10/10/2004

Hurray for Honda

Honda has announced that with its new hybrid Accord V-6 model coming out, sales of its hybrid vehicles in the United States will catipult to over 45,000 next year. Honda expects that its Accord hybrid sales will amount to some 20,000 cars next year. Honda is planning to market the hybrid to, "affluent, well-educated professional of around 50, with a household income of $100,000-plus."

The microeconomic implication of this recent development is that with hybrid sales taking off, American's are now being seen responding to surges in oil prices. Also, Honda found an incentive in continuing to develop and release models that would further its plans to provide an adequate return on its investment while at the same time further protecting the environment. Consumers are responding to incentives in that the new hybrid vehicles get better gas mileage which means less money at the pump.

10 comments:

Bryce Larkin said...

I believe the American people are feeling the effects of the high oil prices, even the more wealthy class. If a family is wealthier, who really wants to pay $50 or more for a tank of gas? I think it is an extremely smart move for Honda to market a hybrid to families with higher income. With the oil price increasing more car companies will have to make engines that consume less gas.

miles said...

I think that this is a smart business move for Honda. Especially with high oil prices that aren't forcasted to be declining anytime soon. The incentives of high mileage cars are finally getting to the point where they are outweighing the gas-guzzling SUVs and trucks.

Bryce Larkin said...

I just hope the new electric/gas cars look better than the hybrid cars today. I still think it is a great idea to market hybrid cars to the upper class, but they need to look good. Does anyone else think they look completely disgusting and would never be caught dead in one?

Rufio said...

Why is Honda targeting the upper class with this new car, and why is it so expensive? The article said that the Accord hybrid will cost around $30,000. That price seems a bit excessive to me. With the hybrid Accord getting 30 miles per gallon in the city, and 37 on the highway you will save money at the pump, but I know that Volkswagen has a Turbo-diesel engine that will get 45 miles per gallon on the highway. Volkswagen's car is cheaper too. Honda makes a great car, but I think they might be better off trying shoot for a target market that isn't in such a high bracket. If you make your target bigger you are going to get a lot more hits.

John West said...

I think what Honda is doing by charging $30,000 for the hybrid Accord, is recouping some of its massive R & D costs. Technology is not had without extreme amounts of up-front capital. If you look at the trends in the auto industry over the past 10 years, prices have gone through the roof. You now see everyday people diving around in $60,000 Lincoln Navigators, Hummers, and many others. This has caused companies like Hyundia and Kia to take advantage of markets that serve the less fortunate.

natty said...

I am struggling to see the benefit of the hybrid car. What I mean is this: yes, you will save some money at the gas pump, but, you will have to drive a lot of miles to make up for the high sticker price. And what about maintenance and insurance? My guess is that they will be high as well. In my opinion, you would be better off to buy a Honda Civic. It gets pretty good gas mileage, it is very reliable, and it is inexpensive to insure.

Bruce Banner said...

Honda is not the only auto manufacture making hybrids. Most large automakers are creating an alternative fuel vechicles. But right now the cost of these hybrids are expensive. In the end will you save money for hybrids?

Bryce Larkin said...

Bruce, I believe that you will save money on the hybrid if the oil prices for a barrel keep rising. I know the hybrids are expensive but when you pay $50 to fill up your tank weekly, it adds up fast. The problem I have with the hybrids is their looks.

Maudi said...

Once again people are starting to change their tune. The high oil prices and new economically sound vehicles are starting to change the way Americans look at the car market. The days of driving big SUV tanks are starting to change and I think honda is on the cutting edge. This new V-6 Accord is enough rocket without the gas consumption.

Dr. Tufte said...

I think the message that Honda is sending is that this vehicle is not likely to be economical for someone who doesn't have money to burn on a luxury. But, that's typical of environmental concerns, which typically don't interest people much until a society's median income gets high enough.

All of this says that the income elasticity of hybrid cars is high.

From tbe business side, it is very common to introduce products with high fixed costs to the rich first. They may have reservation values high enough that you can make some monopoly profits to recoup those fixed costs before free entry starts to hit you.

I wonder why the looks of they hybrids are so bad. Do you think there is a perception that something that is good for the environment must not be attractive? Certainly we see this in the "look" of a wilderness area vs. a park, and the environmental movement has been explicitly against certain grooming habits in the past.