Hybrid Premium and Showroom Cost Parity
| Vehicle type | Fuel used |
|---|---|
| All-petroleum vehicle | Most use of petroleum |
| Regular hybrid electric vehicle | Less use of petroleum, but non-pluginable |
| Plug-in hybrid vehicle | Residual use of petroleum. More use of electricity |
| All-electric vehicle | Most use of electricity |
HEVs can be initially more expensive (the so-called "hybrid premium") than pure fossil-fuel-based ICE vehicles (ICEVs), due to extra batteries, more electronics and in some cases other design considerations (although battery renting can be used to reach the cost parity). The trade-off between higher initial cost (also called showroom costs) and lower fuel costs (difference often referred to as the payback period) is dependent on usage - miles traveled, or hours of operation, fuel costs, and in some cases, government subsidies. Traditional economy vehicles may result in a lower direct cost for many users (before consideration of any externality).
Consumer Reports ran an article in April 2006 stating that HEVs would not pay for themselves over 5 years of ownership. However, this included an error with charging the "hybrid premium" twice. When corrected, the Honda Civic Hybrid and Toyota Prius did have a payback period of slightly less than 5 years. This includes conservative estimates with depreciation (seen as more depreciation than a conventional vehicle, although that is not the current norm) and with progressively-higher gas prices. In particular, the Consumer Reports article assumed $2/U.S. gallon for 3 years, $3/U.S. gallon for one year and $4/U.S. gallon the last year. As recent events have shown, this is a volatile market and hard to predict. For 2006, gas prices ranged from low $2 to low $3, averaging about $2.60/U.S. gallon.
A January 2007 analysis by Intellichoice.com shows that all 22 currently available HEVs will save their owners money over a five-year period. The most savings is for the Toyota Prius, which has a five-year cost of ownership 40.3% lower than the cost of comparable non-hybrid vehicles.
A report in the Greeley Tribune says that over the five years it would typically take for a new car owner to pay off the vehicle cost differential, a hybrid Camry driver could save up to $6,700 in gasoline at current gasoline prices, with hybrid tax incentives as an additional saving.
In countries with incentives to fight against global warming and contamination and promote vehicle fuel efficiency, the pay-back period can be immediate and all-combustion engine vehicles (ACEVs) can cost more than hybrids because they generate more pollution.
Toyota and Honda have already said they've halved the incremental cost of electric hybrids and see cost parity in the future (even without incentives).
Read more about this topic: Hybrid Electric Vehicle
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—David Blankenhorn (20th century)