Hybrids May Get More Affordable

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Car buyers may no longer have to pay more for a hybrid if a strategy started by Lincoln catches on.

The brand’s parent company, Ford Motor (Stock Quote: F) is dropping the price of its 2011 Lincoln MKZ Hybrid sedan to $35,180, according to the company’s website.

That’s the same price as the regular MKZ, which is powered by a traditional internal combustion engine, The Detroit News reports.

“Based on some of our recent research, many luxury-car buyers resisted the hybrid versions because the added cost simply didn't pencil out,” says Art Spinella, auto analyst at CNW Marketing Research.

The biggest benefit for consumers here opting for a MKZ Hybrid is fuel economy. For the same price, the Lincoln MKZ Hybrid gets 41 miles per gallon in city driving and 36 mpg on the highway while the version with the internal combustion engine gets just 18 mpg in the city and 27 mpg on the highway.

And discounting the price of a hybrid is actually better for an automaker than cutting thousands of dollars off of a sticker price through incentives. Too many incentives can lower the perceived value of any vehicle, according to Mike Jackson, Director of North American Vehicle Forecasts at IHS Automotive.

Ford has been particularly active in developing its hybrid and electric car lineup, and while it’s the first car company to discount a hybrid model, according to The Detroit News, it may make sense for other hybrid and alternative energy automakers to follow suit.

Car companies across the board took a hit in the economic downturn as consumers were more reluctant to replace their older vehicles, so automakers have been trying harder to appeal to prospective car buyers.

The Lincoln brand in particular may have needed to boost its offerings due to its image as a luxury brand that’s not all that luxurious, however.

“It’s not considered top-tier. It’s certainly not in line with BMW and Mercedes and it’s certainly trying to reestablish its cache and reestablish its value,” Jackson says. “The real objective is … expanding the number of consumers open to consider the product,” he adds.

Since the profits all companies make on luxury vehicles are so much higher than on more basic models, it’s easier for them to afford making luxury hybrids more affordable, Spinella explains. “Expect others to follow suit, notably Lexus (Stock Quote: TM),” Spinella says.

“It will eventually happen with less expensive vehicles, and the Lincoln move could well signal Ford will expand the effort to trucks (including Explorer) and eventually all models,” Spinella adds.

On the lower end, a Volkswagen Jetta TDI, for example, which runs on diesel fuel, can get about the same gas mileage as the MKZ Hybrid, at 30 mpg in the city and 42 mpg on the highway for $22,830, according to the company’s website.

However, the price for diesel fuel tends to be higher than that of gas. Diesel currently costs about $2.89 a gallon compared with gasoline at $2.72 a gallon, according to the Department of Energy.

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