Dirty Secret: Most Green-Car Owners Go Back to Gasoline

NEW YORK (TheStreet) — Goodbye Prius, hello Hummer.

An Edmunds.com study has found that a record share of hybrid and electric-car owners are swapping their "green" models for sport utility vehicles as low fuel prices make gas guzzlers less expensive to operate.

"For better or worse, it looks like [green-car] owners are driven more by financial motives rather than a responsibility to the environment," Edmunds senior analyst Jessica Caldwell says. "With today's gas prices as low as they are, the math [for eco-friendly cars] just doesn't make a very compelling case."

Edmunds analyzed 2012-15 auto sales and found that the share of hybrid and electric-car buyers who went with a green model again at trade-in time dropped to just 45% as of this year's first quarter.

That's down from 60% in 2012, as well as the first time that less than half of green consumers stuck with hybrids, plug-in hybrids or electric cars when trading in their old models.

In fact, Edmunds found that some 22% of green-car owners actually swapped their eco-friendly rides for that bane of tree huggers' existence: the SUV. That's nearly double the 11.9% green-car-to-SUV rate seen just three years ago.

Boston-area auto dealer Brian Kelly says eco-friendly cars only sell well at his Kelly Auto Group's nine showrooms when gas prices approach $4 a gallon — well above the $2.72 average that U.S. drivers face today.

"Sales are way down — and look at all of the incentives people have to offer to sell [green models]," he says. "You can't sell an electric car unless it has $5,000, $6,000 or $7,000 of [tax breaks and automaker incentives], and the manufacturers say they lose money on every single one."

Caldwell believes low gas prices and improved fuel efficiency for traditional cars are prompting many green-vehicle owners to reassess things. She thinks many decide that modest SUVs combine good-enough fuel economy with better prices and more room than hybrids or electrics offer.

"Fuel economy for [gasoline] engines has gotten a lot better in the past few years, and I think a lot of people feel they can do well enough with a compact or midsize SUV," the expert says. "It's like: 'Wait a minute, why should I pay more for a hybrid or an electric vehicle?'"

Consider the Toyota Camry LE. A gas-powered version starts at $24,460 and gets 35 miles per gallon on the highway — just 3 mpg less than what a $28,230 Camry LE hybrid offers.

Edmunds estimates that at today's gas prices, you won't recoup the $3,770 extra you'll pay for the hybrid Camry for 8.8 years. That's some three years longer than the average American keeps a car.

Caldwell doesn't believe every green-vehicle owner is swapping a Nissan Leaf for a Cadillac Escalade. Rather, she thinks many are opting for Honda CR-Vs or other moderate-sized models.

One thing that's clear is that sales of green cars — which many experts once thought would replace gas-powered vehicles entirely — are stalling.

Hybrids, plug-in hybrids and electric vehicles now account for just some 2.7% of all U.S. new-car sales, down from a roughly 3.7% peak in 2013.

Caldwell says the shrinking market share shows that green cars need either bigger fuel savings or generous tax breaks to succeed. Plug-in hybrids and electric cars enjoy up to $7,500 in federal tax credits, but Uncle Sam stopped offering incentives on the Toyota Prius and other "regular" hybrids some four years ago.

Of course, another option would be to just give up on green cars and try something else to cut auto pollution and fuel consumption, Caldwell says.

"At the end of the day, this is a free-market economy and people will buy what they want," she says. "Green vehicles aren't what everyone is flocking to." 

 

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