The Highlander Hybrid, for instance, meets Environment Canada's stringent Tier 2 Bin 3 standard and it also is certified for the tough California Air Resources Board Super Ultra Low Emission Vehicle tailpipe standard. Obviously, fuel economy plays a big role. Toyota Canada claims fuel consumption for the Highlander Hybrid is half that of conventionally powered SUVs at 7.5 litres/100 km city, 8.1 highway and 7.8 combined. A seven-passenger gas-powered V-6 Highlander gets fuel economy of 12.7 city/9.0 highway. Clearly, there is a "feel-good factor" coming into play for many hybrid buyers who are willing to pay a stiff premium for the latest "green" automotive technology. For a manufacturer such as Toyota, which has invested more heavily in its hybrid effort than any other auto maker, there is a significant marketing benefit in being seen as the leader in offering environmentally sensitive vehicles -- even if fuel economy and environmental gains, not to mention fuel-pump savings, are marginal compared to other vehicle ownership costs. Not all auto makers have seen hybrids in this way. Earlier this year at Detroit's auto show, General Motors vice-chairman Bob Lutz, who heads all product development for the giant auto maker, admitted that his company overlooked the marketing and public relations benefits of selling a growing fleet of hybrid vehicles to the public. In analyzing the "business case" for hybrids, GM did a rigid cost-benefit analysis and found that, purely in terms of dollars and cents, the right decision was to delay the technology until it was ready for wholesale application to large fleets of fuel-swilling pickups and sport-utility vehicles. So GM overlooked the value of hybrids to auto makers interested in creating a positive image in terms of public perception. "We forgot the emotional impact and the fact that a lot of people out there want to make an environmental statement," Lutz said. Toyota has not made that mistake. According to J. D. Power and Associates, by 2011 the number of hybrid models will expand to 38 -- 17 cars and 21 trucks and SUVs -- and Toyota can be expected to dominate the market with the greatest variety of vehicles. The J. D. Power study found that Toyota holds more than 60 per cent of the North American hybrid market and though its share is expected to shrink to 40 per cent by 2011, it will remain the market leader. Indeed, Dave Hermance, executive engineer of environmental engineering at Toyota's Technical Centre in the United States, says the auto maker is on track to hit its sales goal of 100,000 gasoline-electric hybrid vehicles in 2005. In addition to the Highlander Hybrid and the Lexus RX 400h launched in the past few months, Toyota also plans to introduce hybrid versions of the Lexus GS and Toyota Camry in the 2007 model year. They follow the highly successful Toyota Prius five-door hatchback launched earlier. No other auto maker approaches the scope of Toyota's hybrid effort. The J. D. Power study projects that Honda's current 31 per cent of the hybrid market will slip to 20 per cent by 2011. GM's Chevrolet brand is forecast to be the largest domestic brand in the hybrid market, growing its share to nearly 15 per cent by decade's end. Ford, which last year launched the Escape Hybrid SUV and has plans to sell at least three other hybrids by next year, will be eclipsed by GM. In the meantime, current hybrid sellers Toyota, Honda and Ford will soon be joined by not only GM but also Nissan, DaimlerChrysler, Hyundai and even Kia. Admittedly, hybrid sales today remain minuscule in terms of the overall new vehicle marketplace. According to DesRosiers Automotive Consultants, thanks to the arrival of the new Prius, hybrid sales in Canada increased more than six-fold from 2003 to 2004 and they more than doubled in the United States during the same period. That means only 1,960 hybrids sold in Canada in 2004 and 54,574 sold in the U.S., not including sales figures for the Honda Civic Hybrid. But in a recent study, Michigan-based R. L. Polk & Co. noted that sales of hybrids have risen by 960 per cent since 2000. So while hybrids account for only one per cent of the 17 million-plus new vehicles sold in Canada and the U.S. today, the trend is clearly toward booming sales of gas-electric vehicles in the medium term. In fact, another Polk poll of 307 people found that 97 per cent of people have heard of hybrid vehicles, and 78 per cent would consider purchasing one. Auto makers have seen this and similar research and it is one reason they are making this move into hybrids. But it's not the only reason. Another key one is that gas-electric vehicles represent a transitional technology leading to hydrogen-powered fuel cells -- even though mass-production hydrogen vehicles for public consumption are at least a decade or perhaps even two away. Hermance expects Toyota to be on the leading edge of fuel-cell technology, whenever it comes. "Our fuel-cell vehicle uses the same battery that's in the Prius," he explains. "All the learning you do today, all the parts you develop today, except for the gasoline engine, will be directly used on future fuel-cell vehicles." Despite the future promise of a transition to clean hydrogen-powered vehicles, the painful truth today is that the lower emissions and better fuel economy of hybrids come at a very steep price. And consumers are well aware of this. According to Polk, 61 per cent of those surveyed said cost could be a consideration in a hybrid purchase, and 30 per cent feel that the extra money spent on a hybrid might not be worth it. Beyond that, hybrids typically fall well short of their fuel-economy ratings. Indeed, if fuel prices are your main concern, gasoline-electric hybrid vehicles deliver a relatively puny savings in the overall scheme of what it costs to own and operate a vehicle. Dennis DesRosiers of DesRosiers Automotive Consultants points out that insurance costs, depreciation, taxes and regulatory charges all cost Canadians much more than fuel in the final tally of vehicle operating costs -- even with gas at $1 a litre or more. Says DesRosiers: "A typical mid-size vehicle costs about $1,200 to $1,500 per year for fuel. These higher gas prices have pushed that up by about $100 to $200 per year. Will a consumer change their vehicle purchasing buying decision for $200 per year? "Remember the average transaction price of a vehicle in Canada is over $30,000, so an extra $200 per year may not be enough to change buying behaviour." So the sad reality is: Not only do most people fail to save enough on fuel to offset the higher initial price, today's hybrid also costs $5,000 to $8,000 or more than the same non-hybrid vehicle. Some of that extra cost is being offset by a variety of tax-rebate schemes put in place by several provinces, including Ontario and British Columbia. They can provide tax relief equalling up to several thousand dollars on the purchase of a hybrid and are worth exploring with local dealers. However, before tax deals come into play, buyers face some pretty fat hybrid sticker prices. The hybrid's fuel savings The 2006 Highlander Hybrid follows on the heels of Toyota's other hybrids, the Lexus RX 400h and the Prius. Toyota holds more than 60 per cent of the North American Hybrid market. The Highlander Hybrid pairs a 3.3-litre double overhead cam engine with a 167-hp electric motor with regenerative braking. The calculations: Toyota Highlander Hybrid
Toyota Highlander V-6
SOURCES: NATURAL RESOURCES CANADA, M.J. ERVIN AND ASSOCIATES The savings: With gas at 99 cents a litre, the annual fuel savings for the Highlander Hybrid versus the Highlander V-6 comes to $646.47. That's a substantial annual fuel cost savings, but it would still take 11.3 years to pay for the $7,305 premium you are charged for hybrid technology in a five-passenger Highlander Hybrid ($44,205) versus the five-passenger V-6 (36,900). A tax rebate of $2,000 reduces the payback period to 8.2 years. | |||||||||||||||||||||||||||||||||||||
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