Fuel-efficient hybrid cars will soon symbolize a better life

It was inevitable. With all-time-high gas prices driving the demand for gas-electric hybrid cars into overdrive, prices for fuel- efficient hybrids were bound to take off. The Wall Street Journal reports that with a backlog of more than 22,000 orders for Toyota's Prius, the car is now fetching a dealer markup of $5,000 over its original sticker price of between $20,000 and $26,000. Some dealers are auctioning off spots on their waiting lists for $500 or more on eBay, and one customer even resorted to ebay to pay more than $32,000 for his new Prius when his local dealer couldn't deliver even after a six-month wait. Despite the price gouging, most buyers appear all too happy to get a hybrid car -- any hybrid car -- regardless of color, options or an opportunity to test drive it.

Hybrid cars combine gas engines with battery-powered electric motors to achieve, in some cases, 60 miles per gallon. Their batteries are recharged as drivers brake, and contrary to popular belief, they never have to be plugged in. To date, only Toyota and Honda offer hybrid cars, but Ford and Lexus are scheduled to launch the first hybrid sports utility vehicles later this year, which are expected to achieve around 35 miles per gallon.

The markups for hybrids are amazing given that most other conventional cars, particularly large SUVs, have had to rely on sizable rebates, discounts and no-interest loans to encourage sales. Indeed, the average incentive package per vehicle now exceeds $5,000! As the price gap between hybrid and conventional cars widens, however, some analysts are saying hybrid cars aren't worth it. Indeed, for the typical driver, hybrids will save only a few hundred dollars a year on gas. Given that hybrids currently can command $5,000 to $10,000 more than comparably equipped conventional cars, it could take years -- perhaps beyond the practical life of the car -- to reap any cost savings. But does this mean buying hybrids is foolish? Hardly! Consumers rarely purchase cars on fuel economy alone. Status and utility are more important factors, and hybrids offer other advantages, both practical and symbolic, that increasingly will pique the interest of mainstream drivers. Here are a few of them:

Performance -- While early hybrid engine systems lacked the power of conventional engines, technology is advancing. The forthcoming Lexus RX-400h SUV, based on the existing RX-330, couples a V-6 engine with an electric propulsion system, giving it the power of a V-8 and improved acceleration over the already impressive RX-330. The Lexus hybrid is clearly designed for high-performance drivers.

Convenience -- For commuters, hybrids will dramatically reduce visits to the gas station and save time. Hybrid cars may even quicken commutes in some states, such as in Virginia, where hybrids are allowed in car pool lanes even without other passengers on board (similar legislation is pending in California). Ford's Escape hybrid SUVs will offer electrical outlets, appealing to people who need to plug in laptops, power tools or other electronics while out and about.

Esteem -- Prius won this year's Motor Trend Car of the Year, raising its profile among quality-conscious car buyers. Its dazzling instrumentation panel that displays real-time gas mileage and other technical readouts is already a much-talked-about novelty, and drivers like being the first among their friends to own one. Hybrids, however, have also become symbols for socially-conscious drivers who are concerned about America's oil dependency, environment and quality of life. Some owners say that cleaner-emission hybrid cars allow them to make a public statement about their values and concern for their children's future. While many scoff at such "holier-than-thou" rationales, wanting a car that defines one's values and self-image isn't much different than the status-oriented reasons why others pay dearly to possess Hummers or BMWs. Clearly, the appeal of hybrids goes well beyond potential money savings. As more hybrid car models enter the market, their prices will fall and consumers will better recognize their other personal and social advantages. Just as SUVs defined the "good life" in the 1990s, hybrid cars are destined to become the new status symbols for a "better life."

Edwin R. Stafford teaches marketing strategy at Utah State University. His research centers on the marketing and consumer adoption of cleaner technology.

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