Chocolate and Gold Coins

Tuesday, May 24, 2005

Are Hybrids the Car of the Future?

At Randall Parker’s Futurepundit, [link via Instapundit], there is an interesting discussion of the future of hybrid cars. I wrote about how I did not like the subsidies given to hybrid cars before, but I think that I would test drive a hybrid if I were in the market for a new car. Hybrids look like nice technology.

Futurepundit links to an interesting Christian Science Monitor article on hybrids. What I find curious is that articles on hybrids always emphasize the fuel economy, but I think the biggest selling point of a hybrid is the acceleration. From what I hear, these hybrids can really get up and go when you need to. For city driving, the ability to beat the car in the lane next to you is all-important. This alone justifies the $4000 to $5000 premium you would have to pay to get a hybrid over an ordinary car.

Another very intesting issue associated with hybrids is the possibility using the power grid for some of the hybrid’s electric power. The cost of off-peak electricity is at least one-sixth the cost of generating electricity with a gasoline-powered engine. Current hybrids don’t exploit this potential, but they may do so soon.

Futurepundit talks a bit about the rebound effect: the tendency for better fuel economy to lead to more miles driven. The economics of this could not be clearer: better fuel economy is never a factor in how many miles you drive. The opportunity cost of driving (your time behind the wheel) is much more valuable (at least by a factor of ten) than the fuel being consumed. What you might see is that people who decide to commute longer distances might decide that it suddenly is more cost effective to switch to a hybrid. Here, cause and effect are going the other way: the decision to drive more leads to buying a hybrid. Of course, if you just look at data, you might not tell the causation from correlation; econometricians run into this issue everywhere.

The fuel savings associated with hybrids might be disappointing for another reason: hybrid SUVs. People might decide that they can afford a gas-guzzler if it is a hybrid. This is the classic diet soda with your candy bar.

Like most new technologies, the hybrid is on a learning curve. The cost of these vehicles will go down over time and they will probably dominate the auto scene in ten years. But it is always difficult to predict the future: it could be that the learning curve for hybrids has already flattened out. As Paul Samuelson said about predicting: “If you want to predict the future, predict frequently.”

2 Comments:

  • Michael,

    I think you make some great points about hybrid cars. Here is a link to a blog with an interesting post on why hybrids are not actually saving you much money in the long-run. What do you think?

    Vikram

    By Blogger Vikram A., at 1:08 PM  

  • Hi Vikram
    I think that calculation is probably right. Currently, the gas savings is not enough to get all that excited. Hybrid makers should focus on performance.

    I have to admit that I don't know much about all of the performance issues associated with Hybrids. I have heard that they cannot go very fast and there have been software problems. I assume that these are just "teething problems" that will be solved soon.

    But I have read that these hybrids have much better acceleration and I can see the utility of that driving in a big city like Washington D.C. All of the time I'm trying to outrun the other cars to get in the correct lane.

    By Blogger Michael Higgins, at 1:29 PM  

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