Blue-Collar Prius

For most of their brief history, hybrid cars—especially the Toyota Prius, which is attaining near ubiquity in Bushenfreude territory—have been seen as luxury goods. Hybrid car buyers have generally been yuppies willing to pay more for the double satisfaction of saving a little money on gas and flaunting conspicuous, earth-saving virtue. As such, the hybrid was generally dismissed by lunch-pail American automakers as a niche product.

But the rising cost of oil and the current recession, which started among subprime consumers and is steadily eating its way up the economic ladder, may combine to change the hybrid vehicle's image from a white-collar status symbol to a blue-collar money-saver.

Given that consumers—even well-off consumers who shop at places such as Starbucks and Nordstrom—have been pulling back in recent months, one would have thought that hybrid sales would be tanking. After all, during recessions, discretionary products suffer while discount products and companies thrive, which is why Wal-Mart has been doing well. But at Toyota, hybrids have been doing well. In March, a month in which total sales fell 3.4 percent from March 2007, Toyota sold 31,552 hybrids, up 19 percent from the year before. Sales of Lexus light trucks rose slightly, powered by rising sales of hybrid SUVs, even as sales of Lexis sedans plummeted. In this down market, sales of high-end vehicles that convey only status are slumping, while sales of slightly less high-end vehicles that convey status and promise gas savings are booming. Hybrids have become a real business for Toyota. In 2007, a year in which overall vehicle sales fell, hybrid sales rose 44 percent to constitute about 10.6 percent of sales. In March, hybrids accounted for nearly one in every six vehicles sold by Toyota.

Historically (and it's an admittedly brief history), the rap on hybrids is that the higher price one pays isn't justified by the savings in gasoline, especially since hybrids don't do much better than standard cars on the highway. (You can compare prices and mileage claims of standard and hybrid Toyota Camrys here.) But with gasoline approaching $4 per gallon, hybrids promise significant gas savings for most suburban drivers. And for power users of vehicles—those whose livelihood depends on driving, who view cars and trucks the way Prius owners might view a PC or BlackBerry, and who spend lots of time in stop-and-go traffic—hybrids present a much greater value. Take New York City's cabdrivers. Last year, New York City Mayor Michael Bloomberg decreed that by 2012 the city's taxi fleet would shift over to hybrids. And since the process has already started, it's increasingly common to find yourself, as I did on Monday, bumping through midtown Manhattan in the back of a yellow Ford Escape hybrid. The driver, who leased the car, rhapsodized about the hybrid, noting that it saves him between $25 and $30 a day on gasoline. What's more, taxi drivers apparently have to grease the palms of dispatchers to be assigned a hybrid for the day. (Yes, I know, talking to a cab driver is one of the laziest and lamest journalistic clichés out there. But in this case, it makes complete sense.)

The savings are even more significant for blue-collar companies and institutions with massive fleets of trucks. The most dramatic impact of hybrids is likely to be industrial. Business investment may be in danger of slumping, but companies that make hybrid-drive trains for trucks are booking new orders. Eaton Corp., which makes hybrid-power systems that can be incorporated into trucks, has made deals with Federal Express and Coca-Cola, which in February ordered 120 hybrid trucks. (Here are some other wins.) Today, Eaton announced it would build 207 diesel-electric hybrid systems for buses in China. Oshkosh Truck, which makes even bigger trucks, introduced hybrid-drive-technology vehicles in 2006. Its new ProPulse technology is being used for military vehicles.

Pretty much every blue-collar blue chip is getting into hybrid trucks. UPS is experimenting with hydraulic hybrid technology. Wal-Mart last year took delivery of its first hybrid trucking rig. Last month, Peterbilt Motors said it was starting full production of medium-duty hybrid trucks. And it makes sense. The gas savings and tax incentives rise with the size of the vehicle. With gas at $4 per gallon, a trucker who drives 30,000 miles annually at five miles per gallon could save $4,000 a year if he could increase fuel efficiency to just six miles per gallon.

© 2008