Green cars not always so rosy

The economics and viability of some technologies in the alternative vehicle market are not always as great as their hype might make them seem. Studies are showing cost-effectiveness may not be as rosy as manufacturers might lead us to believe.

by Aaron Turpen

wilted rose

In today's growing market of eco-friendly cars and green technologies, a lot is said about their ecological benefits. Often, this is bolstered by cost-savings and other touted bonuses, but in the end, market economics boils down to more than just "green cred." Businesses expect to make money from their vehicles and most consumers aren't willing to pay huge premiums to own a vehicle just because it's "environmentally friendly."

In terms of economics, studies say, most green transportation options in the automotive sector are iffy at best. There is some good news, of course, but despite the hype, not everything in alternative vehicles is roses.

Most Hybrids a Dud

In terms of economics, nearly all hybrid vehicles are a dud. CarGurus.com did a comparison study of hybrid vehicles versus their standard engine counterparts. They compared 45 models currently availabl e on the market that have exact gasoline or diesel counterparts in an apples-to-apples matchup.

They found that nearly all hybrid vehicles have a higher retail price (called the "hybrid premium") over their conventional counterparts. This premium, over the life of the vehicle in total cost of ownership, was not offset by fuel savings. Most hybrids on the list, especially pickup trucks and SUVs, actually lose much of their value compared to their conventional counterparts and have little payoff in mileage boosts.

lincoln mkz

Their advice? Look for lower price premiums on hybrid models and high fuel savings. So a vehicle like the Lincoln MKZ Hybrid, which has no premium over its conventional V6 counterpart, and that shows a single-digit improvement in MPG in comparison is a good value, but only just. Most hybrids do not measure up on both counts.

What Consumers Think Isn't What They Do

Surveys are showing that most consumers are interested in owning an alternative fuel vehicle. An Autobytel query showed that 57% of respondents wanted an alt-fuel option. Yet a more recent poll by Harris Interactive (for Mercedes-Benz USA) shows that most American buyers are clueless about what those alternative options actually are.

The second part of the Autobytel survey, however, gives us the truth of the matter. While car buyers are happy to buy something that is more efficient or "green," they aren't willing to spend much more to do it. When survey respondents were asked what their primary concern was when purchasing a new car, it wasn't eco-friendliness, it was "economics" - in other words, the price of the car.

This means that the green premium mentioned above will likely keep most buyers from purchasing a hybrid or electric car. Sales figures prove this out, with only the smallest percentage of buyers opting for a hybrid. Automotive analysis firm J.D. Power & Associates says this isn't likely to change much for the next decade, with electric and hybrid vehicles making up only about 7% of total auto sales by 2020.

So Is There Any Good News?

Of course there is. The first is that the number of alternative vehicles and fuels is increasing at a fairly fast pace as a sort of Moore's Law for transportation seems to be kicking in. While the efficiency of the technologies may not double every 18 months, these are growing very quickly and the number of models available to the average consumer are becoming more and more variable.

Add to that the fact that many simple changes to current vehicles can greatly boost their efficiency without spending the green premium required for a whole new, eco-vehicle.

The National Research Council made some fuel consumption benefits versus cost analysis on various improvements. These can be easily added to current vehicles or are available on the market in new vehicles of today.

Those improvements were ranked by average cost per 1% fuel economy improvement:

  • Low Viscosity Lubricants: $12 / 1% improvement
  • Variable Valve Timing Cam Phasing: $21 / 1% improvement
  • Turbocharging and engine downsizing: $25.80 / 1% improvement
  • Low rolling resistance tires: $26.67 / 1% improvement
  • Aerodynamics (5-10% drag improvement): $30 / 1% improvement

Now compare that to the full hybridization cost of about $127.66 per 1% improvement. Most of these cheaper technologies are already available on the market. Carmakers are finding creative ways to improve the economy of their vehicles without raising the price tag too much. So although hybrids and battery electrics tend to get the headlines, these other improvements are where the near-term market is really hopping.

Conclusions

Of course, these short-term improvements aren't the long-term answer. Over time, new technologies and currently-premium technologies will improve while dropping in cost. It's likely, by all accounts, that combustion engines will still make up the bulk of vehicle model sales for the foreseeable future ñ out to the next two or three decades at least.

Those will eventually be supplanted by other options, however, and combustion doesn't have to be a bad thing as another growing market, alternative fuels (such as bio-fuels) is expanding fast. It's likely that the future will hold a mixture of solutions for transportation rather than one single option.

So rather than a future filled with primarily petroleum-fueled vehicles, which is what we have now, we will likely see a future in which electric vehicles with various power sources (batteries, fuel cells, etc.) are mixed in with combustion vehicles using biofuels as well as extremely efficient gasoline or diesel engines. This will likely be the norm fifty years from now.

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