Wednesday, January 07, 2009

Hybrid Bust

I found another interesting item at the Planet Gore blog, even though many pundits have claimed that the reason for the problems of the Detroit auto makers is that they haven't been selling cars that are "climate friendly" enough, we are now seeing how so-called hybrid vehicles are performing much worse than cars only fueled by gasoline.

The reason is simple. Earlier this year when gasoline prices were high and nominal income growth higher, low fuel cars appeared a lot more attractive, though so-called hybrid vehicles have never reached a market share above 3%. But now that people are more insecure about paying high sums for a car, but less concerned with gasoline prices, people are turning away from the more "fuel efficient" but more expensive cars.

This illustrates that it is uncertain what cars will be popular in the future, and that politicians trying to impose such strategies on bailed out companies won't succeed (unless they cheat by using taxes or hand outs as incentives to promote their car models, but that will in any case cost a lot too).


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