Hybrid Cars: Chic, But Not Cheap
Topic Pricing Concepts and Pricing Determination
Key Words Price-quality relationship, pricing objectives, supply and demand
InfoTrac Reference A133841315
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News Story 

Today's conscientious consumers have long enjoyed their fair trade coffee and organic skin-care products, but new hybrid-motor technology is making it possible for environmentalists to even drive with a clean conscience. For eco-minded consumers, hybrid cars are a chic way to drive in style while simultaneously protecting the environment. Auto manufacturers like Toyota and Honda are racing to produce hybrid versions of their best-selling models, and even Fed Ex has produced a fleet of diesel-electric delivery trucks--all for the well being of the planet.

But while petrol-electric motors installed in hybrids promise cleaner air and superior gas efficiency, they come with a high price tag. The Lexus RX400 hybrid SUV costs nearly $12,000 more than its gasoline-only twin, and the hybrid Toyota Camry is about $3,000 more than the gasoline-only version. And contrary to popular belief, hybrids don't necessarily pay back at the pump. Automotive Web site edmunds.com estimates that with fueling, insuring, and maintenance, hybrid models cost owners thousands more than conventional models over a five-year period. As it turns out, hybrid owners might have to drive a vehicle 30 years before the fuel savings offset the higher sticker price.

In spite of their added expense, hybrids are off to a good start. Sales of the Toyota Prius are expected to double in 2005, and energy-saving vehicles are attracting some high-profile drivers. Actor Larry David drives a Prius in his HBO comedy hit "Curb Your Enthusiasm," and Dustin Hoffman was one of the first buyers of the Lexus RX 400.

As long as the so-called "green consumer" continues to demand clean driving, hybrid cars are guaranteed at least a niche within the overall automobile market. Yet until auto manufacturers can make hybrids affordable and practical-to-own for the average driver, neither they nor the planet will be seeing much green.

Questions
1.

What reservations would you have in purchasing a hybrid vehicle?

2.

Do you think the environmental benefits associated with hybrid vehicles justify the higher cost of ownership? Why or why not?

Source Thane Peterson, "What's Driving Hybrid Cars; Sales are soaring, and they're kinder to he environment, but these green machines might not pay back their price at the pump," Business Week Online, July 7, 2005 pNA
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