Thursday, June 26, 2008

A reasonable story about the auto market

There is finally a reasonable story on car buying in today's LA Times. It is the first I've seen that doesn't claim high gas prices as the primary reason auto preferences are shifting. The story makes two important points that diminish (but not eliminate-there is an effect) the role of high gas prices in the current auto market. First, from an economical point of view, small cars with conventional engines are a much better investment than hybrids over the life of the vehicle. The second point is that people do not buy cars based solely (or even mostly) on operating costs. They buy the car that they want. If operating costs were a big deal, then people would have turned away from large SUVs long ago since they have always had high fuel costs (and big tanks to fill) and cost far more to insure than cheaper small cars. Matt Kahn has written about the clustering of Prius buyers in the Bay Area of San Fransisco as a function of showing off one's "green" credentials. You can't show off a transit pass like you can a Prius.Publish Post
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