Monday, May 30, 2005
Todd McInturf / The Detroit News
Jimm White of Farmington Hills bought his 2005 Ford Escape Hybrid in September. "It's a neat car, and the gauges let you see how you're saving and using gas," he says.
Hybrid vehicle demand soars
Buyers face long waits and some pay premiums for latest fuel-efficient cars.
By Christine Tierney / The Detroit News
In March 2004, a year before
Toyota Motor Corp. began assembling hybrid versions of its Highlander SUV, Vince Procopio secured a choice spot on the waiting list with a $200 deposit. His order assured him the second gas-electric Highlander delivered to his dealer in Center Line.
Procopio grew tired of waiting and bought a secondhand Jaguar S-Type, but he held on to his Highlander order. Last month, he sold it for $499 on the eBay online marketplace.
"What gave me the idea was salesmen who told me, you can get a premium on it. They were so much in demand," said Procopio, a Troy salesman.
With gas prices hovering near record highs, dealers are selling every hybrid they can get. The gas-electric cars may have started out as a fad six years ago, but they appear to have staying power in the market even though they cost several thousand dollars more than conventional gas-powered models.
Waiting lists are so long that many customers are paying extra just to move ahead in line. Others are paying full sticker price for a used hybrid -- a practice rarely seen outside the trade of Ferraris and other super sports cars.
While automakers rely on cash rebates to prod sales, some car dealers are marking up the price of hybrids, or simply turning customers away.
Toyota already has 12,000 U.S. orders -- a six-month backlog -- for the hybrid Highlander sport utility vehicle, although the model will not hit showrooms until June.
The Japanese automaker has curtailed advertising for its new Lexus RX 400h hybrid to trim the order backlog. It now stands at 9,000.
"At the local Lexus dealer, they said it would be at least a year to get into the Lexus RX 400h, and I should get into a 330," said Lydia Segal, a physician from Alexandria, Va.
Ford Motor Co., the first automaker to produce a hybrid SUV, says customers wait two months, on average, to take home a gas-electric Escape.
Six years ago, when Honda Motor Co. brought its Insight hybrid compact to the U.S. market, it attracted mostly hard-core environmentalists.
But with hybrid technology now available in a wider range of vehicles, hybrids are appealing to a broader audience.
"We've seen pent-up demand for exotic cars, like the Ford GT, or limited-production models, but we've never seen this type of demand for a vehicle that is somewhat mainstream," said Mike Chung, pricing and market analyst at the online auto research firm Edmunds.com.
Cars twice as clean
As the name suggests, hybrids have conventional internal combustion engines as well as electric motors, which can assist the gas engine. In a full hybrid system, the electric motor can take over, especially during slow driving conditions, in city traffic, for instance, when internal combustion engines perform least efficiently.
The vehicles are about twice as fuel-efficient -- and less than half as polluting -- as similar gas-powered models.
"It's a neat car, and the gauges let you see how you're saving and using gas," says Jimm White, a financial adviser for Wachovia Securities in Southfield.
He bought a Ford Escape hybrid in September. "(The) No. 1 reason I bought it was for the gas mileage. No. 2, to join my daughter, who has had two (Toyota) Priuses, and I wanted an American hybrid. And No. 3, the country's got to start saving gasoline," White said.
While most hybrid buyers list fuel efficiency and low emissions as their primary reasons, demand also is fueled by factors ranging from the novelty of the technology to tax breaks and access to carpool lanes in some cities, and even political concerns.
Jim Press, chief operating officer of Toyota's U.S. sales division, says the cost of oil now includes more than crude and refining costs. Referring to the war in Iraq, he told analysts in January: "Would we be there if it wasn't for oil?"
A steep growth curve
Currently, hybrids account for only 1 percent of U.S. auto sales -- but that measure does not take into account potential buyers like Procopio who grew tired of waiting.
Edmunds.com's Chung estimates hybrids will triple or even quadruple their share of industry sales over the next three years as automakers ramp up output. Similarly, J.D. Power and Associates predicts hybrid vehicles will account for 3 percent of the U.S. light-vehicle market by 2008.
So far, hybrids are proving to be reliable vehicles, according to Consumer Reports magazine, although there are hiccups. Toyota is now looking into a handful of reports that Prius engines are losing power or stalling.
Some auto executives, including Renault and Nissan CEO Carlos Ghosn, say the business case for hybrids is weak because they are more expensive to produce. Toyota says it makes money selling hybrids, but its rivals aren't convinced.
GM executives initially viewed Toyota's commitment to the technology as a shrewd public relations exercise.
But both GM and Nissan now plan to offer full hybrids. GM teamed with DaimlerChrysler AG in December to develop front- and rear-wheel drive hybrid vehicles.
Last week, Nissan announced plans to produce a hybrid Altima sedan in North America in late 2006, using technology licensed from Toyota.
A growing lineup
Ford, intent on burnishing its environmental credentials, will expand its hybrid lineup to include a gas-electric version of the Mercury Mariner sedan later this year, a Mazda Tribute in 2007, and hybrid Ford Fusion and Mercury Milan sedans in 2008.
"Those all run off the four-cylinder hybrid configuration we have now" on the Escape, said Bryan Olson, marketing manager for the Escape hybrid.
After the success of its Prius hybrid compact, Toyota developed a more robust hybrid drive train for the Toyota-brand and Lexus SUVs.
Fitted with six-cylinder gas engines, the Highlander hybrid and Lexus RX 400h, which came out in April, are the largest full hybrids on the market and deliver the greatest torque and towing capacity.
More and fancier options
By expanding hybrid technology into premium segments, Toyota is reaching out to a more demanding class of customer.
Dylan Hixon, an investment manager in New York City, ordered a Lexus RX 400h 1 1/2 years ago and took delivery last month.
"I had made the decision to get a hybrid as soon as one with size, power, comfort and technology acceptable to me was available," he said.
"I could not be more pleased with the car. I am getting about 27 miles per gallon, which is roughly twice the mileage of the 2000 Range Rover that the RX 400h replaced."
Next year, Toyota will launch a rear-wheel-drive hybrid sport sedan, the Lexus GS 450h.
It will also begin producing a hybrid version of its best-selling Camry at its Georgetown, Ky., plant in 2006.
Honda's hybrid vehicle sales have ballooned from 17 in 1999, to 16,000 in 2002 when it introduced a hybrid Civic, to more than 27,000 last year. Its hybrid Civic and Accord sedan set sales records in April.
While waiting for more hybrids to roll into showrooms, customers are jockeying for anything available -- new or used.
Chung says used Toyota Prius models sell for sticker price or just under, while secondhand Insights and Civic hybrids retain less value because they are older.
With demand surging now for new hybrids, many dealers bid up the price.
Tom French of Hermosa Beach, Calif., says the first Toyota dealer he visited initially resisted adding "market value" markups.
But five months after French put down a deposit on a Highlander hybrid, "we received a call from another salesman who informed us that the price would include $2,000 for market value."
French canceled the order and went to another dealer.
"We've been very firm with our dealers about holding the line on MSRPs (manufacturer suggested retail price)," said Toyota spokesman John Hanson.
"From the customer satisfaction point of view, the wait is enough of an inconvenience without having to worry about additional dealer markups," he said.
These days, that's an unusual dilemma for automakers. "It's up to the dealer to negotiate the price," said Ford's Olson. "We tell customers to shop around for the best deal."
Source