Study: Are Hybrids on the Decline?

Although it may seem like the car market is flooded with more and more hybrid models these days, the overall market for gasoline-electric cars is not growing as quickly as you’d think. According to a new report from IHS Automotive, hybrid cars’ market share percentage has actually declined recently despite an increase in available hybrid models.

IHS Automotive counts that the number of hybrids on the market has nearly doubled between 2009 and 2014, going from 24 hybrids on sale in the U.S. five years ago to 47 hybrid models available currently. But hybrids’ market share has not kept pace with this expansion. From 2009 until 2013, this increasing number of hybrid models only resulted in a 0.9 percent gain in market share, from 2.4 percent to 3.3 percent. So far in 2014, hybrid market share has actually declined compared with last year, going down 0.3 percent to 3.0 percent market share.

Why is this happening? IHS analyst Tom Libby says that the increasing efficiency of traditional internal combustion engines is a significant factor in rendering hybrids less appealing to consumers. Fuel-saving technologies like direct-injection, turbocharging, and start-stop systems mean that non-hybrids are inching ever closer to their hybrid equivalents in terms of EPA mileage ratings, but for significantly less cost.

For instance, one of the hybrid models mentioned in the study is the Honda Civic Hybrid, which is rated at 45 mpg combined. The standard 2014 Honda Civic sedan has a significantly lower combined rating of 33 mpg, but costs more than $5000 less than the Civic Hybrid. If you calculate the payback cost of hybrids compared with traditional gas-powered cars, in terms of fuel cost and initial purchase price, few hybrids today make sense from a financial perspective. Libby said that in his research, he found that the Toyota Prius was the only hybrid with a reasonable payback period over an equivalent gasoline-powered car.

As for why automakers continue to launch more and more hybrid models if the market doesn’t seem to support them, Libby reiterated the fact that there is a lag between when a decision is made internally and when a vehicle comes to market. Additionally, once an automaker has incurred the cost of developing a hybrid powertrain, it makes financial sense to install that powertrain into more models in the lineup -- regardless of how popular hybrids are in the new-car marketplace.

Going forward, we may see less of an emphasis on hybrid powertrains as automakers funnel more and more funds into developing fuel-saving technologies for higher-volume traditional gasoline engines. Libby mentioned that diesel engines may also be on the rise in the U.S., especially for European brands looking to increase fuel economy, as German luxury automakers, for instance, already produce efficient diesel engines for their European offerings.

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