Hummer and Prius war for America's auto soul.

Commentary about business and finance.
Feb. 26 2004 4:03 PM

Hummer vs. Prius

The surprising winner in the war for America's auto soul.

Of all the inanities uttered by former Bush press secretary Ari Fleischer, perhaps none was more inane than his May 2001 assertion that burning fossil fuels was part of the "blessed" American way of life. Those driving giant cars, he suggested, were not only exercising some fundamental right of citizenship but proclaiming American exceptionalism.

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Thus considered, no vehicle was more blessed than the Hummer. Based on the Humvee military vehicle, the Hummer was first produced for consumer use in 1992, in part at the suggestion of action-hero Arnold Schwarzenegger. (According to this article, the California governor now has eight.) In December 1999, General Motors acquired the Hummer.

After 9/11, Hummers became a cocky symbol of American greatness. Driving the biggest, baddest, least-fuel-efficient car on the planet was tantamount to giving the finger to environmentalists, Arianna Huffington, and all those who suggested that the involvement of Saudi citizens in the attacks should lead us to rethink our dependence on foreign oil. You could be an active home-front warrior by buying an expensive Hummer—imitating our troops in Iraq and stimulating the economy at the same time. (Hummers also come in handy in case you need to mount a motorized assault on the Stop-n-Shop.)

By the summer of 2002 customers were waiting months to take delivery and were bidding more than the sticker price for the privilege of driving one. Between July 2002 and November 2002, monthly sales of the Hummer H1 and the Hummer H2 practically doubled, from 1,922 to 3,933, according to figures provided by Autodata.

But in recent months the Hummer has bogged down. Combined year-over-year sales of the H1 and H2 have fallen for the past five months. In January 2004, just 1,927 Hummers were sold—off nearly 50 percent from December 2003, and down by one third from January 2003. The future doesn't look very bright, either. Business Week reported there are 68 days worth of Hummers in inventory, and that GM has throttled back its 2004 sales forecast from 40,000 to 30,000.

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The sales drop reflects simple common sense. The Hummer is a mediocre car, with the quality ratings to show for it. The drop may also reflect a change in the zeitgeist. When you compare the fortunes of the Hummer to those of its opposite— Toyota's hybrid Prius, which can get upwards of 50 miles per gallon—it looks like the market may be shifting. First sold in the United States in 2000, the diminutive Prius remained a curiosity as the Hummer rose to celebrity. But sales rose to about 20,000 in 2002 and to 24,000 in 2003. Since the new 2004 model was introduced in the fall, the Prius has been stomping the Hummer. In November 2003, the Prius outsold the H2 by a 2-to-1 margin, according to Autodata. In January 2004, Prius sales were up 82 percent from January 2003.

For the 2004 model year, Toyota initially boosted production 50 percent to 36,000. But demand has been strong enough that production has already been increased to 47,000. And that's still not enough. My Toyota dealer doesn't have a Prius on the lot and says that interested purchasers must put down a deposit today and wait six months. By contrast, my local Hummer dealer has several on the lot.

Comparing the Prius and the Hummer is like comparing apples and oranges, or apples and watermelons. The Hummer costs more than twice as much as the Prius—although the absurd, huge federal tax break available to purchasers of giant vehicles for business use reduces the price a lot. (Those who purchase a Prius receive a smaller and shrinking tax break.) And of course, purchases of Hummers and Priuses represent a tiny fraction of the 16.6 million vehicles sold in 2003. The vast majority of car buyers are buying neither Hummers nor Priuses. Instead, they are purchasing millions of vehicles that get decent gas mileage, like the Ford Taurus and Honda Accord, and millions of vehicles that get poor gas mileage, like Jeeps and pickup trucks.

Those who buy Hummers and Priuses are symbolic, marginal buyers. But economists will tell you that behavior at the margins can influence entire markets. In the summer of 2002, the marginal buyers were pushing hard for the gas guzzlers. Today, more people are clamoring for fuel-efficient cars.

Could the sales figures, small as they are, signal a movement that American car buyers are becoming more eager to demonstrate conspicuous virtue? It could be. More likely the declining Hummer sales and rising Prius sales reflect that Americans are economically rational creatures. The Hummer, like many gigantic SUVs, gets about 13 miles per gallon. With gas at about $2 a gallon, and likely to rise further, driving a Hummer is an expensive proposition. Toyota's calculator shows that if you drive 40 miles a day, the annual cost of operating a Prius will be $2,144 less than operating a Hummer.

The demand for the Prius is pushing Toyota to install hybrid technology in other models, including SUVs. Also, it's spurring other automakers to adapt hybrid motors. Apparently, there's even a hybrid version of the Hummer in the works.

Daniel Gross is a longtime Slate contributor. His most recent book is Better, Stronger, Faster . Follow him on Twitter.