The Myth Of The Prius Success Story
Immediately when you think about it, you realize one great problem with that theory: namely that any consistent environmentalist would reject all cars-after all even green cars will contribute to increased use of energy, which will ultimately through the price mechanism increase demand for all forms of energy. So, that is not a market which car makers can reach.
It is of course true that there are inconsistent environmentalists who, while worrying about "climate change", still want to drive cars. That group would presumably be willing to buy "green cars". Moreover, to the extent that "green cars" use less fuel, they can appeal even to people who don't care about "climate change". I mean, what car owner doesn't want to reduce his or her fuel costs, all else being equal?
But the problem is that all else is not equal in the real world. So people for whom "climate change" and fuel costs matter will often still choose gas guzzling vehicles. "Green cars" tend to cost more to build and they are generally less safe and have less comfort than for example SUVs. People who have a large family might be able to get them all into an SUV, but not into a Prius. And if you get hit by another vehicle, you generally have a better chance of survival if you're in a SUV than in a Prius. In short, "green cars" are simply worse cars in all aspect except fuel costs.
It should therefore be no surprise that "green cars" in fact generally sell very bad, and create even bigger losses than other cars. As George Will puts it:
"The stunning shift in consumer preferences that should make the White House's freshly minted auto experts feel vulnerable has been reported under headlines such as "Like a Rock: Hybrid Car Sales Plummet" (Wall Street Journal, Dec. 9) and "Hybrid Car Sales Go from 60 to 0 at Breakneck Speed" (Los Angeles Times, March 17). Absent $4 gasoline, customers, those nuisances with their insufferable preferences, do not want the vehicles the politicians want them to want, even with manufacturers now offering large rebates and other incentives.
The two best-selling vehicles in America this year are large pickup trucks (Ford F-Series and Chevy Silverado). In February, Toyota sold 13,600 Tundra and Tacoma pickups and 7,232 Priuses. It sells the Prius at a loss, which it can afford to do because it makes pots of money selling pickups."
The assertion that Toyota owed its previous profits to Prius is simply false, as they sell far fewer of them than they do of large pickup trucks despite selling them at a loss and having good margins for the pickup trucks.
Moreover, as Shikha Dalmia points out, it is simply not true that GM hasn't invested in "green cars". The only reason that these "green cars" make up such a small part of their sales is that hardly anyone have wanted to actually buy them.
"Indeed, Obama has already declared that he wants to make GM the world's leader in "building the next generation of clean cars." Never mind that GM can neither build these cars well nor sell them. Out of GM's top 20 "profit-contributors" last year, only nine were cars—the rest were all politically incorrect SUVs and trucks. GM sold less than 15,000 hybrids last year, and this year is going to be worse because industry-wide hybrid sales have dropped by two-thirds from their peak last year. Indeed, last year there was a waiting line for a Toyota Prius—today there is an 80-day supply sitting on dealer lots. Meanwhile, the Obama task force was forced to conclude that the crown jewel of GM's green lineup, the $40,000 electric Chevy Volt it developed expressly to impress D.C. Democrats, is "too expensive to be commercially successful."
And do note that the miserable sales numbers for hybrid cars comes despite the fact that the government tries to bribe people into buying them through tax credits and other subsidies.
Aside from ridding itself from the far too high cost of labor and excess capacity, a key for making GM profitable is that they build cars that people want. But if they continue to take bailout money from Obama that will be impossible, as Obama will use that bailout to order GM to build the cars that he wants consumers to buy, instead of the cars that the consumers themselves want to buy. And that requires that GM goes to a bankruptcy court, instead of going to Obama.