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High gas prices and generous tax credits now offset the high sales prices of some hybrids. (http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-08-22T211427Z_01_N22263287_RTRIDST_0_AUTOS-HYBRIDS.XML&rpc=66&type=qcna)

Reuters - August 22, 2006

http://www.cleanmpg.com/photos/data/501/HCH-II.jpg
2006 HCH-II does pay for itself study finds.

Detroit, MI. - Some hybrid cars will pay for the premium added to their sticker prices because of high gas prices and tax credits from the U.S. government on the more fuel efficient vehicles, a study released on Tuesday shows.

Hybrid cars and trucks, which get improved mileage in city driving by running on a combination of gas and electric power, cost between $1,200 and $7,000 more than traditional versions of the same vehicles, according to auto Web site www.Edmunds.com.

But a fuel economy study by Edmunds.com showed that the scales were starting to tip in favor of hybrids. "High gas prices and generous tax credits now offset the high sales prices of some hybrids, assuming owners keep their hybrids for a few years," said Alex Rosten, an analyst with Edmunds.com.

The shift is significant because analysts have said that higher sticker prices were constraining hybrid sales.

Hybrids currently account for 1 percent of new car sales in the United States. But Japan's Toyota Motor Corp., the hybrid market leader, sees its annual hybrid sales topping 1 million units soon after 2010.

The consumer-focused Web site said that assuming vehicles were driven 15,000 miles per year and gas was priced at $3 per gallon, owners of the Toyota Prius and Ford Motor Co.'s Escape Hybrid would break even within three years.

Buyers of the Saturn Vue Green Line from General Motors Corp the Toyota Camry and the Civic Hybrid from Honda Motor Co. would break-even within six years, Edmunds.com said.

But federal tax credits for hybrid buyers are being phased out on the most popular models.

Under a provision of the tax code, buyers of a Toyota hybrid after Sept. 30 will only qualify for half of the tax credit for which they would have previously qualified.

Tax incentives will also be cut on other hybrids after auto makers sell 60,000 of the vehicles - a sales threshold Toyota has reached.

The tax credit on Toyota and Lexus hybrids is scheduled to drop to 25 percent in April 2007 and then be eliminated in October 2007.

In another study released on Tuesday, auto industry tracking firm CSM Worldwide cited higher gas prices as one factor driving a shift toward more efficient six-speed transmissions.

CSM forecast that automatic six-speed transmissions would account for 60 percent of the U.S. car and truck market by 2012, up from less than 5 percent today.

GM has already announced plans to shift to a new family of six-speed transmissions for upcoming models.

CSM said three-quarters of the new cars from GM, the world's No. 1 automaker, would feature the six-speed transmission by 2012.

Begging your pardons for the Prius-focus of my post.

I felt the urge to google 'Prius total cost of ownership' which led to the following observations. Edmunds (referred to above) predicts that the 2006 Prius total cost of ownership over 5 years will be 52 cents/mile. Yahoo! Autos says 49, the Auto Channel says 48.5, and Consumer Reports came in at 41.1. All of the above IMHO use rather inflated depreciation numbers, and the ones that I have contacted about that (Edmunds and Consumer Reports) are quite unrepentant.

But continuing, MSN Autos who apparently use Intellichoice data, rate the 2006 Prius at 26.5 cents/mi. Ahhh, that's more like it. But still it confuses me because Cons Rep did say that they got depreciation data from Intellichoice. For me it is all somewhat blurry, but I continue to believe that with appropriate depreciation numbers, 20-something is about right for Prius.

For the earlier model, CarFax reported 24.8 cents/mi for the 2001 and 18.2 for the 2002. The latter is the lowest Prius TCO I have seen anywhere. NACO.org, in evaluating 2003 Prius for county govt. fleet use, suggested 22.8 cents/mi over 8 yrs/100,000 miles. As I recall INEL ran some classic Prius for about 5 years and came up with mid-20's cents/mile (retrospective, not estimating forward). My 2001 (as I have probably claimed before) is now about low-20's, assuming I were to sell it tomorrow at a typical market price (entirely unlikely that is).

If you really want to look at controversial and widely varying numbers, try the environmental costs of CO2 emissions (specifically, the CO2 emissions avoided by higher fuel economy. Emissions trading is now happening in the range of $6 to 30. This translates into a very small 'avoided external cost', but of course if we end up agreeing that CO2 emissions are more 'expensive', that would increase.

Similarly controversial are the health costs of pollutant emissions (NOx carbon monoxide and hydrocarbons). Based on references I saw earlier (and could find again if needed) the avoided external costs of squeaky-clean hybrids vs. typical current sedans worked out to about 6 cents/mile IIRC. Can't help mentioning that diesels (with USLD apparently not yet widely available) do not shine in that category. I have not seen a health costs assessment of the <10 micron particles, which may be the worst feature of diesels overall as a group.

Xcel might remind us that reliable conventional used sedans (driven then to completion, shall we say) will have even lower TCOs, and I agree. There is room for TCO improvement below mid-20's. But few of those are going to be SULEV or better.

Overall, my assessment of what cars actually 'cost' to operate is remarkably out of step with the mainstream media.

DAS

This is not a precise estimate, but I've estimated I might have gotten 35mpg out of my 1988 CRX HF towards the end (it was 50mpg+ in new condition). Over the first six years and 108,000 miles saved about $2492 if the average prices was $2.00 a gallon over that time. If the average gas price over the next six years is $3.50, savings will be $4360.