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What is the economic impact of hybrid cars?

        Auto | Hybrid Cars

Hybrid Cars' Economic Effect on the Population
Fisker Automotive's Fisker Karma, a sports luxury plug-in hybrid car, is shown at the 2010 Los Angeles Auto Show, in Los Angeles.
Fisker Automotive's Fisker Karma, a sports luxury plug-in hybrid car, is shown at the 2010 Los Angeles Auto Show, in Los Angeles.
AP Photo/Damian Dovarganes

The financial consequences of hybrid cars stem from the auto and petroleum market forces already discussed, combined with consumer behavior and the rhythms of the technology adoption cycle. In other words, it amounts to a question of who buys hybrids, why they buy them and whether they buy them in sufficient numbers to have an effect.

The number of hybrids being bought, and why, is difficult to pin down because purchasing patterns are driven by several factors. Consider the effects of gas prices, for example: Since the advent of the Prius, and at various times in the history of hybrids in general, people have bought more hybrid vehicles as gas prices have climbed, but they've also bought muscle cars and SUVs despite rising gas prices. Although economic rebound effects, which undercut the fiscal rewards of a technology by introducing countervailing behaviors, are not yet evident, they could potentially attend the more extensive embracing of hybrids; for example, a household could rationalize buying a muscle car if they own a hybrid, telling themselves that the two purchases offset each other -- a kind of household-level cap-and-trade.

The issue of who purchases hybrids presents an easier target. Hybrid car buyers have statistically higher household incomes and education levels, and value fuel consumption and technology higher than other criteria, including brand preferences and design. They tend to be early adopters as well. Of course, as available brands and options expand, as fuel prices increase and as consumers grow accustomed to the technology, that may change.

Other population economic effects of hybrids range from environmental impacts to the creation of new jobs. In light of the current economic downturn, economists, columnists and even the president have begun looking toward the creation of new, greener energy technologies and industries as the key to a stronger economy and future economic prosperity. Thus far, American policy support from Congress for such initiatives has been weak. Additionally, these plans, currently in their early stages and painted in broad strokes, face challenges from large global economies such as China, which holds a home field advantage: the rare earth metals necessary to make hybrid batteries. In other words, hybrid cars could mean more jobs, but they also might not.

Nevertheless, economic impacts continue to trickle in. California-based Fisker Automotive, for example, recently purchased a shuttered GM plant in Delaware to manufacture plug-in hybrids. Fisker estimates the plant will employ 2,000 American assembly workers, and industry experts expect an associated surge in employment for domestic parts suppliers and service providers.

Along similar lines, the $787 billion stimulus package approved by Congress in 2009 incorporated more than $2 billion in grants to support American education and manufacturing related to hybrid and electric vehicles. The proposed Domestic Manufacturing and Energy Jobs Act of 2010 provides tax incentives to consumers that purchase heavy (more than 8,500 pounds or 3,856 kilograms) natural gas vehicles and heavy hybrid vehicles. Moreover, electric and hybrid batteries exemplify the kinds of jobs that American companies are less likely to export, because labor only accounts for about 10 to15 percent of their overall cost [source: Wald].

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