Wednesday, April 15, 2009

are simply not cost effective, and will not be in the next seven to ten years, if at all then.

The second structural defect afflicting hybrids is their pricing. It could well turn out that unless auto companies ensure that the pricing levels of offered hybrids are in tune with mass market expectations – especially in markets like India and China, expected to be the world’s top two in the next five to ten years – they might well start failing. Hybrids are simply not cost effective, and will not be in the next seven to ten years, if at all then. A hybrid, to be rampantly successful, has to be priced in such a range that enables the consumer to perceive its ‘long term’ cost effectiveness over the ‘short term’, thus engaging his buying intent. Confusing? For better clarity, read what Deputy Editor Virat Bahri writes later on in the cover section: “Doubts are often raised about how cost effective hybrids really turn out to be. NuWire Investor’s Cali Zimmerman compared the [price of the] Toyota Camry hybrid with the normal version, and statistically proved that the cost difference cannot be recovered before 13.8 years!!! Even the first hybrid to be introduced in, say, a poor country like India – the Honda Civic – costs a huge Rs.18-22 lakhs.” How does one expect consumers in a poverty-ridden country like India (with per capita GDP just around $1000) to buy such a costly car? Isn’t it then quite a no-brainer issue to say that a hybrid, by its very definition, loses its USP once it is priced higher than even normal cars? Amusingly, not when you look at it from the perspective of billion dollar corporations who refuse to wink when drunk.

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Source :
IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and
Arindam Chaudhuri (Renowned Management Guru and Economist).


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