Invisible Hand Kills Hybrid Car Sales

I read in the news that sales of hybrid vehicles dropped 43% in December 2008 compared to a year ago. While sales of other cars also dropped, hybrid car sales dropped a lot more. The obvious reason is lower gas prices. When people were buying Toyota Prius above MSRP with a long waiting list, they said they were doing it for the environment, which is partly true. The payback time from fuel savings was already pretty long back then. Now that the payback period is even longer, apparently the environment is no longer a priority for a lot of people.

You’ve got to give it to Adam Smith. The invisible hand regulates people’s concern for carbon footprint or dependence on foreign oil. When they have money, they care about the environment. When they don’t have money, many people no longer need a good citizenship status symbol. It makes sense to me.

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Comments

  1. Ashley @ Wide Open Wallet says

    Back when gas prices were high everyone was wondering if the public would keep up their new habits if prices were to drop. There’s your answer huh?

  2. Pelon says

    It seems that most people view environmental stewardship as a luxury good. Maybe the best way to improve the world’s environmental standards is to focus on maximizing global wealth instead of restricting output.

  3. Pablo says

    Very interesting post. Nowadays, it seems peoples memories are designed to simply carry them through to the next commercial break…

  4. Ted says

    I would argue that almost everyone buys a car as a status symbol or expression of themselves. Very few actually buy based on basic usefulness alone (like me).

    Environmentalism is one way to express yourself with a car just like a Hummer is for someone or a Porsche is for another.

  5. shadox says

    Which to me means that if we have any intention of protecting the world from climate change we must ensure that the market sends the right pricing signal to folks – i.e. gas must cost more, and the best way to achieve this is a carbon tax, as I have recently posted on my blog.

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