Steane Klose | Jan 5, 2009

The purchase of a hybrid vehicle was an attractive proposition when the global price for oil was heading north of AUD$140 a barrel. Now having fallen below AUD$40 a barrel, and with pump prices having fallen everywhere, the 'value equation' for the hybrid has been severely weakened.

Price premiums on hybrid models coupled with the falling price of fuel mean that it now takes considerably longer to see purchase dollars spent returned in fuel savings.

As a result, and coupled with a wrecked economy, hybrid car sales are plummeting in the US - they dropped by half through November, with December figures expected to show a similar decline. This diminishing interest has automakers concerned about the returns that may be seen on money and time invested in the development of hybrid technologies.

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To add to the problem, America's flagging economy means new car buyers are reluctant to stretch their budgets and, despite hybrid vehicle purchases attracting tax credits there, the price premium is more than consumers are prepared to bear.

It's unwelcome news for environmentalists as the flagging sales would indicate consumers are less concerned about environmental impact and more concerned with their bottom lines.

There are reports now surfacing that environmental advocates propose to petition the US Government to introduce a special tax on fuel to make hybrids an attractive proposition once more. Hmm. Australian motorists' experience with fuel excise - our special tax - and GST sitting on top, is not a happy one. I think we'd be advising the US that the last thing motorists need there is an additional tax on fuel.

We'll keep an eye on this story and let you know more as it unfolds.

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