My musings on the economy, life, technology, business and things I find interesting.

Friday, June 13, 2008

Hybrids - Do They Even Make Sense?

Some Numbers
When your mileage goes from 14 MPG to 20 MPG you're saving 30% on gas, over 12,000 miles that translates into a savings of 250 gallons or about $1000. In order to achieve these savings you must buy a hybrid version costing $4000 more.

Lets compare this to going from 36 MPG and 45 MPG, that's a savings of 20%. In terms of dollar savings it's $267 per year over 12,000 miles. In order to achieve these savings you must buy a hybrid version costing $7600 more.

The former vehicle is the Chevy Tahoe and the latter is the Honda Civic, the payback periods without considering the time value of money are 3.8yrs and 28.5yrs respectively. I pulled these numbers from the manufacturers websites and then ran the math.

Interestingly enough the big heavy gas guzzlers benefit most from hybrid drive trains while with the Honda it seems almost silly. Or put another way small cars are already fairly efficient and thus the hybrid drive train, although making a difference, provides little economic benefit. With truck factories closing across the country it seems that no one wants trucks anyhow but I digress. Conclusion: buy a used Honda civic for 7 grand, the money you save will far outweigh the extra $260 in gas per year over 50yrs needed to make the difference up (actually practically invested you'd never make it up).

The Economics of It
Most people miss this, a 20% gain in efficiencies is nothing to laugh at, the problem is the Honda is already starting with good numbers so it's base cost of running limits how much impact the hybrid can have on your pocket book. The Tahoe on the other hand chugs gas for a living so the dollar savings are more significant, but still crappy when weighed against the civic. As gas goes up it creates more room for savings, but even if it doubled again the civic hybrid would make little sense.

Its All About the Weight
  • Just like the average north American, cars have been getting fatter and fatter
  • People love their massive pimped out soccer mom escalades
  • Engines are getting more and more powerful, the speed limits it seems can't keep up
  • People are demanding more and more space (maybe because they're fatter)

It's Not Brain Science
The force required to accelerate an object is proportional to its mass. The bigger the more you need, twice as heavy = twice the force required.
Race Cars
  • Less weight = less tire patch needed
  • Less weight = smaller breaks
  • Less weight = faster
  • Less weight = less stress on the structure
  • Less weight = more fun
  • Go take a ride in a Lotus Elise or a crotch rocket and you'll understand
Don't Make the Mistake
  • Big doesn't need to be heavy, it just happens to be that way at the moment

Mumbo Jumbo
  • Hybrids in their current form make little sense economically
  • People living huge distances from amenities makes little sense
  • Driving everywhere is much more depressing then the romantic images of open highways and freedom. More like road rage, ugly landscapes and pissed off people.
  • Big vehicles everywhere and lots of owners wondering why they need that new F150 to drive to work on paved roads both ways, maybe an echo with a rodeo decal on the side will suffice and maybe a picture of Calvin pissing on the Hyundai symbol

What Makes Sense
  • Being within walking/biking distance to amenities
  • Local neighborhoods
  • Smaller, lighter vehicles
  • Electric vehicles
  • Buying used
  • Avoiding the hybrid trap

An Extreme
  • 60 km on 1 kw-h ( for the Americans that's about 37 miles)
  • At off peak hours that would be an incremental cost of 4 cents on my hydro bill
  • So to go 60km with a car doing 10L/100km would require 6L or about $8 of gasoline
  • Compare It: $0.04 vs $8.00 - that's two orders of magnitude - a 200X difference
  • For perspective the Tahoe would cost $3500 for a year and your moped would cost $13. The pretax difference even larger.

Now that's for a little two person electric moped, but you get the picture, electric power trains coupled with low weight vehicles offer a substantial opportunity for savings. You can get a electric scooter with a range of about 100km / 60 miles for about $2200, if you live in an actual community you could get around with something like that. In China they already are - one manufacturer just received a HUGE bid over the current asking price. The economics makes sense so people use them, the price of oil becomes relatively irrelevant with a well designed EV.

If North America is going to revert to the mean economically along with the rest of the world and if oil is going to be expensive you can be darn sure that light electric vehicles are going to play a BIG role. Imagine 1/200th of the cost of gas, charges in 2 hours overnight and provides more than enough range.

Wait for the plug-in hybrids that give you 20-30 miles off the battery alone - when you can run your car of the grid for the majority of your driving, that's when you'll see big savings and big opportunity for getting off of foreign oil.

Opportunities Abound
There will be plenty of opportunities to make big bucks off of alternative energies. It's not all hocus pocus, there are some companies doing some seriously compelling things. The company that can do solar at scale at $1 per watt is going to make a killing, many say they already can. Nanosolar should be interesting to watch. I would load up my entire roof and more at $1 / watt. Just like in the tech boom there is a lot of promise and a lot of hype. It's a sand box full crazy multiples and perpetual motion machines and it's a scary place to play. I'm steering clear at this point but I'm keeping my eyes open for the angle - just like chemtrade you could have seen it coming if you had dug deep enough into the BioFuel boom. There's always an angle that's safer then the obvious, but that's the problem it's just not obvious.


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