New Hybrids Face Market Headwinds

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Hybrids face more scrutiny than most cars, especially when potential buyers are concerned about whether their gas savings will justify the extra money they’ll have to pay.

New hybrid models such as the Ford Fusion Hybrid and Lexus RX 450h unveiled at the Los Angeles auto show will have to contend with the slowing car market and gas prices that have dropped below $2 a gallon. Those lower prices reduce the pain at the pump that drove buyers into the arms of fuel-conscious hybrids in the first place.

“I think the panic is gone as it relates to gas prices,” said Erich Merkle, lead auto analyst at consulting firm Crowe Horwath LLP. “Now it’s more of an issue of, ‘Jeez, do I have the money to spend on a new car?'”

“People are not spending money right now,” said Paul Lacy, manager of technical research at forecasting firm IHS Global Insight. “Asking them to spend more money (for a hybrid) is kind of reaching.

“The economy is real tough, but the pressure on fuel has come off. We know that’s temporary, but we also know that it takes pressure off the [manufacturers] to put out green vehicles right away.”

Still, Lacy expects hybrid production to increase to 2.5 percent of all North American auto production in 2009, up from about 2 percent for 2008. That translates into a modest uptick in vehicles — from about 250,000 in 2008 to 287,500 in 2009 — as production of all cars falls. That might not sound like a lot of cars, but those figures don’t include hybrids like the new Honda Insight and redesigned Toyota Prius, both of which will be built outside of North America, at least initially.

Ford’s new 2010 Fusion Hybrid will hit dealerships in spring 2009. The midsize sedan is powered by a hybrid drivetrain that uses a 2.5-liter four-cylinder engine and an electric motor, and it offers significant gas savings and intriguing new gauges.

Official EPA fuel economy figures haven’t been announced, but Ford says the Fusion Hybrid will beat the Camry Hybrid’s city estimate by at least 6 mpg, which would give it a minimum rating of 39 mpg. That’s very good for a midsize car. Ford hasn’t announced any projections on highway gas mileage for the Fusion Hybrid, but spokesman Alan Hall says it too will be better than the Camry Hybrid, which has a highway rating of 34 mpg.

The Fusion Hybrid features what Ford calls SmartGauge with EcoGuide, which is an instrument panel designed to help drivers maximize fuel savings based on information provided by configurable LCD screens.

“The visual impact of it is tremendous,” Hall said. “This goes way beyond telling you what your average or instant fuel economy is.”

Lexus’ 2010 RX luxury crossover will again be available in hybrid form. Dubbed RX 450h, the redesigned hybrid hits dealerships in spring 2009. It uses a larger V-6 engine that’s part of a hybrid system that makes more power than before. Official gas mileage estimates aren’t available, but the automaker expects the RX 450h to achieve better mileage than its predecessor’s 27/24 mpg city/highway for the front-wheel-drive model and 26/24 mpg for the all-wheel-drive version, according to Lexus spokesman Craig Taguchi.

While the market looks grim for automakers, it’s brightening for hybrid shoppers thanks to an ever-increasing number of models ready to challenge the established hybrids.

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Mike Hanley has more than 20 years of experience reporting on the auto industry. His primary focus is new vehicles, and he's currently a Senior Road Test Editor overseeing expert car reviews and comparison tests. He previously managed Editorial content in the Research section. Email Mike Hanley

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