In writing up my last economic journal entry [it was an analysis on an article discussing the importance of good products and strong business models for a business to thrive], the concept of hybrid cars kept running through my head. It appears as if they are the future of driving, the best environmentally sound option next to the now defunct electric car. But at this stage, many people do not realize that contrary to advertisements, hybrids are not yet the best economic choice for consumers. Buying one for the environmental benefits is one thing, but for the most part, the saved cost on gas is countered by the car itself being much more expensive than others. The point at which the fiscal decision works to the advantage of the buyer usually takes years longer than people own/lease the car for. At least at this point in time when hybrids are relatively new to the market, the opportunity cost is simply too big. Economically speaking, if one wants their car to be sound, they should go with a normal one now, and by the time they need a new car, hybrids, being more commonplace, will likely be cheaper with the kinks worked out.
- Andrew Citrin
3 comments:
Yea, I think Citrin makes a good point. People often ask, “If Hybrid cars are cheaper and more environmentally sound then why aren’t more people buying them?” In fact, it is not nearly as cheap as we think since the initial cost, as Citrin stated is greater. This is in large part because of car companies’ infrastructure. Their companies and supply lines are designed to make gas cars, so to convert their supply lines to make electric cars is quite costly for them hence the high initial cost. Eventually, when more and more companies start converting their whole infrastructure to make electric cars, we will see the price drop and that is when electric cars will become a bit more affordable. They are definitely the cars of the future, but companies are going to have to incur some expenses to make the switch.
I do not pretend to be an authority in the department of hybrid cars, but I believe (not completely sure about the accuracy of this) that the hybrid cars do not significantly imprve gas mileage despite their ability to partially run on electricity. Provided that this statement is true, then this coud be another reason for why they haven't really taken off. The price may be one reason for their lack of succes, and the lack effeciency may also contribute in this category. I believe that as the tehcnology improves, meaning that they are able to run significantly longer on electricity saving tons of gas and possibly one day not needing gas at all, and the prices of manufacturing these cars drop, they will have the potential to become the cars of the future.
Andrew, the thinking behind a hybrid car is that it is a sound long-term investment. Granted if you are buying a car and planning on selling it in a few years, you should probably stay away from a hybrid. Hybrids, however, are for people who take care of their cars, don't run up the mileage on them and can make them last for 10-12 years. Now, my only concern would be that in that time there will be a new generation of vehicle that is even more effecient and better for the environment. But for the time being, as with anything you must plan ahead for your investments.
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