Zell, Chris wrote:
The real horror here would be a situation in which the premium NEVER comes
down in real dollars - enough to justify the difference. That would
suggest that the price difference represents the value of the additional
energy put into the vehicle and thus - (gasp!) NEVER WOULD MAKE ANY NET
DIFFERENCE in energy consumption. It's all well and good for 'experts' to
calculate but the economic reality MUST agree.
This is an astute comment. I believe it is rooted in classic economics.
The other day I posted a calculation showing that it would take ~20 years
for the Prius to pay back the $3,720 "premium" compared to the Corolla.
That was a mistake. Putting the numbers into a proper a spreadsheet, for
11,766 miles per year, I get 110 gallons extra, which costs $276, and the
payback time is 13.5 years. That is still too long, as Zell fears. However,
there are mitigating circumstances. For people who drive long distances the
hybrid already pays for itself, even compared to the Corolla. Plug in
25,000 miles per year, and the payback falls to 6.3 years. Raise the price
of gas to $3.00 and it falls to 5.3 years.
People who drive such long distances might be considered a niche market but
there are probably tens of millions of them, more than enough to sustain sales.
Also, as Ed Storms pointed out, the Prius has other advantages in styling,
size, quietness, and an overall "cool" design. So let us go with what the
trade magazines say, and set the "premium" at $3,000, moving the other $720
over to the "extra cost for cool styling." Payback is now 4.3 year, which
is reasonable. Most corporations would invest in equipment that pays back
in this amount of time. They would not throw away old equipment that still
had usable lifetime, but when it came time to purchase new equipment they
would certainly consider this a reasonable return on investment.
There are some other extenuating circumstances that bode well for the future:
* As I said, in the near future better batteries are expected, and these
should substantially improve the Prius performance without increasing the cost.
* At present, Toyota is the only company in the U.S. with a truly
cost-effective and popular hybrid model. They can charge anything they
want for this feature. Actually, they are doing us a favor by selling the
car for only $22,000. But this monopoly will not last forever. When other
companies begin offering "strong" hybrid cars competition will push down
the price. (The Honda Insight is a "strong hybrid" but it is not selling.)
* A plug-in hybrid model would knock all other cars completely out of the
ring, giving most drivers effectively well over 100 mpg. I think we can
expect these within a few years. The add-on kits will arrive within months
and I expect they will prove extremely popular with Prius drivers and with
the general public. Toyota will see that this is a public relations gold
mine, and they will cease their present mild opposition to the idea. (The
main reason they have opposed it is because they think it will confuse the
customers, who they believe do not want to plug in an electric car. I think
they have totally misread the public, and in particular I think they have
misread the people who are buying the Prius at this stage, who are geeks
like me. I can read their minds!)
As a general rule, the tail end of an obsolescent technology is usually
close to the starting point of the new improved technology. The new
technology does not at first leap far ahead of the old, to achieve
performance that would be unthinkable. It does later though: the plug-in
hybrid that gets 150 mpg will never be equaled by any production model
conventional car.
I believe the last generation of fast British stagecoaches on a good day
could keep up with the earliest, slowest railroad trains, at around 15 mph.
They could barely keep up but they did manage it. When steam passenger
ships became popular on the North Atlantic routes, some of the remaining
clipper ships advertised very cheap rates and swift passages. The captains
made good on these advertised times by piling on far too much canvas for
safety, which scared the hell out of passengers, and ran the ships and
crews ragged.
The other day, I wrote that you can achieve the same mileage with a
conventional car as a Prius, but "you could *barely* achieve the same
performance. You would end up with a small, stripped-down, noisy, dangerous
and underpowered conventional car, whereas the Prius is a midsize luxury
car, very safe and quiet." The last generation of clipper ships could only
compete the same way: stripped down and dangerous, healing far over and
battered to pieces. Compared to last generation of sailing ships, the first
steamships were luxurious, safe and swift, but at first they were not
cheaper or economically justified for most people.
- Jed
