Gas Mileage Rises, Hybrid Car Sales Fall: Here’s The ReasonGas Mileage Rises, Hybrid Car Sales Fall: Here’s The Reason

Gas mileage: It’s all about hybrids, right?
The 2012 Toyota Prius hatchback and Toyota Prius C models each get a combined 50-mpg rating from the EPA, the highest fuel efficiency of any non-plug-in vehicle sold in the U.S.
So hybrid sales should be soaring.
They’re not.
While Toyota has expanded the Prius line from one to four vehicles for 2012, and more makers roll out hybrid models each year, the share of overall U.S. sales racked up by hybrid-electric vehicles has stayed between 2 and 3 percent for the past few years.
For 2011, hybrid sales represented 2.2 percent of a total 12.8 million vehicles sold. That compares to 2.4 percent of 11.5 million overall in 2010, according to figures from LMC Automotive cited by Bloomberg.
The explanation is simple: Hybrid-electric technology definitely improves fuel efficiency, letting a vehicle recapture and reuse energy that would otherwise be wasted as heat from the brakes.
But it’s not the only way to increase gas mileage, and it’s expensive.
Even at Toyota’s high volumes–it has built at least half of the world’s 3 million-plus hybrid vehicles since 1997–a full hybrid system like the Prius’s adds $1,000 to $2,000 to the cost of a new car. For lower-volume makers, the increment is higher.
2012 Toyota Prius C launch, Detroit Auto Show
And to meet increasingly stringent fuel efficiency standards between now and 2025, manufacturers will focus most intently on reducing the consumption of their high-volume gasoline engines.
We’ve long said that the bulk of the gasoline saved globally will come from smaller, much more efficient gasoline engines.
Consider the 2011 Hyundai Elantra mid-size sedan, which dumped any V-6 option. The 2013 Ford Fusion follows suit, and we may soon even see a 1.0-liter, 3-cylinder EcoBoost engine offered in the subcompact Ford Fiesta.
So even as the number of hybrid models soars–most manufacturers will offer one or more–their competition is increasing.
And with U.S. gasoline prices relatively low by global standards, the difference in fuel cost between a more efficient gasoline car and a hybrid may actually be falling.
With more and more compact (and soon mid-size?) cars claiming 40 mpg for EPA highway mileage–and combined ratings of 30 mpg or more–hybrid cars will have to get even higher ratings to make a significant difference.
After all, in 2004, a Toyota Prius got 46 mpg combined, but a Corolla was rated at 28 mpg with an automatic. 
2012 Toyota Prius C launch, Detroit Auto Show
Today, the 50-mpg Prius may get compared to a 33-mpg 2012 Hyundai Elantra. As both cars have migrated up the non-linear MPG scale, the number of gallons saved gets smaller.
Even at $4 gasoline, the annual fuel cost savings over 12,000 miles are less than $500 between the two cars.
Next year, the 2013 Ford Fusion (not the hybrid version) may be rated above 30 mpg combined when fitted with a 1.6-liter EcoBoost four–and it’s a much larger vehicle.
Still, it’s early days yet, and most industry analysts expect hybrid technology to spread slowly throughout the world’s new cars.
It may grow from today’s 1 percent of global production (or very roughly 1 million cars out of 80 million vehicles built worldwide) to 5 to 8 percent by the end of the decade.
Cheaper start-stop technology, however, may by then have become almost universal. It simply switches off engines when a car is stopped, and it doesn’t require the costly high-voltage battery packs, electric motor(s), or power electronics that hybrid systems do.
So when someone sneers at hybrids because their sales are falling, calmly remind them that it’s not about a specific technology.
It’s about using less gasoline.
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