Why aren’t Hybrid SUVs Selling Like Hotcakes?

The hybrid car industry is booming right now. High gas prices and a rising environmental consciousness have consumers lining up to buy the fuel efficient little things. Good luck finding a new Prius or Green Civic. At the same time, the General Motors dealership across the street still has hybrid Tahoes and Yukons that aren’t seeing much action. Sales of hybrid SUVs have been much slimmer than anticipated. GM predicted that it would sell between 8,000 and 12,000 of its hybrid SUVs this year and to date – sales linger around 1,540 combined for both the Tahoe and the Yukon. What’s up with that?

Did you know?
If you ask the average person on the street to name a few makes and models of hybrid cars, you likely won’t hear GM’s two SUVs mentioned. Chrysler’s even bringing two more hybrid SUVs to the party in 2009 (a hybrid Durango and hybrid Aspen), but you probably won’t hear mention of them either. So, the marketing department over at GM is blaming sluggish sales on…bad marketing. They say no one is buying the hybrid SUVs because they just don’t know they exist. That’s possible; in a competitive market, raising awareness of your product usually helps. Maybe the Superbowl ad didn’t pay off.

Or is it…?
Right now, the two biggest issues that seem to be holding hybrid SUVs back in terms of sales are: price and efficiency. For a hybrid Tahoe, you’ll pay about $10,000 more than you would for a standard fuel version of the same vehicle. The Yukon is an even worse deal with the base hybrid priced around $50,000 – roughly the same price you’d pay for a top of the line standard fuel Yukon. Cleverly, Chrysler has noted this gap and will be pricing their 2009 hybrid SUVs lower – around $45,000.

But, surely, for paying a premium, drivers can see a radical jump in fuel efficiency, no? No. These gigantic hybrid SUVs get about 20 miles per gallon – up from the standard fuel SUV, which gets just 14 mpg. That kind of efficiency is just not enough to sway most buyers.

Who is buying, who isn’t?
Interestingly enough, most sales of hybrid SUVs aren’t to the typical hybrid buyer. Typical hybrid buyers care just as much about the environment as they do about saving money on trips to the gas station – if not more so. Folks buying hybrid SUVs typically see it as a cost saving measure. Gas is going up and most insurance companies give a discount to drivers of hybrid vehicles. So, for some buyers, the hybrid SUV just makes sense. It’s also possible that buying the hybrid version of a really large SUV might just be to lessen the guilt.

My Hybrid Sport Utility Prediction.
When gas prices topped the $3 mark in February of 2008, searches for green sport utility vehicles jumped dramatically. As gas continued to rise to more than $3.50 per gallon in April and May, hybrid SUV searches hit an all time high (on hybridsuv.com). Surprisingly, as fuel exceeded $3.75 at the pump, searches for larger hybrids started to decrease and they remained at those lower levels as the price hovered around $4.  Recently, the cost for gasoline dropped about 40 cents and guess what? Hybrid SUV searches are on the rise!

 Click image for larger view (chart from Gasbuddy.com).

My prediction is that contrary to popular belief, the final chapter of America’s love affair with the SUV has yet to be written. Not every family fits in a Prius, and hybrid sedans can’t haul loads or pull boats. The fate of the sport utility vehicle, hybrids included, hinges on what buyers are willing to shell out at the pump. Whether that threshold is $3, $5, or even more remains to be seen.