"As the numbers show, vehicles with a rating of 30-plus miles per gallon have suffered a dramatic drop in sales. For the first five months of 2010, sales of vehicles with that 30-plus MPG rating have dropped by 10 percent compared to the same period in 2009," Loveday said.
"Overall, these high-efficiency cars accounted for four percent of the market in 2009, but now only hold a three percent share," Loveday continued.
"A few of these efficient vehicles suffered mightily: sales of the Toyota Camry Hybrid dropped 40 percent, Civic Hybrid sales plummeted by 77 percent and Honda Fit numbers fell off by 19.7 percent. Ward's Auto suggests that low gas prices have led to the decreased interest in fuel-efficient vehicles, which, can lead right into a discussion about the need for a gas tax once again."
Monday, June 21, 2010
Why aren't people buying more fuel efficient cars?
The Cross-elasticity of demand for cars with respect to the price of gasoline is bigger than we thought:
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The decrease in oil price is the main reason for the decrease in sales, but some other things are the large up front price and the end of the tax write off are other causes of the decrease in sales. There are a few ways to increase the sale of the hybrid cars, but they would come with someone losing money or the government changing the market. Car companies could increase the price of non-hybrid cars, decrease the cost of hybrid cars, or the government could tax oil. The government could also allow rebates for those who by hybrid cars, or offer tax write off for companies to sell more hybrid cars. This would require someone to make a decision to move to hybrid cars.
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