Will Hybrid Price Cuts Increase Sales?

Many automakers have cut prices on hybrid vehicles in order to spur sales, which have lagged below expectations. Recently Toyota dropped the price of the 2014 Prius base hybrid plug-in by $2,000. It is not just Toyota being affected by the market. Plug-in hybrid electric vehicles (PHEV), extended-range electric vehicles (EREV), and pure battery EVs, have all seen a drop in sales.

Plug in hybrid

Plug in hybrid (Photo credit: Tom Raftery)

When asked about potential causes for the decrease in sales, research engineer and PHEV/EREV/EV expert Bill-Insup-Kim says, “There are numerous factors that can affect sales of PHEV, EREV, and pure battery EVs. These factors include price, performance, NVH, comportness, charging station availability, environmental concerns, customer vehicle knowledge, and so on. Until now, most of the vehicles have also had a high price yet sacrificed performance. The price cut does not guarantee an increase in sales. However, when it comes to Prius PHEV, its users are sensitive to price, so I can expect the price cut would help increase sales.”

Frederic-Delrieu, an automotive engineering project leader and technical synthesis engineer, also shares his thoughts about the hybrid market. “This price drop mostly concerns HEVs, which face increasing competition with BEVs, especially with innovative commercial schemes such as battery rental. As recently demonstrated at the Frankfurt Motor Show, new models are coming and that increases the competition with BEVs, but also shows more and more the disadvantage of HEVs that remain heavy, complex and expensive, not only when buying them but also when refueling them with gas. The next months should bring more visibility on the price convergence of these technologies and their market shares.”

Vice president of engineering  Paul Gifford, Ph.D. sees the Toyota price drop as more than an issue of the public’s acceptance of hybrids. “Clearly charge sustaining hybrids such as the Prius have gained excellent customer acceptance, with new models being announced almost daily. Toyota still dominates this marketbut the company as a whole has been hit recently with several high profile quality issues. This may have spurred a price drop for the new Prius, or it may simply reflect decreases in cost as the technology has matured and sales volumes have increased.”

He continues, “The argument for plug-in and/or pure battery remains a difficult one, particularly for the US with its relatively low cost gas. Pure battery EVs will always remain a niche market due to perceptions around range limitations. Plug-ins present a more complex equation, but I believe most consumers will find that the limited fuel savings (estimated at about 5 cents/mile) do not justify the added cost combined with the need to install a charger, plug the vehicle in daily, and still have the maintenance issues associated with a conventional IC drivetrain.”

Regional sales manage r Sherry Calkins  has been employed in the automotive business for many years. She explains, “Hybrid technology has certainly come a long way. Having said that, so has your basic 4-cylinder vehicle. In addition, today’s market offers a lot of fuel efficient gas options in the lines of crossover vehicles vs. traditional SUVs. Consumers today are being marketed with MPG everywhere and are more educated today in terms of options. When a consumer is considering a hybrid vehicle vs. conventional gasoline, they weigh their options on ROI. In most cases, the upfront purchase price of a Hybrid vs. a gasoline vehicle can be in the thousands, and when you compare the MPG on a 4 cylinder sedan, today’s models have much better fuel efficiency and can give Hybrids a run for their money. Couple the purchase price of Hybrids with the reduction of tax credits, and consumers aren’t seeing the dollars and cents add up.”

Consumers will be watching to see if hybrid vehicles will find a permanent place in the automotive market. Market analysts will have to see whether Toyota’s decision to drop the price of their base hybrid plug-in will make a difference.

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