http://news.yahoo.com/s/bw/20070309/bs_bw/0712b4026062

Why Hybrids Are Such A Hard Sell

By David Welch Fri Mar 9, 4:29 PM ET

Given all the buzz about hybrids, not to mention the greening of the
citizenry, you'd think they would be easy to sell. They're not. After
growing nicely through much of 2006, hybrid sales began to slow early
this year. The gasoline-electric vehicles now make up 1.8% of all vehicle
sales, says Edmunds.com, down from a peak of 2.1% in October.

One major reason is that hybrids typically cost $3,000-plus more than
conventional cars. As a result, automakers in recent weeks have been
slashing prices. Less than a year ago, Toyota dealers got full price for
the Prius. Now you can immediately lease one for a slim $219 a month.
Ford Motor Co. (NYSE:F - News) is also cutting the price of the latest
version of its Escape hybrid. In fact, in February, carmakers spent an
average of $1,500 on incentives per hybrid, says Edmunds--triple what
they laid out in January.

The discounting helped the likes of Toyota Motor Corp. (NYSE:TM - News)
and Ford post decent sales in February, but, as the Big Three know all
too well, ladling out incentives is no way to make decent profits. Making
matters worse, just as hybrid sales start slowing, automakers are gearing
up to launch a slew of new models. At least 30 hybrids will hit the
market in the next 20 months. That will bring the number to more than 40,
up from 12 today, says Boston research firm Global Insight. "Now that the
automakers have tapped the early adopters, they're going after the mass
market," says Jesse Toprak, an Edmunds analyst. "For consumers, the
answer is often no."

Tailing Off
A few years ago, automakers decided to put hybrid technology in regular
models. The hope was to move beyond the geek chic of the Prius and win
over everyone else. Hybrid would be another option, like , say,
navigation. If enough people bought hybrids, carmakers figured, they
would achieve sufficient economies of scale to eliminate the big premium
over conventional models.

That hasn't happened. And some models have suffered badly. Honda Motor
Co. (NYSE:HMC - News) sold 70% fewer hybrid Accords in 2006; Toyota has
sold 24% fewer Lexus RX 400h sport-utility vehicles so far this year. The
fuel savings are simply too puny to offset the hybrid premium. With gas
at $2.50 a gallon, it would take 10 years to recoup the extra $3,000 cost
of the Accord hybrid.

Honda and Toyota are trying to have it both ways: putting the technology
in regular models while coming up with new hybrid-only cars that, like
the Prius, confer instant uber-greenness. Lexus is considering one, and
Honda plans a subcompact.

Getting prices down--and not by discounting--is the long-term solution.
That means finding a way to make the cars more cheaply. Batteries account
for about half the hybrid premium. But cheaper lithium ion cells won't
appear for several years. Cutting costs further requires achieving those
elusive economies of scale, which means building and selling more
hybrids. That's Toyota's strategy; it hopes to sell 160,000 Priuses this
year, up from 107,000 in 2006.

Pulling that off will require deft marketing, especially since the
government this fall will start requiring a more accurate measure of fuel
economy. The Prius' claimed 55 mpg will likely drop to a less compelling
46 mpg. Both Toyota and Ford are planning major advertising campaigns.
And discounts on all hybrids are here to stay for a while.

Look closely and you can see the automakers hedging their bets. Toyota is
pushing into diesel. Ditto for Honda, which may not build a new hybrid
Accord. Nissan (NasdaqCM:NSANY - News) is waiting to see how its hybrid
Altima does before putting the technology into other vehicles. Honda's
planning chief for North America, Dan Bonawitz, likely speaks for most of
his counterparts when he says: "There won't be a giant surge in hybrid
sales unless there's an oil crisis."

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Hybrids are just anonther scam to fleece the public. The way to improve
gas mileage is just smaller cars with fewer of the heavy useless frills
the automakers love to add.  Detroit could easily  make a damn good  2000
pound IC family car for $8,000 and it would give 50 mpg.