Renewable energy options driving future of autos

by Joe D. Jones

Published: June 13,2005

Scanning down the Mississippi Business Journal’s editorial calendar, we land on two focuses this week: one covers oil, gas, energy and utilities; the other delves into transportation.

One of the hottest topics in both of these areas is the blossoming of the hybrid automotive market in the U.S.
Several weeks ago, one of our writers talked to a number of dealers around the state to find out how hybrid vehicle sales were going. All of them reported high levels of interest and brisk sales.

According to Wayne Eldridge, sales manager for Gray Daniels Toyota, some people are paying $1,000 to $2,000 over the sticker price for a used Prius.

“I have 15 sales people who work for me here, and every one has a list of potential Prius clients,” Eldridge said. “This month we expect to have two unsold Prius by the end of the month, and our sales people are salivating to get them in.”

Eldridge said because of the time it takes to order a new Prius, occasionally when a car comes in the person who ordered it will have backed off. When that happens, the dealership is able to sell the car to someone else in about 24 hours.

Something just like that happened to my cousins, Carrol and Anna Crull of Kerrville, Texas.

When a buyer who had ordered a Prius decided against buying it last fall, cousin Anna’s name was at the top of the waiting list. The dealer called to see if she wanted it.

She wanted to think about it and would be down in the morning to take a look at it, she told him.

The dealer told her that it wouldn’t be there in the morning. She bought the car that afternoon.

The hybrid car market gives new meaning to the expression “selling like hotcakes.”

Is it more than hype?

As gas prices remain high and the buzz about hybrids grows, I decided to find out what’s going on here. Are hybrids mostly hype — or the wave of the future?

Fortunately for me, both of my cousins are engineers and are always ready to answer my questions.

First things first: Who cares about a hybrid car and what is it anyway? The media is replete with praises for the new hybrids, their economy and performance, but nobody takes time to explain what it is. For those with engineering inclinations, I suppose any explanation I might offer will seem mundane.

Well, here it is.

A hybrid automobile has two engines — a traditional gasoline engine and an electric engine. The electric engine is more accurately described as a generator that takes a modicum of energy from the gasoline engine and stores it in huge batteries.

The car then runs on electricity until the batteries start running down and then converts to gasoline to both power the vehicle and recharge the battery. In some situations, such as hilly terrain, both gasoline and electric engines combine to provide the power necessary for the circumstance.

That’s what a hybrid car is. Now, as to why anyone should care, the answer is the cost savings.

Using renewable electricity as a power source dramatically cuts down on gasoline consumption. Fuel economy for the Prius is about 50 MPG on the highway and 40 MPG around town. And, that’s burning regular unleaded gasoline.

My family experts say this is definitely the direction of the future for automobile manufacturers. Toyota plans to have all of their vehicles available with hybrid engines by 2008. Honda currently has hybrids available in its Civic, Insight and Accord models. As for U.S. manufacturers, Ford has its Escape SUV available in a hybrid model.

What about the bottom line?

However, before we get all giddy about gas economy, we better take a look at the cost of the vehicle.

Getting up to 50 miles a gallon is great unless the car costs so much that we have to mortgage the house to buy one. Happily, that doesn’t seem to be the case. The Prius runs about $26,000-$28,000 tax and title included. Though not inexpensive, the price plus the fuel economy makes for an intelligent buy.

U.S. sales have been stellar ever since the hybrid was introduced in 2004. In fact, waiting lists are the norm and paying more than sticker price is common. And, demos are generally not available. Some folks who want to try the car out before buying are renting one at Enterprise or Alamo.

I love my truck, but…

All this rush to buy hybrids bodes well for resale value. Unfortunately, the availability of hybrids is putting further downward pressure on the resale value of gas-guzzling SUVs.

Last weekend I had to gas up my old Chevy Z71 truck. I laid three $20 bills on the counter and got less than a dollar in change. I really love my truck, but those $20 bills are hard to let go of. I suppose they’ll soon be making hybrid trucks with sufficient pulling power to get the job done and maybe I’ll take a hard look at buying a hybrid then.

However, until then, I’ll just keep cashing my paycheck and handing over the money to the gas station attendant.

Thought for the Moment

A musician must make music, an artist must paint, a poet must write, if he is to be ultimately at peace with himself. What man can be, he must be. — psychologist Abraham Maslow (1908-1970)

Joe D. Jones, CPA (retired), is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.

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