Once is enough.

Anthony Davis played basketball for one year at Kentucky before declaring his intent to go pro.  He won a championship, tasted sweet victory, and then passed on a chance to become a NCAA legend.  Most hybrid buyers, it seems, also pass on the opportunity to have another go.  In 2011, only 35% of hybrid owners in the market for a new car bought a hybrid.

Only 35%?  That sounds really low.  You’d think hybrid owners love their cars so much they’d of course be back to by more hybrids.  But, according to this study, they aren’t.

And what’s the implication?  The message surely can be spun to say that hybrids are a failure.  Even their own customers aren’t coming back to buy more. As the Autoblog post linked above says:
“How much do hybrid drivers really, truly like their cars? According to R.L. Polk, not all that much – at least not in 2011.”

But the question wasn’t whether they like their cars.  It’s whether or not they bought new hybrids.  This is example of the media extrapolating data into an assumption that make for a better story than the press release actually said.  For the record, RL Polk, the company behind the hybrid study, did a good job of just reporting numbers and not making such assumptions.

So if the customers aren’t unhappy with their hybrids, why aren’t they buying more?  I’ve got at least three explanations:

Household shopping:  Say your parents own a Prius and a minivan.  The minivan is old and it’s time to be replaced.  They want another minivan.  There are no hybrid minivans in the mainstream marketplace so they just buy some normal minivan from the local annoying dealer on your TV.  This purchase would register as a hybrid owner not coming back to buy a hybrid.

Fuel economy: In short, the fuel economy of non-hybrids has improved considerably over the last few years.  The 2007 Camry hybrid got 38mpg highway.  They 2012 normal Camry gets 35mpg highway.  The city economy numbers are a lot different, but many people often ignore that number.  The hybrid premium is $3400 on a new Camry and the mileage hasn’t improved much over the 2007.  Even if they like their 2007 Camry Hybrid, it might not be worth the cost to get a 2012 hybrid over the normal version.

The economy: Of course, this is my favorite explanation.  If you look at Polk’s number of customer loyalty to hybrids quarter over quarter you can see the buyer looks to be sensitive to the economy.  2008 was a rough year for hybrid loyalty, and the economy.  When the tsunami hit last year and the European Union seemed on the brink of breaking up everyone was worried about the impacts on the US.  For a while last fall some started to think we’d enter another recession.  Hybrid loyalty tanked during this time.

The economy part two: Polk is kind enough to break down the hybrid loyalty by market so we can see that LA has average loyalty and Florida has high loyalty.  In fact, the top 4 markets for hybrid loyalty are also markets that have taken huge hits to their economies due to housing: West Palm Beach, Phoenix, Orlando, and Tampa.  So if the most loyal customers are in these areas, and the economy has affected everyone’s purchasing habits, what would the hybrid loyalty score look like if those cities hadn’t cratered in the housing bust?

All in all, customer loyalty for hybrids from 2008 until today is largely identical.  But since then the economy has changed dramatically.  To say that loyalty for, what is still a premium product, hasn’t faltered during this period sounds like a good thing to me.  If our economy were fully recovered we could expect hybrid loyalty to be much higher than it is today.

As for Anthony Davis, he never would have gone to Kentucky if it weren’t for a rule that requires him to wait a year from high school to go pro.  Just like many hybrid buyers before 2011 might not have bought if it weren’t for a tax credit that’s no longer available.  Once again, we should applaud the hybrid’s resiliency in the face of adversity.

Coincidentally, the rules that put Davis in Kentucky and incented hybrid purchases, passed in 2005.

Image: efusco (really wanted a picture of Davis in a blue Prius but don’t think I’ll ever see that)


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categories: business, cars, economics