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Hybrid economics

The soaring prices of fuel in recent months, a phenomenon that doesn’t seem to have a happy ending in the short term because Vladimir Putin seems to be set on prosecuting his clumsy war in Ukraine for the long and destructive haul, has led many of us to take a second look at the way we are still dependent on fossil fuel powered transportation.

With the P40 per liter price of gasoline feeling like it has become part of ancient history, we will have to either increase our fuel budgets or find new modes of transportation that uses less fuel.

Faced with this new normal, I started checking out the viability of electric and hybrid vehicles in the country and was both shocked and disappointed to see that such vehicles are still not feasible for Filipinos. Unless government finds a way to lower taxes to make such vehicles cheaper and more accessible, it looks like we are stuck with fossil fuel burning vehicles for the foreseeable future.

Fully electric cars are still priced out of the market. The most affordable Japanese-branded electric car is the Nissan Leaf that currently sells for a whopping P2.798 million. At that ridiculous price, only the hard-core environmentalists who cannot use bicycles would pay such a steep premium to go “green.”

There is actually a cheaper option, from the Chinese brand Changan that costs P1.828M, but that’s still a lot considering your options for the same new car budget. Furthermore, I don’t know anyone who would be environmentally or fuel conscious or enough to shell out almost 2M for a Chinese-branded vehicle.

If electric cars are out of reach, and you really want to save the earth by reducing emissions or save on fuel costs, the next option is to go hybrid. A car powered by this type of engine is supposed to be more fuel efficient than a vehicle with a traditional internal combustion engine (ICE) and is cheaper than a fully electric vehicle. However, it is still more expensive than the former.

With my curiosity piqued by our current situation, the quickest way to come up with an apples to apples comparison was the pricelist of Toyota Philippines that offers models that are both hybrid and ICE powered.

As per the Toyota pricelist, a hybrid Corolla Altis will cost P1.595M while a regular one is P1.215M. A hybrid Corolla Cross is P1.665 while an ICE powered one costs P1.303M. That makes the average price difference to go hybrid an additional P370k.

What is the difference between a hybrid vehicle and a regular one? Aside from the powertrain, technology, emissions, and a cool badge, there isn’t much difference between the two vehicles. They will get you from point A to point B.

The biggest difference for me is the price. For the P370k premium that must be paid to go hybrid, the new car owner gets to spend less on gas and produce less emissions.

The question becomes, what do you actually save when you pay extra for a hybrid car?

For me the biggest factor is fuel, so let’s do some quick and dirty math.

Let’s assume the following:

Let’s be generous and say that a hybrid vehicle will have twice the mileage of its IEC equivalent: say 12km/liter vs 24km/liter.

A regular user will go 10,000km per year, and let’s put the price of gasoline at P70/liter.

An ICE powered car driven 10k km per year at 12km/liter will consume 833.33 liters of gas that will cost 58,333.33 annually.

A hybrid car driven the same distance consuming half the fuel has an annual fuel cost of only 29,166.66.

So by going hybrid, a person who uses their car 10k km a year will save approximately P30k per year in fuel costs compared to using a regular car of the same model.

That sounds good right?

However, if you factor in the price difference of P370k to get hybrid tech, it will take 12 years to pay for that price difference. If the price of fuel falls from P70/liter to say P50, the payback period becomes even longer. In other words, the hybrid owner may enjoy lower annual fuel costs and feel good about producing less emissions, but the humongous price difference that they pay at the beginning doesn’t make any financial sense.

My conclusion is that even with the skyrocketing prices of fuel these days, it still doesn’t make sense to replace my ICE powered vehicle with a hybrid one right now. While I might get a kick out of doing my share to save the planet, the extra P370k I end up paying up front is no joke and doesn’t really equate to any financial savings.

Until our government and car manufacturers can work together to come up with a pricing scheme and tax incentive package that can make it make sense, it is simply not feasible to shift to hybrid or electric tech. Personally, unless I can save P203 billion from not paying taxes to the government, I wouldn’t pay an additional P370k just to do my part to save the planet.

How long will it take before the Philippines will let its motorists save on fuel costs and at the same time reduce greenhouse gas emissions by making it economically feasible and practical to adopt hybrid or electric tech? Is it something good that can come from this this fuel crisis that we are currently enduring?*

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May 2022
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