PLUG OK license plate
Wall St.Journal, Toyota, Edmunds on Hybrid Packbacks
Jun 20, 2008 (From the CalCars-News archive)
This posting originally appeared at CalCars-News, our newsletter of breaking CalCars and plug-in hybrid news. View the original posting here.
Want more? Become a subscriber to CalCars-News:

We've often said people don't buy hybrids for paybacks -- they're buying "the environmental feature," just like people buy leather seats -- or for that matter, choose an eight-cylinder car instead of a six even knowing it has a "negative payback." But journalists keep focusing on it. Of course, when we get mass-produced PHEVs, the issues will be recast: especially if tax incentives cover some or all of the additional cost for the first PHEVs, their operating expenses of 2-4 cents/electric mile vs. 10-40 cents/gasoline mile will help sell PHEVs.

Meanwhile, here are several views on the topic. Our favorite is the Wall Street Journal's, because it ends up talking about PHEVs. We follow that with Toyota's new posting, that positions the numbers more positive than anything we've seen as a result of its method for evaluating what vehicles are compared, and Edmunds' study, which would have made the Wall Street Journal's analysis look far better.

Joseph White, the Journal's Detroit Bureau Chief, has been saying more and more positive about PHEVs in recent months. Here are excerpts from what he said on April 7, in "Getting All the Carbon Out of Cars: California's Embrace of Plug-in Hybrids Shows How Hard Zero Emissions Really Is: "Plug-in hybrids, essentially gas-electric cars modified to run in all electric mode for a significant portion of a daily commute, have made the journey from the auto industry's fringes in near record time. Just a couple of years ago, Toyota Motor Corp. was discouraging people from modifying its Prius hybrids so that the batteries could be recharged from a wall outlet. Other car makers dismissed plug-ins as the answer to the question: "How could anyone make a gas-electric hybrid more impractical and costly?" Then, gas prices shot up, consumers began clamoring for better fuel efficiency, and minds began to open. General Motors Corp. got such an enthusiastic response to a plug-in hybrid show car called the Chevy Volt, that it decided to put the car into production ­ and feature it heavily in advertising. Toyota's engineers remain wary of the potential technical problems of the lithium-ion batteries needed to make a plug-in hybrid go. But Toyota decided to go with the flow, announcing it plans to field a test fleet of plug-in hybrids by 2010 for tightly controlled use in fleets.....So mark down a victory for the technological insurgents who pushed the plug-in concept over Detroit and Nagoya's objections. But it's a long way from the end of the war."­article/­SB120733236876290335.html?mod=googlenews_wsj Now here's his latest column:

Still Waiting for Hybrids To Be the Smartest Buy, Higher Gas Prices Help the Equation;
Will the Future Be With Plug-ins?
By Joseph White June 16, 2008­article/­SB121346814330775183.html?mod=hps_us_inside_today
(usually this column appears in the Tuesday print edition, but this one didn't)

A colleague came to me recently with a question that is on the minds of a lot of American consumers these days: Should I buy a hybrid car?

With gasoline at record prices, demand for some (though not all) gas-electric hybrid vehicles is booming. The average Toyota Prius is getting sold just 13 days after hitting the showroom floor, according to Power Information Network data sampled from dealerships. A year ago, it took 24 days to sell a Prius. Prius sales dropped 38% in May compared to a year ago, but that was because Toyota dealers were running out of cars to sell. Dealers had just 3,832 unsold at the end of a month during which they sold more than 15,000 cars. (Those same Toyota dealers had more than 19,000 Sequoia sport utility vehicles gathering dust at the end of May, according to Autodata Corp., after selling just 3,575 of the U.S.-made big rigs.)

Readers, over to you: Have higher gas prices pushed you to buy a hybrid as your next vehicle? Discuss.

Honda Civic hybrids are selling in an average of 30 days, compared to 67 days a year ago. Average prices for both cars are higher – more than $1,000 higher in the case of the Prius. (Not moving so well is the Nissan Altima hybrid, which is sitting on the showroom floor an average of 60 days.)

The stampede toward hybrid technology reflects the much broader rush toward smaller, more fuel-efficient vehicles that has roiled the auto market as gasoline prices started topping $4 a gallon. Hybrid fever seems to be everywhere, as car makers compete to demonstrate their pro-hybrid bona fides. (Toyota last week said it will show off early next year two new hybrids. General Motors Corp. is providing regular progress reports on the status of its Volt plug-in hybrid, due in 2010. )

The problem is that even at $4 a gallon, most current hybrid vehicles won't save their owners enough at the pump to pay back quickly the price premium over similar, conventional vehicles. The numbers have gotten better, of course, as gasoline prices have risen. But buying a hybrid isn't financial a no-brainer. It depends on your starting point -- what vehicle you drive today -- what you are willing to consider as an alternative to a hybrid, and how much you value the non-monetary benefits of hybrid ownership.

For example, by my rough calculation, if my colleague buys the Honda Civic Hybrid he's considering, he'll likely save $640 a year out of pocket compared to a regular Civic sedan, if his hybrid averages the EPA combined estimate of 42 miles per gallon over 15,000 annual miles and gas stays around $4 a gallon.

But the hybrid Civic lists for about $4,840 more than the gasoline model. A calculator or (in my case) an Excel spreadsheet says the payback on gasoline alone will take about 7 ˝ years. This is why my colleague is now focused on benefits of hybrid ownership that can't be counted in coin -- such as the privilege of using the High Occupancy Vehicle lanes on the suburban freeways around Washington D.C.

Consumer Reports in 2006 did a more elaborate analysis, factoring in depreciation, savings from tax credits and maintenance costs and concluded that most hybrids cost more over five years than their standard counterparts. Over longer periods, some hybrids get into the money.

But if what you're really after is the best mileage for dollar spent, a forthcoming Consumer Reports analysis will conclude that you should buy a Honda Fit, says Jeff Bartlett, a Consumer Reports editor.

This price-to-gas-savings issue shouldn't even be such a close call. Frustration over the comparatively modest benefits of current hybrids is a main driver behind the enthusiasm for the concept of the plug-in hybrid. Just three or four years ago, advocates of plug-in hybrids were a small band, operating on the fringes of the automotive mainstream. They hacked the battery packs of Toyota Priuses to create cars that could recharge from the electrical grid and run far longer in all-battery mode than a standard Prius. Toyota effectively disowned the plug-in movement -- and still isn't wild about it. Other manufacturers largely ignored the plug-in geeks.

That was then.

PHOTO CAPTION: A modified Toyota Prius that is a plug-in hybrid

Last week, a conference on plug-ins sponsored by the Brookings Institution, a Washington think tank, and, an arm of Internet giant Google, drew a standing room only crowd to a big hotel ballroom just a few blocks from Capitol Hill in Washington, D.C.

Among the speakers was former Central Intelligence Agency director R. James Woolsey, who drives a plug-in Prius and is advising Republican presidential candidate Sen. John McCain (R., Ariz.) Widespread and rapid adoption of plug-ins, he said, could help break the stranglehold of oil on the U.S. economy -- and undermine al Qaeda by drying up the flow of dollars to the Middle East. Mr. Woolsey's vision is to develop cars that use carbon fibers for light weight, clean energy from the grid to recharge batteries, and ethanol for backup fuel to achieve the equivalent of 1,000 miles per gallon.

"We can, we should and we must destroy oil's monopoly!" Mr. Woolsey thundered, jabbing the lectern as the crowd applauded.

The conference was a dramatic demonstration that the plug-in insurgency is now going mainstream. But it also remains vulnerable. Speakers at the conference stressed how the technology needs Washington's help -- in the form of subsidies, tax breaks, and mandates to adopt new standards for recharging infrastructure such as "smart" electric meters that can assess lower fees for replenishing batteries in the dead of night.

The Department of Energy did announce at the conference it would offer the Detroit Three $30 million over three years to help develop plug-in prototypes. But that's small change against the full costs of retooling for mass production of such vehicles.

As advocates of climate change action can testify, waiting for Washington to flash a green light can consign even the most stirring vision to the slow lane.

Irv's Sheet: The Hybrid Premium Payoff, June 17, 2008­2008/­06/­irvs-sheet-the.html
by Irv Miller, Group Vice President, Corporate Communications

There's been a great deal of talk recently about how cost-effective running a hybrid vehicle really is. The issue, it seems, is the amount of time required for the reduced cost of operation of a hybrid to pay off the vehicle's price premium.

Vehicles with alternative powerplants like hybrids cost a bit more than do vehicles with standard engines. In addition to the usual gas engine, the Toyota Hybrid Synergy Drive powertrain also includes an electric motor, a special continuously variable transmission, a battery pack, a regenerative braking system and a lot of computing power to make it all work. Hence, the price premium.

But a hybrid saves you money because of superior fuel economy, so you spend less on gas, right? So how far must you drive before your mpg savings pay off that premium? It depends on the amount of the price premium (the price difference between a hybrid and a comparable non-hybrid), and on the price of gas.

Various studies that give a surprising spread of payback times are being circulated. In fact, one of these studies surfaced on the Today Show, on MSNBC, June 10. None of these numbers looked right. So we decided to crunch the numbers ourselves so that we could see what's going on.

We started with three popular hybrid vehicles - the Prius, the Camry hybrid and the Highlander hybrid. To arrive at what we'll call the "hybrid premium," we started with the True Market Value (TMV) prices of the base hybrids as calculated by the popular auto site, using the numbers we found there last week. From that, we subtracted the TMV prices of equivalent non-hybrid vehicles. In the Prius's case, we used a four-cylinder Camry SE, which in our line is the car closest to it in overall size; in the case of the Camry Hybrid, we used a four-cylinder Camry XLE, which is closest to the Camry hybrid in trim level; and in the case of the Highlander hybrid, we used a standard AWD V6 Highlander.

For the purposes of this calculation, we used the vehicles' EPA-rated combined mpg figures, an average of 15,000 miles per year and per-gallon gas prices of $4.00, the current national average. We also ran the calculations using $4.40 per gallon. Here's what we found:

The price premium for the Prius is $97, and at $4.00 per gallon, according to our calculations you'd get annual fuel savings of $1,096 and achieve payback in 0.1 year, or a little more than one month. At $4.40 per gallon, you'd save $1,205 per year and still achieve payback in 0.1 year. The premium for the Camry hybrid is $2,155, and at $4.00 per gallon, you'll save $635 per year and achieve payback in 3.4 years. At $4.40 per gallon, you'd save $699 per year and achieve payback in 3.1 years. Finally, the premium for a Highlander hybrid is $7,052. At $4.00 per gallon, you'd save $850 per year and achieve payback in 8.3 years. At $4.40 per gallon, you'd save $936 and achieve payback in 7.5 years.

In the past, before fuel prices spiked, the payoff period wasn't much of an issue, at least for some, because people bought hybrids like our Prius because of their perceived "green" character. Being "green," of course, is good. But saving money also is good. And if you can be "green" and save money at the same time, that's the best of both worlds. It is, in fact, the world of Toyota's Hybrid Synergy Drive. I just thought you should know.

Hybrids "Paying Off" More Quickly, New Edmunds Data Shows
Edmunds AutoObserver
May 08, 2008 By Bill Visnic­2008/­05/­hybrids-paying-off-more-quickly-new-edmunds-data-shows.html

As gasoline prices go higher, many hybrid-electric vehicles currently on sale are proving to be even wiser investments, says new data from

Considerable past discussion about hybrids has focused on "payback" time, or the period required for savings from a hybrid's enhanced fuel economy to recoup the initial higher purchase price a hybrid commands. Detractors often claimed that, from a strictly fiscal view of hybrids, most vehicle purchasers would never save enough in gasoline costs to recover their investment in expensive hybrid technology.

But with every increase in gas prices, the hybrid payback time becomes consequently shorter - to the point where some popularly priced hybrid models can pay back their owners' investment in as little as 18 months, according to the new study.

That's the case with Toyota Motor Corp.'s Camry Hybrid, currently one of the nation's best-selling hybrid vehicles. Compared with a conventionally powered four-cylinder Camry XLE, the Hybrid model costs $889 more, says Edmunds. But based on 15,000-mile-per-year driving, the Camry Hybrid saves $573, assuming gasoline priced at $3.61 per gallon. At that rate, owners can recoup their hybrid investment in just 18 months.

General Motors Corp.'s Chevrolet Malibu Hybrid also is a fuel-efficiency investment with relatively quick return. Edmunds data shows the extra $438 the Malibu Hybrid costs compared with a conventional four-cylinder Malibu LT is returned in 2.7 years. Driving the Malibu Hybrid saves about $160 in fuel costs annually, Edmunds says.

For many hybrid buyers, it's never been about the money -- hybrid ownership is an environmental statement. But many factors now are aligning to make purchase of a hybrid vehicle not so bad for the wallet, either.

"Environmentally conscious consumers have been drawn to hybrid vehicles since day one and were willing to pay a premium for them," said Jesse Toprak,'s Executive Director of Industry Analysis. "But now as a result of lower price premiums, higher gas prices and, in some cases, tax credits, it won't take long for consumers to offset the price premium and actually save money by buying a hybrid -- depending on which one they choose."

For Toyota, the nation's volume leader in hybrid-vehicle sales, federal tax subsidies for buyers -- which are tied to the number of hybrids sold -- have long since disappeared. But many other automakers' models still qualify buyers for federal tax credits; the Edmunds payback data takes into account any applicable tax credits.

And what of Toyota's Prius, the most famous and most recognizable hybrid on the road? Prius has no non-hybrid counterpart, but Edmunds says compared with a four-cylinder Toyota Camry LE sedan, a Prius returns its $3,489 hybrid "premium" in about 3.5 years, saving a customer who drives 15,000 miles annually a not-unsubstantial $989 each year -- or about $82 per month.

Costlier hybrids, meanwhile, are better bought for their environmental feel-good rather than their economic merits. An extreme example is the LS 600h L from Toyota's upscale Lexus division: Owners had better buy while they're young, because the LS 600h L requires 68.6 years to pay back the gigantic $18,630 it costs over the standard-powered LS 460L.

But the long-payback factor is not limited to premium-priced hybrids. Owners would have to hang on to GM's Saturn Aura Green Line hybrid for 16.2 years to recoup their investment in hybrid technology, and the Toyota Highlander Hybrid takes 12 years to return the extra cost of hybridization.

HYBRIDCARS.COM'S VIEW (USING EDMUNDS NUMBERS)­decision-process/­new-hybrid-math.html
The New Hybrid Math
Published May 19, 2008

This week, Toyota will raise the price of a few of its cars, including a $400 hike on the Toyota Prius and a bump on the Camry Hybrid by $300. But in the past four weeks, the average price of regular gasoline increased by almost 30 cents a gallon. Therefore, in actual ownership costs, the price of Toyota hybrids is cheaper this week than it was a month ago. Welcome to the new hybrid math.

Buying a hybrid car, like any consumer purchase decision, has never been solely about dollars and cents. As many economists have pointed out, consumers buy things just as much based on their hopes and fears about the world, and desires for their own lives. Nonetheless, the media has repeatedly crunched the numbers on the “payback period” to demonstrate that hybrids don't add up--until $4 gas turned that argument on its head.

In April 2006, Consumer Reports said that not a single hybrid would recoup its extra cost over five years of ownership--and then recanted its study, designating the Toyota Prius, Honda Civic Hybrid, and Ford Escape Hybrid as economic winners. Since that time, the EPA rating of hybrids has been cut by about 20 percent, and Toyota and Honda hybrids have lost some or all of their federal tax incentives. How did that affect the hybrid cost-benefit analysis?’s most recent analysis released earlier this month expanded the list of hybrids that earn a five-year "payback" to five models: Chevrolet Malibu Hybrid, Honda Civic Hybrid, Nissan Altima Hybrid, and Toyota's Prius and Camry Hybrid. Edmunds used an average gas cost of $3.61 per gallon and 15,000 miles a year of travel. If you expect the price of gasoline to average more than $3.61 over the next five years or to keep the car longer than five years, the math looks even better. And Edmunds is not calculating relative resale values for hybrids.

"Environmentally conscious consumers have been drawn to hybrid vehicles since day one, and were willing to pay a premium for them," said Jesse Toprak,'s industry analyst. "But now, as a result of lower price premiums, higher gas prices and, in some cases, tax credits, it won't take long for consumers to offset the price premium and actually save money by buying a hybrid--depending on which one they choose."

The shifting economic algebra of hybrids is expected to accelerate the red-hot growth of the market for gas-electric vehicles. As most of the auto industry suffers through a dismal year, Prius sales in April jumped by 67 percent compared with last year. "Many of our Priuses sell the same day they arrive on the lot. If they haven't already pre-sold, that is," said Bill Kidd, a Baltimore-based Toyota dealership owner, in an interview with

A few other numbers to consider: Toyota recently announced that it sold its one millionth Prius. And despite the $400 price increase and the belt-tightening in the United States, Toyota is maintaining its goal to sell one million hybrids globally every year beginning in about three years.

Copyright © 2003-08 California Cars Initiative, an activity of the International Humanities Center | Site Map