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The Math Behind the Hybrid Hype
markmcb writes "OmniNerd has posted a thorough mathematical analysis of purchasing a hybrid vehicle that dispels much of the hype associated with this modern buzz word. The author considers all of the major factors to show just how much money a hybrid vehicle will or won't save you. In the end, it seems the only real winner after a hybrid purchase is the environment."
> the only real winner after a hybrid purchase is the environment.
That is to say, everyone and everything on the planet.
Here in Europe the fuel prices are vastly different. Where in the US the price this year was between 37.9 and 26.82 UK pence / litre, in the UK it is currently 91 . So you would have to multiply the savings in petrol by 3 or so.
Fortunately in Europe we also have a system of public transport which most environment minded people (like myself) prefer to use rather than pretend we are doing our bit through the purchase of a new car.
Mouse powered Chips, Open source Processors and Lego
"In the end, it seems the only real winner after a hybrid purchase is the environment"
And that isn't enough?
My Sig: SEGV
umm...
buying a new car is almost -always- a losing proposition, financially. If money is a concern, a 3-year-old Accord or
Camry is probably the best way to go.
I bought my prius to replace my 15 year old celica. I didn't buy it to save money, I bought it because it was an interesting/cool car in my price range. The fact that it is a hybrid entered into MY purchase equation but it wasn't the only reason.
The fact that I've gotten as much as 66.5 mpg (after a 50 mile round trip commute) is just icing on the cake.
My dad works for a local government and was required to investigate the use of hybrid vehicles for use in his department, as a form of gasoline reduction measure, to save money. However, since this local government doesn't have to pay taxes on the gasoline it purchases, it can get it for very cheap. He also found that it would take well beyond the life of the vehicle to become profitable.
I think it's kind of unfortunate, really, why hybrids cost so much more than conventional vehicles. The tax incentives in this case were of no use, as I said, because this agency didn't pay taxes.
This data does not take into account someone who is already willing to lay out 20-30K on a SUV and deciding to switch to a hybrid instead. It has been long obvious that hybrids were not yet the most cost efficient way to travel. Though if you already own a 30K SUV, and you trade it in for a hybrid, you will see savings. Take these statistics for what they are. The most interesting point being in figure 13 where it seems with gas at 2.50 a gallon, a car that gets 50 - 60 mpg would have to cost less than 13,000 to be the cheapest new bought transportation.
quis custodiet ipsos custodes
He compares the Prius to a Corolla; really it's closer in quality and size to a Camry, which is much closer in price.
Also, the value retention part of it is key in treating it as an investment, but "OmniNerd" doesn't do that, he's just calculating the change in monthly payments. That completely invalidates the monetary comparison from the start.
I.e. the "Math" here is off base, by quite a lot.
Plus, my '05 Prius is very fun to drive, wouldn't trade it for just about anything (well, maybe one of those $40,000 sports cars...)
Energy: time to change the picture.
It is the whole model that is screwed-up.
Getting rid of the cars is the only solution. There is no way on earth (or in hell) to provide three tons of scrap (and the energy needed to move them) to each human on the planet.
Anyone who purchases a hybrid without doing at least a really basic cost analysis is an idiot.
We purchased a Prius back in June. We knew that unless gas stays at like $3 or $4 a gallon, it wouldn't really pay off (and then Katrina hits, and we actually paid $3 a gallon for a few weeks).
It's not a cheap car, but fully loaded, it really wasn't that big a difference for us compared to, say, and Accord. And it gets better mileage. You can run the A/C in stop-and-go traffic with virtually no gas consumption (the gas engine cycles on for 30 seconds every five minutes or so).
Plus, it's incredibly geeky. What's not to love? We've even been able to fit a lot of stuff in it for weekend trips (suitcase, assorted other bags, cameras, etc., plus a stroller, pack-and-play, and, of course, the baby), even leaving the back seat pretty much free of extra boxes or bags. You'd never think there was so much space to look at it from the outside.
Bottom line: Don't buy it to save money. Buy it for the clean air impact, and especially to support the longer-term development of hybrid technology. Imagine if this were in *every* Toyota car -- their CAFE numbers would probably be up in the 30s or 40s (it's probably in the 20s right now).
[it's also displaced our Explorer as our primary errand-running car, which is certaily helping *our* bottom line somewhat...]
Nice analysis, but like most of these type of analyses, they ignore some important factors:
Environmental cost of manufacturing NiMH batteries
$ Cost of replacing batteries at end of useful life (which is likely before the vehicle's useful life is over)
Environmental cost of disposal of NiMH batteries (likely 2 sets per vehicle during useful life, 100 pounds+ each set) That's a lot of heavy metals to dispose of.
I'm always fascinated by the capacity of the US citizen to asked to be taxed further.
Dark Reflection
This math does not take into account the ass factor. There are a lot of chicks that are hip to this save the rain forest crap and they may be more inclined to open up for a guy who "cares" about the ice melting. Think of these tofu-eating broads as an untapped market and get yourself some rubbers and a set of 21 inch rims on your Prius and you're ready to go. You might not even have to use rubbers with these girls if you play the latex is bad for the pandas card.
if you're the type of person that gets a new car every 5-7 years or 100,000 miles, whichever comes first, then no, you're not going to save money by purchasing a more expensive car. If, on the other hand, you're the type who takes care of your vehicle, maintains it, maybe even makes a few repairs on your own rather than taking it to the shop (or neglecting problems outright), with the hopes of getting 10-20 years (and 250,000+ miles) out of your vehicle, then you might actually save money in the long run, assuming roughly equal wear-and-tear and part replacement needs for hybrid and conventional vehicles.
My personal take on it is that hybrid and fuel-cell systems are still flawed due to their continued reliance on fossil fuels. An all-electric vehicle would be ideal, and indeed we have our electric motor science down pat. What we lack are effective battery systems -- pound for pound, gasoline contains far more energy than our best batteries. Until we can improve our electrical energy storage, we are limited to either having a very small "gas tank", in which we'd have to stop and recharge every 50 miles or so, or a very large, heavy, slow vehicle carrying a ton or six of battery cells in order to extend the range of the vehicle. Neither is a generally viable solution.
The car manufacturers are reluctant to further research these alternate systems, I think, due to the fact that if you take away or reduce the internal combustion components of an engine, you reduce the stress and heat experienced by the engine, which means the engine parts fail less often, which means they sell fewer new cars. No company is going to deliberately research ways to reduce their profit.
Actually, the analysis is based on MSRP, but I doubt anyone pays MSRP anymore. In fact, I've two Honda civics, one standard (for my wife), and one hybrid. The hybrid came with more options standard and ultimately I argued the price down to about $1400 of the normal Civic. I've made that up between tax breaks and gas savings, but better still it's ULEV that can go 600 miles on a tank of gas. That's pretty good.
As far as maintenance costs -- both have been excellent.
The article seems to be assuming that Gas prices remain constant through the life of a car. Anyone believe that? How about the same calculations assuming a 10% per year increase in gas prices (which they were this year before Katrina).
I think I disagree with your premise that the US energy model is 'fundamentally flawed'. Surely, it makes sense that cheap energy will stimulate economic growth and add to the wealth of the nation. To this end, it is justifiable to have affordable gas. Venezuela is using this idea right now, last time I checked they were retailing gas for 4 cents/L.
With respect to this line of reasoning, the big white elephant in the room is the environmental costs. What is the point of enriching a nation if it become toxic in 50 years? What need to be happen is for the global economy, not just the US, to come to some concensus on the future of energy availability. More and more signs point to peak oil occuring now or in the next 5 years. That means from now on (or not far from now) energy will be a premium commodity and the costs associated will inflate. Inventing efficient gasoline cars is a useful tactic to stem the tide of oil scarcity, but oil is still dirty. Technology like fuel cells and hydrogen power must be the focus. Preserving the oil economy is folly.
Many people realise this and have argued that the global oil economy is a disastrous thing. I, for one, have no confidence that it will change, however. We are addicted to oil. Everyone in the developed world is addicted to oil. We are not going to stop. It is like an alcoholic who drinks himself to death. He knows he is killing himself but he keeps drinking. That is us. We will use oil until the world is toxic or the economy collapses plunging us into chaos. I'll be dead by the time it happens but unless there a radical shifts in the next ten years I think we are doomed.
So, to single out the US oil stategy is unfair. We all suck.
Have a nice day.
Just a couple of simple points:
1. I currently pay $2/gal and $1 of that is tax
2. The US is over twice the size of Europe so that does present some barriers to public transportation.
3. Actually, I agree with you in principle, just wanted to make the above points.
Those who open their minds too far often let their brains fall out.
from the article:
Gas-electric hybrids are the most fuel-efficient passenger cars on the road and ecologically there isn't a more viable option. Until something big changes, though, the industry-high efficiency can't economically offset the steep sticker price.
This is quite a sweeping claim, and one that I would contest. The VW Jetta TDI (diesel) gets consistently 55-60 mpg -- about as good as the best hybrids out there. What's more, diesel fuel uses less fuel in its manufacture than regular gasoline, meaning that the "embedded fuel" is significantly lower.
I tend to agree that much of the hybrid talk is hype and that getting 25 more miles out of a gallon of fuel does not make your car "green". What's much more, though, is the idea that hybrids get better mileage than any other cars on the road. Diesels, particularly some of the models by VW and Audi (in Europe, at least), prove that efficiency is more than just fancy technology.
The batteries in the Prius are not lead-acid, as another poster pointed out. They're NiMH. In addition to that, they are warranted for 8yrs/100k miles, and expected to last the lifetime of the car without replacement, so it's unlikely that there will be much more than one battery pack per car lifetime on an average basis.
Toyota recycles them completely, chemicals, metals, case, wiring, etc... and pays a $200 bounty to encourage people to do so. Their recycling program has been in place since the Rav4 EV, so it's a fairly mature process by now.
I'm guessing the reason the article's author chose to structure things in terms of a bunch of new cars (hybrid and not) vs. a 1999 Honda Accord is because the author owns a 1999 Honda Accord. This alone gave the article an unnecessary slant. The basic conclusion -- that hybrids are more expensive to own on an installment plan than comparable standard and diesel cars -- is valid, but the gratuitous comparison to a six-year-old car exaggerates the differences by making everything a bad proposition compared to his 1999 Accord.
Heck, how do I get a 1999 Accord for $4000 anyway? By lucking out at an auction? By buying one off my favorite aunt? Last I checked in my area, 1999 Accords in decent condition fetched at least 50% more than that even through private sellers. Use of honest numbers for comparison woud help. That and factoring in repair costs. I doubt his 1999 Accord is still under warranty, making average repair costs more expensive.
Also, his favorite new-car-to-new-car comparison was between the Prius and the Toyota Corolla. The Corolla, though bigger for 2006 than past models, is a compact and the Prius is generally regarded as mid-sized, Edmunds database notwithstanding. And comparing a Prius to the stripped-down base Corolla is also a bit dishonest. The base Prius is equipped comparably to one of the upgraded Corollas that sell for $15,000-$16,000, not to ths stripped $12,000 model. Want a decently-equipped Toyota for $12,000? Go look at the Echo or whatever they renamed it. That's even smaller.
The TCO advantage still belongs to the quality non-hybrid gasoline and diesel vehicles, but not as much as indicated here. And as gasoline prices pick up again this spring and likely top $3/gallon for good, the smaller-than-stated gap will narrow considerably.
Look at how much toxic chemicals is in a battery. Now factor in that you have to replace the batt every 2-4 years. Not only does it end up costing you more, but you're not doing much besides thinking you're helping.
Interesting...I've had my Prius for over 2-1/2 years and over 75,000 miles, and I haven't had to replace the battery yet. The battery carries a 100,000 mile warranty, and is designed for the life of the car.
Where does the 2-4 year number come from?
Government's idea of a balanced budget: take money from the right pocket to balance...oh who am I kidding?
They only burn less because they usually have a higher utilisation. And they only always have higher utilisation during rush hours.
e.g.
http://www.futurepundit.com/archives/002197.html
Conventional mass transit isn't the answer. Packetised mass transit is...
Deleted
And this is a key point that the author overlooked in the economic analysis. It's similar to saying the world's space programs have all been a total economic waste and reaching that conclusion by eliminating all of the economic side effects that have resulted from the technology that went into those space programs. That's a political statement, not an analysis.
The large-scale production of NiMh battery arrays that go into hybrids is rapidly reducing the unit price of these high energy density storage devices. Now, is it really a great lap of logic to think that low-cost high energy density rechargeable electricity packs might find use in other products besides hybrid vehicles once the price is right?
Not only has the price of large arrays of NiMh cells gone down dramatically in a short time, but the early stages of an upramp in large arrays of Li-Ion batteries is beginning as well.
But wait, there's more!
Supercapacitors. Did you know that the regenerative braking system in Japanese hybrids uses arrays of supercapacitors? Again, the technology has been around for a long time, the real issue is price and the price doesn't come down until we get economies of scale and we don't get economies of scale until we get a consumer grade product that uses masses of these devices.
The availability of these high energy density devices at low prices is almost guaranteed to have fall-over effects in all sorts of different consumer markets. Unless you take those significant advantages into consideration, it's really just a snipe to draw a conclusion about the lack of economic value in a hybrid car.
The only reason to buy a hybrid is show other people how much you care about the environment: it's a statement, not an answer.
Okay, mr-stereotypical-SUV-driving-cellphone-talking mcdonalds-sucking-American-corporatist-pigdog, some of us actually do care about the environment.
Very few people can tell that I use all CF lighting in my home and pick my CPUs based on power consumption (Athlon 64 all the way, baby!). My lawn "only" looks healthy, not the bright-chemo-green I could get by dumping fertilizer and weed killer on it. No one but me can tell that I go out of my way and pay more to fill my (SO's) car with B20 biodiesel. That I use biodegradable laundry detergent and non-chlorine bleach. That I manually duplex all my printouts, thus using only half the paper (and for personal use, I'll even do 2- or 4-up per side as well). That I post on Slashdot using 100% recycled electrons.
You can't tell any of those things from a casual observation (well, I suppose if you came into my house you might notice the color of the CFs rather than incandescents). Therefore, I can't possibly have a "oh, look at me saving the environment! Look, look, I care!" motive. Nor can you attribute it (like the FP) to purely financial goals - Some of those save me money, some cost me more. The net gain goes straight to helping YOU breathe better.
Unfortunately, I suspect that more often than not, you have it right. But hell, I'll take even the slight improvement of faux-environmentalists over a proud SUV owner any day.
I've had a 2004 Prius since November 2003. I'm very pleased with my car, and I'll keep it for many years to come, I think. One thing that keeps coming up is that I didn't save any money. What I don't understand is why that focus is applied to the hybrid and not other cars? You can pretty much get a fully functional, well engineered car today for around $12K. So every dollar you spend over that is just for personal taste. When someone buys a $60K BMW, I don't hear people saying "You know, you didn't save any money".
I guess the idea that you might save money with a hybrid casts the image that most people who buy them are out to save money. I'm not. At $24K, the Prius is only a bit more expensive than other cars of it's quality -- but like a BMW purchaser, I would have bought it for even more. BecasuseI think it's cool. I like the idea of using as little oil as I can while still living a convenient and comfortable life. I like the idea of polluting as less. And most of all, I like the idea of voting (with my dollars) for changing technology in automobiles.
So, just want to point out that not everyone who buys a Prius is doing it for a financial reason -- probably not more than with any other car.
Cheers.
However, the arguement is that Europe "taxes the bejesus" out of their gasoline in order to encourage mass transit and energy saving vehicles.
In the U.S., while in principle this would be a good idea, there just isn't the urbanization that there is in Europe. European cities aren't built for car commuting - hell most of them had to be upgraded for horses 1400 years ago. Narrow, winding streets, and cobblestones, do not encourage cars. In the U.S., everything is younger, and most of it is built to accomidate cars, with wider streets, etc. As a result, the U.S. has always had that huge suburban and rural population that drives into work. In many places, there just isn't a mass transit option. I lived in metropolitan Memphis for a long time; there's no mass transit to speak of there, other than an aweful bus system. It's too close to the mississippi and too close to the water table for a subway (no one has a basement in Memphis). But, you know what they do have? A "beltway" (I-240) and a LOT of parking.
It's only feasable to use mass transit for everything if you live in one of the cities like Washington, DC, which has an excellent metro system and inbound rail system, or New York, who's subway system, while not pretty, can get you anywhere you need to go.
Driving places is a culture in America. Very few of us live close enough to walk, or even bike, to work. A friend of mine told me about an exchange student from Estonia whom he befriended, and how when they went to D.C. one day, and Dimitri saw the "Springfield Interchange" (the Mixing Bowl), it flipped him out. A road that's seven lanes wide in each direction, with flyover ramps going everywhere, people merging at 60 miles an hour 10 feet apart... it was like nothing he'd ever seen before.
Raising taxes on gas to $6-$8/gal in the U.S. would crush the economy. We're just not built for it. We're slowly emphasizing mass transit and there's been a small movement towards local community envolvement (i.e. not driving 50 miles to work, but working where you live), and we'll get there... but let's not get drastic.
~W
sig?
As for needing wars to get that oil, these wars come about by interacting with a stunted, xenophobic society. It is unfortunate that this happens.
This is the kind of rationalization about wars that scares the hell out of me.
If you have to go to war repeatedlly to maintain your energy policy, despite having being bitten once 30 years ago, then something must be wrong with your policy. Especially when alternatives to oil already exists.
It's just that the populations of Islamic societies don't want to be in contact with Westerners.
This blanket generalization scares me even more.
But just to say oil is evil, etc. is not a solution.
Nobody is saying oil is evil. It is the irresponsible use of a limited resource, in an enviromentally damaging way, maintained by a myopic national energy policy which uses wars as a policy tool, that is evil.
Mode (3) smart-aleck mode. Press * to return to main menu.
Ahhh, did anyone check the math. It looks a bit off. First he uses a 1.15 multiplier to account for 'other costs' THEN adds it to the loan value (i.e., interest oriented). If you read the endnote that is based on the fact that loans are for 115% of the value (payoff on old car?). How is that a legit 'cost' of the new hybrid car?
Second he is using the full cost of the hybrid. He is assuming that you dump a perfectly good car and buy a hybrid, NOT that you are bright enough to buy a hybrid when it is time to buy something. That is, he is assuming it is the full cost, not the incremental cost of the hybrid. While that MAY be a correct financial analysis, it is unlikely to be a real world analysis (IMO).
If I want a $22K hybrid and my other choice is a $18K car/SUV at 25MPG, then the 'additional capital expense' is $4K NOT $22K. $4K * 1.15 (assuming I use his magic math) is $4.6K incremental cost at 5.25% over 60 months that's about $88/mo in payment. Given the gas savings and higher trade in allowance, the case for a hybrid may be closer than he paints. Of course that assumes the competition for your car dollar is an SUV at 25 MPG if it is a small car at $15K and 30MPG then the hybrid case is less good.
The real issue is during a "I'm going to buy a new car, what will it be" purchase period. It is fair to deal with incremental costs and incremental improvements in gas mileage/trade-in value. As I read it, the article assumes a 'forced trade' at full cost, not incremental costs. I'm not sure that is a fair comparison.
But profits can't be judged by dollar amounts alone. What counts is the percentage of revenues those profits represent. "Our numbers are huge because the scale of our industry is huge," Exxon CEO Lee Raymond tried, probably in vain, to explain during last week's big Senate hearing on oil company profits. Exxon's profits last quarter amounted to 9.8 cents for every dollar of sales. Is that obscene? Well, it was more profitable than Shell (which netted 7.8 cents of each dollar of revenue) or Chevron (6.6 cents) or BP (4.6 cents). But compared to Coca-Cola (21.2 cents), Bank of America (28.3 cents), or Microsoft (33.2 cents), it was nothing to write home about.
Oil companies invest billions. getting a billion (or even 100 billion) isn't that much. The government, on the other hand has "made" $2.2 trillion on gas taxes. Thats money you and I could have spent elsewhere.
The government doesn't have enough to maintain roads? That's because the so called transportation money goes elsewhere - even money spent on transportation is more likely to go to new projects as that gets better visibility. Repairing roads isn't sexy and it doesn't get you votes.
Genius is one percent inspiration and 99 percent perspiration, which is why engineers sometimes smell really bad.
The real way to make a good economic comparison is to compare buying a new hybrid vs. buying a new conventional-engine car, and do a time-value-of-money calculation to get present values of the cars and gasoline. Sure, monthly payments are what hits you in the wallet when you're making them, but they go away once you've paid off the loan, so you can calculate the Net Present Value of any interest you might pay to car dealers (might be positive or negative, depending on whether they're doing loss-leader loans to keep the car price higher.) Assume you're going to keep them both for the same number of years (otherwise it's way too messy; more on this later), estimate the effective interest rate for money over the next N years (which is not the same as the interest on your car loan...), estimate the future value of the car at the time you sell it (and calculate NPV), estimate the NPV of the price of any repairs you'll need to make, estimate the price of gasoline and amount you'll use over that period and NPV that.
So does it pay off, or not? Depends a lot on what kind of car you'd get instead, how long you'd keep the cars, and on the assumptions you make about the future cost of money, gasoline, and used cars. If you're spending the same amount of money on the car (overinflated price of a hybrid vs. buying a fancy car), it's probably a win. If you're comparing the hybrid to an econobox, it's probably not a win. If you think cars last 15 years, and you're comparing the hybrid to a used econobox now, another one five years from now, and another one in ten years, it's almost definitely a big lose, but you get fewer coolness points for driving around in beaters during the first ten years (after that, your hybrid will also be a beater, and repair costs are much harder to predict than for standard cars.)
I'm not the typical American car consumer - I buy cars with cash, generally new, don't drive very far most days, and keep them till they die of old age or are sufficiently close financially, so I spend less on cars and more on repairs (though replacing the engine in an old van did cost about the same as buying a used van of similar vintage, but since it had spent most of its years in California instead of New Jersey, the body was in really good shape.) A few years back, when my 1985 Toyota was getting old, we were thinking about keeping it running for a couple more years and getting an electric, but then the PT Cruiser came out, so we decided to go with the cool car instead... bought it on eBay.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
I'm sorry but this is the type of idiocy that runs rampant (conservatives as well as librerals use it). If you don't get the result you want you claim the science is wrong. Economics is not a fundamentally flawed science. What you are calling economics is actually finance. This guy ran a financial analysis NOT an economic one.
With a proper and more full economic analysis you would include costs to the environment (say the cost of cleaning up extra pollution, or the opportunity costs of using the oil for gas, or economies of scale when more people purchase hybrids). Poor analysis isn't the fault of economics, it is the fault of the economist.