Read the following case and answer the related questions.
Hybrid cars such as the Toyota Prius have seen tremendous success since the first hybrids were introduced in the late 1990s. Yet the market share of hybrid cars in the U.S. fell from an all-time high of 2.8 percent in 2009 to 2.4 percent in 2010 and even further to 2.2 percent in 2011. These results are even more surprising given that the number of hybrid models on the market has increased each year from 17 in 2009 to 30 at the start of 2011. That’s more choices, but fewer takers. While some may think that the hybrid car industry feels pressure from other novel car segments such as electric cars (e.g., Nissan Leaf), competition comes from an unusual suspect: plain old internal gas combustion cars!
The primary reason why environmental and cost-conscious consumers prefer gasoline-powered over hybrid cars is rather simple. Engines of gasoline-cars have increasingly challenged the key selling attribute of hybrid cars: fuel economy. While hybrid cars still slightly outcompete modern gasoline cars in terms of fuel economy, consumers increasingly don’t see the value of paying as much as $6,000 extra for a hybrid when they can get 40 mpg on the highway in a gasoline car such as the Hyundai Elantra or the Chevrolet Cruze.
Gasoline-powered cars may also outcompete hybrids on other selling attributes. For instance, buyers may prefer mature technologies such as gasoline-powered cars that don’t come with the uncertainty of new technologies, such as doubts about the longevity of hybrid batteries. Moreover, new car generations like the Nissan Leaf and Chevrolet Volt allow consumers a sneak preview into the future. J.D. Power’s most recent U.S. Green Automotive Study suggests that some customers would rather wait and invest their dollars in this new generation of electric cars. Customers holding out for electric cars that won’t use any gasoline at all and the technological advancement of gasoline engines caused the unexpected comeback of the gasoline car.
Sources: Naughton, K. 2012. Hybrids’ unlikely rival: Plain old cars. Bloomberg BusinessWeek, February 2: 23–24; Valdes-Dapena, P. 2011. Hybrid car sales: Lots of options, few takers. money.cnn.com, September 30: np; and Valdes-Dapena, P. 2011. Green cars are ready, car buyers aren’t. money.cnn.com, April 27: np.
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