Demand for hybrids cools as gas prices, economy plummet

The long lines for hybrid cars like the Toyota Prius have disappeared as gas prices have dropped from around $4 to $2 a gallon.

When gas was in the $4 range last summer -- and experts were suggesting it could hit $6 or $7 -- people everywhere were trying to get their hands on the Prius and other hybrids.

"Unfortunately, we didn't quite have the supply to equal the demand. That's when we started having waiting lists for the car because we didn't have enough cars for the amount of customers who wanted them," said John Stanley, who manages Power Toyota in Tempe.

Those lines are gone now, but Stanley said that's not necessarily because of gas prices.

"Our economic situation has driven car sales down in general, which obviously includes the Prius."

The demand is a little different now, said Stanley.

"There's not the urgency that people had when gas prices were $4 a gallon, now that they're down near $2 a gallon."

But, he said the Prius still is selling.

"The car has become a cool car to own. People who have had other really nice exotic cars have decided to buy Priusese. They love them. They love the gas mileage."

With a gas tank that takes you about $500 miles and costs roughly $20 to fill up, the car is still a great value, Stanley said. Once the economy turns around, and gas prices go up again, Stanley said the demand for hybrids may be bigger than ever.

Meanwhile, AAA Arizona says the cost of gas may drop even more, to below $2 a gallon before the year ends.

That's based in part on the Department of Energy's short-term energy outlook, which projects that gas consumption will continue to decline into next year. Gas in Missorui already is selling $1.88 for a gallon of regular unleaded.

Price cut may clear Civic Hybrid inventory

The special discount offered on the Honda Civic Hybrid is not sustainable by the car-maker and could be a strategy to clean up its inventory. On Wednesday, Honda had cut the price of the hybrid version of the Civic sedan from Rs 21.50 lakh to Rs 13.36 lakh and shocked the market with such an aggressive pricing.

However, while the company has sold 130 cars till today, it is offering only 190 cars under the scheme, which have been imported from Japan. "It seems we would be able to achieve this target in a few more days and the aim was to popularise the scope of the hybrid cars," says Jnaneswar Sen, senior general manager (marketing), Honda Siel Cars. Sen says the prices will revert to the original tag once the scheme ends. Sen adds that once the prices go up, he expects volumes to go down again, but asserts that the offer is not a inventory-cleaning method.

However, rivals say that Honda's strategy is meant to clean up inventory of hybrids which have been piling up in 2008. "This problem crops up in the case of cars that have the special edition tag whose inventory must be cleared within a given time span. In buying special cars like hybrids, year of manufacture matters especially during resale. Hence, the huge discount," says a senior executive of a leading Japanese auto-maker.

Other car majors in the country with hybrid models (existing or in planning stage) feel that they cannot follow such a strategy and the market is not big enough. The 4th largest manufacturer of cars – Toyota says it has no plans to speed up the launch of its best-selling hybrid car Prius in India. "We are studying the Indian market," says Sandeep Singh, deputy MD (marketing), Toyota Kirloskar. Industry CEOs say the Indian market is not ready for mass conversion to hybrid cars primarily due to its prohibitive cost arising from an import duty of about 104 per cent.

"The launch of the Scorpio hybrid is some time away," says Pawan Goenka, president (automotive sector), M&M.

Goenka says despite having to import key components of the hybrid vehicle into the country, it's cheaper to assemble a dual-fuel vehicle in the country than importing as a CBU.

Besides, the high price, industry sources say the infrastructure available for the largescale adoption of hybrid cars is not in place.

"Trained mechanics preferably by OEM or dealers are essential for the proper maintenance of the car. This is largely not in place, especially on highways and in the rural areas," says another source.

Honda Civic hybrid comes with a two-year preventive maintenance warranty or 80,000 km and standard warranty for two years or 40,000 km, besides roadside assistance for 4 years.