Dec 14 2009

Plug-In Hybrids: The Good, The Bad and The Ugly

Posted by: Jonathan Marshall

There's good news and there's bad news today for fans of plug-in hybrid cars.

The good news first: Toyota, the undisputed champion of traditional hybrids, has belatedly announced plans to introduce a plug-in version of its best-selling Prius. It's a little early to get in line--only 150 will ship to the United States next year for a demonstration program--but the company aims "to begin sales in the tens of thousands of units to the general public in two years."

Earlier this month, General Motors announced that it would begin producing its long-awaited Volt--with an electric range four times greater than the plug-in Prius--late next year. GM said it is "working with key utilities across North America to prepare each regional market in advance of the retail market deployment." One of those utilities is Pacific Gas and Electric Company.

Now the bad news: the National Research Council claims in a new study that plug-in hybrid cars like the Volt will cost at least $10,000 more than manufacture than conventional vehicles, more than offsetting any savings on fuel costs. As a result,

Subsidies in the tens to hundreds of billions of dollars over that period will be needed if plug-ins are to achieve rapid penetration of the U.S. automotive market. Even with these efforts, plug-in hybrid electric vehicles are not expected to significantly impact oil consumption or carbon emissions before 2030.

Hopefully that assessment will prove pessimistic. One way to make it so would be to give consumers a stronger incentive to buy plug-in hybrids (and other fuel-efficient vehicles). That's why many automakers--including the heads of General Motors and Ford, along with most economists--now call for a higher federal gasoline tax, a position they would never have embraced a few years ago.

As Bill Ford Jr. said earlier this year, "We have to have some predictability on fuel pricing and that price signal has to be strong enough so customers will continue buying smaller, fuel-efficient cars."

Thomas Cooley, dean of the NYU-Stern School of Business, noted last year in a column for Forbes that gas taxes in Europe typically run $3.50 per U.S. gallon, seven times the average combined federal and state gas tax in the United States. "Put bluntly, we are not on the same planet where this issue is concerned," he observed.

Maybe with a higher gas tax in the United States, Ford would consider selling here its new version of the gasoline-powered Focus--available in Europe next spring--which gets a whopping 62 mpg. That's efficient enough to give any hybrid a run for its money.

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