High prices at the pump have sparked more interest than ever in hybrid vehicles, but while gas-electric types lead in availability, hydrogen-powered and other alternatives are coming on fast.
Consumers had been edging away from big gas-guzzlers, but once gas hit $4 a gallon they went running.
“It seems like that's the bell that went off and everybody started turning in their trucks and SUVs,” said Eric Ibara, director of market valuation at Kelley Blue Book.
Amid this flood, the resale value of a 3-year-old Cadillac Escalade SUV has plummeted 24% in a year to $24,500, says KBB, nearly twice the percentage of such a vehicle's decline just two years ago. By contrast, a fuel-sparing 3-year-old Honda Civic has lost just 8% in resale value over the past year.
“This is quite unusual in the marketplace,” Ibara said of the exodus from extra-big vehicles. “I've been talking to people in the business 20 to 30 years and the comment I keep hearing is they don't recall a time when this happened.”
U.S. vehicle sales fell more than 18% in June vs. a year ago, the worst showing in 17 years. All carmakers reported big declines, except Honda. In May, Honda Motor Co. (NYSE:HMC – News) said it logged its best month ever for U.S. sales of the compact Civic and its hybrid version. June was the best month ever for the subcompact Fit.
“The Civic and Fit are doing extremely well, because of gas prices,” said Honda spokesman Todd Mittleman.
The Civic gets 29 miles per gallon, its hybrid version 42 mpg and the Fit 30 mpg.
Hybrids cost more than comparable nonhybrids in any model line, to help manufacturers defray technology development costs. With $5-a-gallon gas, a $5,000 sticker-price premium on a hybrid driven 15,000 miles a year would typically take 8.1 years to recoup, KBB calculates. At $3-a-gallon, it would take 13.4 years.
Automakers are accelerating technology development, so what people consider a hybrid or alternative vehicle could soon be very different.
'Not One Answer'
“For us, everything's on the table …” Mittleman said. “It makes sense to look at all of our alternatives, because there's not one answer right now.”
Honda in June introduced a limited run of the FCX Clarity hydrogen-fuel-cell vehicle to the Los Angeles market, where Shell and General Motors (NYSE:GM – News) just opened the first area hydrogen refueling pump at a conventional gas station — most hydrogen refueling spots in the U.S. are at research facilities or for fleets. At the L.A. Shell station, the fuel is prepared on-site through water electrolysis.
The FCX Clarity gets the equivalent of 74 miles per gallon of gas, and its only emission is water. The car is propelled by an electric motor running on energy generated by the hydrogen fuel cell.
About 80 of GM's Chevrolet Equinox hydrogen-fuel-cell vehicles are on U.S. roads.
Another carmaker developing hydrogen technology is BMW. It has started to loan, for limited time periods, its Hydrogen 7 luxury sedan, cost free, to various celebrities, such as Angelina Jolie and Brad Pitt, and environmental leaders. There are just 25 of the cars in the U.S. These are hybrids, able to run on gasoline or liquid hydrogen.
When hydrogen vehicles reach the U.S. market more widely, Ibara says, they have the potential to lessen the popularity of the current gas-electric hybrids.
“It all depends on the pricing. The fuel-cell vehicles may be introduced at a premium. … They could come in even higher than hybrid vehicles,” he said. “If we start seeing mileage estimates significantly higher than 40 or 50 miles per gallon, then I think it would be very compelling for people to gravitate away from traditional hybrids.”
There are relatively few hydrogen-fuel-cell vehicles today, in part due to the limited refueling sites.
“Our hope (is) for expansion of the infrastructure,” Mittleman said.
Not Realistic Product, Yet
For now, Honda is only offering its FCX Clarity cars to select individuals as a $600-per-month, three-year lease that includes collision insurance and maintenance. For the moment, it costs more to produce the car than what Honda could realistically sell it for.
“The lease price, we've determined, is very similar to what a luxury car of that type would cost,” Mittleman said. “If we were to sell it based on its cost, it would be very difficult for the market to bear.”
Prices tend to fall as technologies mature. Clean diesels are another potential challenger to gas-electric hybrids, but right now the range of diesels is limited mainly to crossover and SUV vehicles, trucks and luxury sedans.
“So if you're trying to go looking at a compact gas-engine or hybrid sedan and want to compare a diesel against it, it would be pretty hard to do,” Ibara said.
Diesels tend to be far closer in price to conventional vehicles, but can be several miles per gallon more efficient. On the other hand, diesel price hikes have outpaced conventional gas.
Then there's the plug-in gas/electric hybrid, which Toyota Motor Corp. (NYSE:TM – News) and GM are separately testing on U.S. roads. GM's is the Chevrolet Volt, designed to run up to 40 miles before gas use kicks in — enough to cover the daily commute for about two-thirds of the nation's drivers.
A conventional 30 mpg vehicle costs about 13 cents per mile to operate, but the Volt will cost about 2 cents a mile for electricity from the grid, GM North America President Troy Clarke said in a June presentation to the Brookings Institution.
“So it's not going to be difficult for customers to see the advantage in their pocketbooks,” he said.
