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Auto dealers just love hybrids. These high-mileage vehicles, which run on both gasoline and electric battery power, yield higher profit margins than their gasoline-only counterparts. They also spend a third to a half as much time on dealers' lots than conventional models, according to a recent study by J.D. Power and Associates.
Another good thing about hybrids: They generate positive buzz for the dealer's featured brand, luring more people to showrooms and helping to increase sales of nonhybrid cars as well. That's been the experience of dealers selling the cars of Japanese automakers Honda and Toyota, pioneers in the field.
"Hybrids provided a 'halo effect' for Toyota and Honda, building an image in consumers' minds that they are environmentally friendly companies," notes Tom Libby, senior director of industry analysis for Power Information Network, a division of J.D. Power. "Other automakers decided they had to have hybrids, too."
Automakers are feeling pressure to churn out more hybrids. And they will.
Next month, Lexus rolls out the LS600, followed by the Saturn Aura from General Motors in June. In September, look for a hybrid Chevy Tahoe, GMC Yukon, Chevy Malibu and Cadillac Escalade. In all, at least 16 new hybrid models will join the flexible fuel fleet over the next 18 months.
For the time being, Toyota's Prius is far and away the top draw in the category. Prius sales averaged between 8000 and 11,000 a month last year, capturing 30% to 45% of the hybrid-vehicle market. Toyota's hybrid Camry debuted on the market in April 2006, and its sales are climbing quickly, currently averaging 4000 to 5000 a month. Honda's Civic is another outperformer in this class, though the hybrid Accord has been a bomb -- hobbled by perceptions that the car is overpriced.
Ford is so far the lone Detroit automaker to offer hybrids. Its gas-electric version of the Escape SUV is doing pretty well, with just over 19,000 sold last year, versus 20,000 for the Lexus RX400h, its principal rival. But sales of Ford's Mercury Mariner hybrid have lagged, totaling barely more than 3000 in 2006.
By 2010, 4% of cars and SUVs sold in the U.S. will be hybrids -- totaling about 700,000 -- compared with roughly 1.5% now. Sales of diesel-powered vehicles will also increase dramatically as automakers cash in on the fact that diesel engines are up to 25% more fuel efficient than gasoline engines. Around 750,000 diesel vehicles will be sold by decade's end, up from about 450,000 now.
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