Hybrid Vehicles Proving Costly in Miami-Dade County

Published September 1, 2004

Florida’s Miami-Dade County, which in 2003 spent more than a million dollars to purchase gasoline-electric hybrid pickup trucks, is now learning that greater fuel efficiency does not necessarily save money.

In 2003 the county agreed to buy 50 of General Motors’ new trucks without completing its normal purchasing process. “The idea was to be a leader in the field of getting hybrids and encouraging fuel savings through the county purchasing program,” Commissioner Katy Sorenson told the Miami Herald, as the paper reported on July 13. “We understand that the kinks haven’t been worked out yet.”

High Cost Plus Maintenance Equals Big Loss

Those kinks come in the form of a significant cost to the county. It spent $1.27 million on 30 Chevrolet Silverado two-wheel-drive and 20 four-wheel-drive hybrid trucks, also agreeing to sell them back at a depreciated price to GM after three years so the company can study how they performed.

Because the hybrids cost much more than their non-hybrid counterparts and get only about 10 percent greater fuel efficiency than the standard models, each vehicle will cost the county between $75 and $175 more per month to run than the standard models, even taking into account the fuel efficiency savings.

The editor in chief of Car and Driver magazine told the Miami Herald, “The Chevy hybrid [provides] only about half a mile a gallon better than a regular Silverado under real driving conditions. You wouldn’t make up the additional price of the vehicle with fuel economy.”

Small-Vehicle Technology Unsuited for Larger Vehicles

The higher price vs. better fuel economy tradeoff also has been a problem with smaller hybrid automobiles. A survey by J.D. Powers and Associates released earlier this year found very few purchasers of the popular Honda Civic or Toyota Prius hybrids would keep their vehicles long enough to save more on fuel than they paid extra for the hybrid vehicle. (See “Hybrids’ Disappointing Mileage Confounding State Laws,” Environment & Climate News, July 2004.) Unlike the pickup trucks, however, the smaller vehicles achieve substantial increases in fuel economy, although their achievements in real driving conditions are often significantly lower than the EPA sticker suggests.

The larger problem, however, is that the U.S. auto industry is finding it difficult to develop hybrid versions of larger vehicles that deliver increases in fuel economy similar to those achieved by the smaller models. The Silverado is a case in point. Similarly, the new Ford Escape SUV (based on Toyota technology) delivers a reasonable increase in fuel efficiency in city driving, but not much in highway driving. The Escape, moreover, is Ford’s smallest SUV.

Such problems point to a dilemma confronting the U.S. auto industry. Politicians are keen to have American drivers get better gas mileage, whether it be for environmental reasons or to reduce dependence on foreign oil, but American-made hybrid vehicles are less likely than the smaller, more successful Japanese vehicles to deliver the radical changes needed to justify the increased price.

The domestic auto industry historically has been more dependent than its foreign competitors on high-performance, low-mileage SUVs, pickups, and minivans. Given that it has proven more difficult to achieve significant fuel efficiency savings in hybrid versions of large vehicles than small ones, a general push for hybridization will penalize the U.S. industry at the expense of foreign competitors.

Market Manipulation May Backfire

To date, the push for hybrid vehicles in the United States has been bipartisan. President Bush has proposed a temporary income-tax credit for the purchase of new hybrid vehicles, which would lessen the problem of the higher purchase price of hybrids. Bush’s challenger for the presidency, Senator John Kerry (D-Massachusetts), is considering a plan to give U.S. automakers billions of dollars to convert their automobile plants to build more fuel-efficient vehicles like hybrids, according to a January 23, 2004, Detroit News column.

Neither of those approaches, however, takes the consumer’s likely wishes into account. As one industry source told the Detroit Free Press on July 29, Kerry’s proposal may sound “good in concept, but might not be practical because automakers and the government might spend billions converting plants to create automobiles like hybrid vehicles that don’t turn out to be pragmatic or popular with consumers.”

As the hybrid vehicles have been on the road for only a couple of years, there are long-term issues that remain to be resolved. The engines (involving complex electrical systems and an internal combustion engine) are much more complicated than the traditional gasoline engine. Therefore, they are unlikely to appeal to those who like to work on their own cars. Also, hybrid purchasers have not had experience with long-term maintenance, which means the resale value of the vehicles remains significantly in question.

In the end, the market will determine the true value of hybrid vehicles of all shapes and sizes. They may eventually come to dominate the small-vehicle market. But lawmakers who try to shift the market for larger vehicles through tax breaks and subsidies may find the public’s desire for traditional large vehicles to be significantly less tractable than they hoped.

Iain Murray ([email protected]) is a senior fellow at the Competitive Enterprise Institute (http://www.cei.org).