Cars and Drivers

$2 Gas Could Crush Toyota U.S. Sales

Makers of hybrid and electric cars never saw $2 gasoline prices coming. They believed they would operate in a world in which gas prices hovered close to $4 and the cost to fill up a car could be higher than $50. Americans would need these cars to keep within what are often strict household budgets. That has changed in a matter of six months, and gas prices could stay low. Some of the most popular cars in America could see sales erode considerably.

Toyota Motor Corp. (NYSE: TM) will sustain the most damage. Among the best-selling hybrids are the most popular one in the world and one of the oldest. The Prius is so popular it has spread its brand across a number of models to cater to a broad array of tastes and pocketbooks. There are four versions of the Prius, one of which is a plug-in, to target the growing demand for electric engines. The highway MPG for the balance of the line Prius runs about 50. Toyota also makes hybrid models of its extremely popular Avalon and Camry. Its RAV4 and Highlander SUVs have hybrid engines as well.

So as not to be entirely bested by Toyota, South Korean brands Hyundai and Kia have hybrid versions of their Kia Optima and Hyundai Sonata. Each is toward the low end of pricing in the car industry. Honda Motor Co. Ltd. (NYSE: HMC) operates there as well. Its popular Accord and Civic have hybrid models.

As for the balance of the industry, Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) have hybrid models of most of their popular cars. GM in particular stands out because of the failure of its heavily publicized Volt. At the highest and most expensive end of the industry, BMW and Mercedes have launched hybrid versions of their cars. Even deeply troubled Cadillac offers an expensive hybrid, the ELR. Its sales are almost certainly modest because the car carries a sticker of $75,000 to $82,000.

All of the major car brands sold in America offer hybrid models, the sales of which are bound to falter. But Toyota’s large fleet of hybrids has the most exposure in a world of $2 a gallon gasoline.

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