Hybrid Sales Fall Precipitously as Gas Prices Remain Low

Articles — By forcechange on March 17, 2009 8:30 am

Not surprisingly, as gas prices have fallen in recent months, so have sales of hybrid vehicles.  In February, only 15,144 hybrids sold in America, down two-thirds from last April, when sales for that segment peaked (and gas was an average of $3.57 a gallon).  While auto sales across the board have fallen dramatically as a result of the economic situation, the drop in hybrids has been even more precipitous. 

Two main lessons can be learned from this situation, with the most obvious being that the higher gas costs, the more consumers will purchase efficient vehicles.  But the second lesson, which is less apparent, is that as Congress forces automakers to build more alternative fuel cars as a condition of the bailouts, it is putting these companies in a new bind– since consumers don’t want to purchase these efficient vehicles while gas is reasonably cheap. 

Apparently, the only entity that is more out-of-touch with the American consumer than the domestic automakers is Congress.  By forcing automakers to build efficient cars while gas prices hover around $2, Congress could be setting the stage for another domestic auto industry crash in the coming years.

Of course, this could all be solved by just following the number one lesson above– and dramatically increasing the federal gasoline tax so that consumer (and industry) behavior changes permanently.  But Congress, like the automakers, rarely makes the right strategic decision.