MOTOR MOUTH WHY CHEAP GAS MAKES HYBRIDS A BAD INVESTMENT
It could take you a lifetime to recoup the premium you pay when upgrading to a plug-in
L ast week, the price of gas slid below 70 cents a litre.
Oh, that was only in Alberta, and consumers in higher-tax constituencies — stand up and take a bow, British Columbia and Quebec — were still paying more than 90 cents a litre. But, nonetheless, across the country, motorists are enjoying the cheapest gas since 2008.
And how are we celebrating? By buying more pickups. Yes, thanks to cheap gas, Ford essentially quintupled its net profit to US$7.4 billion on the back of increased F-150 sales. Ditto General Motors, which made even more money, largely as a result of trucks sales. Not to be outdone, Fiat Chrysler has decided to abandon Dodge Dart and Chrysler 200 production (they’ll be outsourced) so they can pump out more Jeeps and Rams.
In the land of cheap gas, guzzlers are king.
What has suffered is the sale of hybrids and EVs, consumers seeing little reason to pay the higher initial cost for so little fuel-sipping payback. Sales of plug-ins are down in the United States by six per cent, while in Canada, Dennis DesRosiers of DesRosiers Automotive Consultants says hybrid sales have plummeted by about 32 per cent since their peak in 2012.
Automotive News says things are so bad that Toyota may scale back its Prius lineup.
Why? The reason is simple dollars and cents.
Automotive News is decrying electric cars’ “steep buy-in compared to increasingly efficient gasoline-powered economy cars.”
The always quotable Bob Lutz, former GM vice-chairman, said it even better: “If gasoline was $8 a gallon, consumers would amortize the costs of an electric vehicle pretty quickly … but at $1.50 a gallon, who is going to be willing to pay an $8,000 or $10,000 premium?”
In other words, for cost-conscious consumers, it’s all about how long it takes for the savings in fuel costs to pay back the initial premium automakers charge for hybrid, plug-in and electric vehicles.
Ever curious, Driving decided to compare the long-term operating costs of some hybrids with their equivalent gasoline-powered siblings.
How long would it take for a hybrid or plug-in vehicle to pay off its higher MSRP?
How much would you save in comparison to a similar gasoline-fuelled vehicle?
How many years would it take to pay off the higher sticker price?
To find out, we used Transport Canada’s estimate of annual running costs as a guide and focused on Hyundai’s Sonata and Ford’s Fusion, the two traditional family sedans that offer both hybrid and plug-in hybrid variants. The results were interesting:
On the positive side, the Ford Fusion Hybrid’s fuel savings would pay off its premium in “only” about 7.4 years. At 8.9 years, Hyundai’s Sonata Hybrid wouldn’t take much longer. Not exactly frugal, but it borders on a realistic time frame.
Not so, it seems, when upgrading from regular hybrids to their plugin counterparts. Moving up from the Fusion Hybrid to the plug-in Fusion Energi, for instance, would take a whopping 30 years to pay off. Upgrading to the plug-in version of the Sonata from the base hybrid, by comparison, would take about 18 years to pay off its $6,500 uptick.
And that’s using Transport Canada’s estimate that fuel will cost an average of $1.09 a litre. Factor in a more current 90 cents a litre price and the numbers look worse. The Fusion Hybrid’s almost-reasonable payback gets extended to a notas-realistic nine years; the Sonata Hybrid would take 11.
The plug-in versions of both? Try 35 and 20 years, respectively.
That’s not realistic. So then we thought, if today’s rock-bottom gas prices make time-conscious payback unrealistic, what would gas prices have to be to pay off the premium in a reasonable amount of time?
We chose four years as being reasonable. In other words, what would the price of gas have to be for an electrified car to pay off its premium in 48 months?
The Fusion Hybrid was still the winner. Its break-even price is about $2 a litre. Scary, when most of us are paying less than $1 a litre, but just 12 months ago, pretty much everyone reading this article assumed gas would soon cost $2 a litre.
At $2.45, upgrading to the Sonata Hybrid from the base 2.4-L version required a little more pain at the pump, but it wasn’t egregiously worse.
Things get seriously ugly, however, when you try to justify the premiums paid for plug-ins. Even factoring in their ability to drive on electricity alone — 41 kilometres in the Sonata Plug-in’s case — gas would have to cost $5 a litre for either the Ford or Hyundai plug-ins to break even after four years and warrant their premiums over the regular hybrids.
One interesting anomaly in these comparisons is that, the higher one moves up the automotive food chain, the easier it is for automakers to absorb the approximately US$200 per kilowatt hour a lithium-ion battery costs.
A price conscious Ford or Hyundai can’t afford to absorb the $2,000 for a typical plug-in battery, but a luxury automaker can easily defray the investment. So, while lesser plug-ins — even the BMW X5 xDrive40e! — require about eight years to amortize, Porsche’s Cayenne S E-Hybrid justifies itself in just 3.5 years.
Farther up the food chain, Porsche prices its Panamera S and Panamera S E-Hybrid exactly the same — $106,600 — despite the plug-in’s 9.4 kWh battery and $1,028-reduced annual running costs.
And so eager is Mercedes-Benz to boost its hybrid sales, that its S550e actually costs less ($117,300 vs. $119,500) than the standard S550. The plug-in’s reduced running costs (about $1,500 a year) are a further bonus.
I guess it’s like everything else in the world; the rich always get the better deal.
Note: Ford’s quicker payback isn’t so much because its hybrids are more efficient — the overall fuel economy is about the same — but because the base Fusion S’s fuel economy, 8.9 L/100 km, is so much worse than the base Sonata GL’s 8.1 L/100 km.