Location: Tulsa, Oklahoma, Tonga

Thursday, June 02, 2005

Reduced smug smog emissions…

Via Ezra Klein , Matt Yglesias points to this article:

Most Hybrid Vehicles Not as Cost-Effective as They Seem, Reports

The Edmunds article concludes:

Consumers who own a hybrid car or SUV may purchase less gas and have lower maintenance expenses than if they owned the non-hybrid counterpart, and may qualify for a federal tax credit designated for hybrid vehicle owners. However, most hybrids' high sales prices, insurance costs and related expenses will offset the savings.

Matt agrees that hybrids cost more.

A lot of people I know seem to feel that car buyers irrationally underestimate the financial impact of fuel economy when making their purchasing decisions,and that this gives us reason to fear that market mechanisms alone won't make everything balance out in the long run. The fact that people are, in fact, buying hybrids even though they aren't worth the additional money seems to indicate the reverse -- consumers either irrationally overestimate the financial benefits of fuel efficiency, or else have non-monetary preferences (about, e.g.,the environment or national security) that factor in favor of buying fuel-efficient cars.

He suggests that offering additional purchaser tax credits is a less desirable way of evening out comparative costs than increasing fuel taxes would be, although he thinks that fuel prices will continue to rise (therefore adding value and increasing hybrid popularity).

Ezra read the Edmunds article and Matt’s article and points out that the Edmunds study “does not, in fact, say that hybrids are more expensive than other cars, just that they're more expensive than their non-hybrid models.”

I looked at the Edmunds article more closely and, frankly, I don’t know what they’re talking about. I have no direct experience with other hybrids, so I will limit my discussion to the Prius.

[Nick Beaudrot of Electoral Math posts there and at Politics and War; he covers Honda hybrids more thoroughly, and reaches different conclusions from Edmunds.]

Edmunds compares the Prius to Toyota’s Corolla and Camry. Toyota has a lovely “comparator” feature on its website, where one can select up to three additional cars to compare with the Prius. My car—a 2001 Prius—is more like a Corolla than a Camry, but the newer Prius is much closer to a Camry in all categories. In some categories, the Prius betters the Camry.

1. Insurance costs and related expenses

My Prius is five years old now. The Edmunds article uses a five-year comparison basis for its figures, so my experience—anecdotal though it is—should parallel their conclusion.

My insurance is no higher than it would be for a comparably-priced conventional internal combustion only car and I have not had any “related expenses” that would not ordinarily occur with any car. Car financing is credit- and cost-based; taxes and fees are calculated the same for both conventional and hybrid cars. Only if the hybrid car costs more initially than the comparable conventional car will any of these costs and expenses be higher for the hybrid.

Edmunds notes that maintenance costs may be less for hybrids. This correlates with my experience. Currently my car has about 93,000 miles on it. I replaced the tires (normal wear) and follow regular oil-and-lube maintenance. Once in a while I clean it, but conventional car owners clean their cars, too. Interestingly, because of the hybrid drive train, I have substantially less brake wear than other comparable vehicles. I don’t know what other expenses they may be considering. I haven’t had them, nor have any of my hybrid-driving friends.

2. High sales prices

The 2005 Prius lists at $20,975. Three Camry models, in order of relative added features, list as follows:

LE 4dr Sedan (2.4L 4cyl 5A) $20,125
SE 4dr Sedan (2.4L 4cyl 5A) $20,955
XLE 4dr Sedan (2.4L 4cyl 5A) $22,545

All prices are from the Toyota/Edmunds Comparator.

Again, as Nick Beaudrot points out, these numbers do not reflect current federal tax credits or other state or local incentives that may be available. High sales prices are obviously not as large a factor as Edmunds suggests.

Matt’s “non-monetary preferences”?
Most of those preferences have pronounced monetary involvement, although that involvement may at times be less obvious.

I wasn’t able to buy a Prius until a few years ago when I found a used 2001 model (new in 2000) for sale for less than $13,000. Unbelievable good luck—especially because my 13-year-old Previa needed mechanical intervention and we have no auto Medicare for aging cars.

My techie son and I got excited about hybrid technology in 1997, shortly after Toyota introduced the Prius in Japan. At first our interest was focused on fuel economy, but we became obsessed with the Prius’s other environmental benefits. Of course, the fact that Prius has several really nifty engineering qualities—like the continuously variable transmission and its ability to operate in “stealth mode”—added to our fascination.

My original motivations for purchasing my Prius were to reduce tailpipe emissions as well as to lower fuel consumption. Lower in, lower out. The social, health, environmental, and economic costs of oil exploration-drilling-production-transport-refining-distribution-consumption accrue at each step of the industry.

Here in Oklahoma the winds come sweeping up the plains, bringing additional air pollution from Texas. We've had "Ozone Alert" days for years, barely meeting Clean Air Act standards. Public health benefits from better air quality; a disproportionately high number of our residents suffer from health problems that are exacerbated by poor air quality. A disproportionately high number of our residents have inadequate or no access to health care, and use emergency rooms in lieu of primary care. Much of the ER care is more intensive treatment than would be expected if the patient had access to primary care; much of this ER treatment is unreimbursed, resulting in higher taxes for us all. Reducing health care system stress is an economic good.

Further, noncompliance with EPA standards would necessitate corrective and remedial measures that would add to the inconvenience and cost of living; more auto inspections, nozzle traps for fuel pumps, traffic routing measures, and so forth. Too, it’s difficult to attract better-quality jobs into a non-compliant region— even more difficult if prospective new businesses will be expected to share in the costs of remediation and correction.

My techie son is in the Army, and we both have a heightened sense of our participation in national security interests. Reducing our imported oil dependence is in our national interest. Misbegotten alliances with and wars against oil-exporting nations—especially when conducted under the arrogance of American righteousness—violate our national security and compromise the security of the entire world. The added costs of increased security should not be divorced from the costs of fuel consumption.

Early hybrid buyers recognized that the new technology would carry a premium cost. Toyota initially swallowed some of those costs in order to bring the car to market. Technological improvements have increased hybrid efficiency and power; the newer model Prius is a larger, roomier, higher-performing vehicle than is my original model. The newer model is more Camry-sized than Corolla-sized, has more power, and gets better mileage than my car—although its sticker price is roughly the same in light of five years' inflation (2001 model cost $19,995—only one model available; the 2005 model carries a $20,975 MSRP).

Hybrid technology seems to be following the adoption life cycle trend of most technology, and, as Matt notes, “if demand for hybrids goes up, per-unit construction costs (and therefore resale prices) will start dropping, pushing sales higher.”

My contribution to better quality of life is a less immediately realized saving than one experiences by buying a non-hybrid economy car, but just as valuable.

That's why I'm feeling smug.