GM Exec Says Hybrids Will Never Be Profitable

I've expressed my doubts before about whether hybrid electric cars are really the future of autos. I'm also a little pessimistic about how quickly Americans will accept these vehicles as their cars of choice. But my skepticism pales in comparison to that of General Motors' vice chairman Bob Lutz. I was actually kind of shocked how upfront he was about the tough road ahead for hybrid vehicles.

Dow Jones Newswires reports:

A General Motors Co. executive on Friday said hybrid vehicles will probably never be profitable and are unlikely to ever comprise more than 10% of the U.S. auto market.


Bob Lutz, GM vice chairman, said the company expects to lose money on future hybrid sales and will pass those costs onto other cars and trucks in the auto maker's lineup to support the development of new vehicles.


Hybrids are generally too expensive to produce, given what customers are willing to pay, for the vehicles to ever be profitable, Lutz said.

So if these cars are doomed to lose money, then can someone explain to me why the U.S. government is investing so much money in making sure they succeed? It's one thing to say that these vehicles will be too expensive for most Americans in the short-run, but Lutz appears to indicate that he doesn't believe they'll ever be profitable.

And consequently, for just a minute, I need to defend hybrids. Even though I too am highly skeptical that they'll ever be profitable, there's certainly a chance they could be. The world's oil reserves are finite. So gas will ultimately get more expensive. That will make the relative cost of owning and operating hybrids cheaper versus cars that rely solely on gasoline. As a result, even if the components for making hybrids are more expensive, theoretically, gas prices should eventually increase enough to make them more economically sensible to purchase.

That's not to say that plug-in hybrids are necessarily the best technology. The winner could instead be hydrogen, bio-fuels or something completely different. It's hard to know which technology may one day be the cheapest to produce and operate. But it's certainly within the realm of possibility that plug-in hybrids could at least be profitable. And if that happens, while other technologies turn out to be duds, then they could very well comprise a large portion of the auto market. Of course, even if that happens, it won't be any time soon.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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