The Billion-Dollar Industry

Screen Shot 2013-05-02 at 12.04.54 PM everyone was as rich as Kobe Bryant then every automaker could make more money of every vehicle. However, income varies for everyone. People like Kobe make millions a year, while most people struggle to make what he makes in a game of basketball. Which brings the question, are hybrid cars profitable?

Hybrids tend to cost $3,000 – $5,000 more than the normal vehicle. The extra cost comes from various parts, but it mainly stems from the battery that powers the vehicle. Automakers have to decide how to charge for a hybrid, but they have to keep in mind that the profits they are seeking may not be attainable at the time. Not every consumer has as much money as Kobe Bryant. Therefore they must calculate a fair price for themselves and the consumer.

Finding a fair price is all based on supply and demand. If they charge too much, than very few people would purchase the vehicle if interested. While charging a low price would hurt company profits. Each company has different capabilities when it comes to producing hybrids. Toyota is able to produce almost 100,000 more hybrids than any other automaker, but they also have the highest demand allowing them to make and sell more, resulting in larger revenue.

Before the 2013 Ford Fusion Hybrid, Ford was losing money on every hybrid sold. However, they were losing money on almost every vehicle sold at the time, which eventually resulted in a bail out from the government. Toyota and Honda make on average $3,100 per hybrid sold. With Toyota’s sales numbers from 2012, Toyota generated over a billion-dollar industry that is growing each year.

Additionally, government subsidies have helped consumers and producers to put more hybrids out on the streets. When the Toyota Prius fist became available to the public, the government offered a subsidy that was roughly enough to take care of the additional costs. Now, the subsidy for the Prius has been removed, but that has not stopped the Prius from being the number one hybrid sold.

Hybrids are becoming more popular every year, with analyst expecting other forms (plug-ins, battery-electrics, etc.) of hybrids to grow each year. The growth can also be attributed to more hybrids being offered along with government subsidies. France offers up to $8,500 in subsidies for hybrids, making it easier for consumers to afford. With subsidies for consumers, the hybrid industry is certainly profitable for automakers.

The hybrid industry is growing every year, and it does not look like it is slowing down. It’s here and it’s not going anywhere.

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