June 3, 2009

Toyota To Lease 500 Plug-in Prius Hybrids Globally! But What About The Rest Of Us, The REAL CONSUMERS?

Okay, I think it's great that Toyota is paving the way to eco-friendly transportation. The majority of Americans commute. Therefore, transportation is essential. However, I'm dismayed at the fact that Toyota is only unveiling a mere 150 of these new vehicles here in the U.S. and only to government and corporate customers. We, the masses are the REAL CONSUMERS who will ultimately benefit their bottom-line. It really bothers me that manufacturers tease us this way unveiling a product we have been demanding and then withhold it from the public?!? The reason why the lithium-ion batteries are costly or expensive is because the demand for them is low. If auto manufacturers increased their production of these eco-friendly vehicles, their orders for these lithium-ion batteries would increase causing an increase in supply and demand. Subsequently, dropping the price (cost) of these lithium-ion batteries! I know they know this basic economic principle. Plus, if there is a market for these lithium-ion batteries, this will inevitably create more producers who will then compete for the auto manufacturers business and thus cause the price to drop. Therefore, I am left to believe there is another underlying reason for preventing eco-friendly vehicles from entering the market! There is a clear demand for these eco-friendly vehicles and almost every auto manufacturer has been taking baby steps instead of giant leaps! It just doesn't make any sense. Just take a look at the graph below. If supply increases, the supply curve shifts to the right. This causes the price to decrease and quantity to increase.

Factors that Shift the Supply Curve
[source: EconWeb-Intro to Macroeconomics, supply and demand]

We list and explain three factors that shift a supply curve:

  1. Change in input costs: An increase in input costs shifts the supply curve to the left. A supplier combines raw materials, capital, and labor to produce the output. If a furniture maker has to pay more for lumber, then her profits decline, all else equal. The less attractive profit opportunities force the producer to cut output. Alternatively, car manufacturer may have to pay higher labor costs. The higher labor input costs reduces profits, all else equal. For a given price of a car, the manufacturer may trim output, shifting the supply curve to the left. Conversely, if input costs decline, firms respond by increasing output. The furniture manufacturer may increase production if lumber costs fall. Additionally, chicken farmers may boost chicken output if feed costs decline. The reduction in feed costs shifts the supply curve for chicken to the right.

  2. Increase in technology: An increase in technology shifts the supply curve to the right. A narrow definition of technology is a cost-reducing innovation. Technological progress allows firms to produce a given item at a lower cost. Computer prices, for example, have declined radically as technology has improved, lowering their cost of production. Advances in communications technology have lowered the telecommunications costs over time. With the advancement of technology, the supply curve for goods and services shifts to the right.

  3. Change in size of the industry: If the size of an industry grows, the supply curve shifts to the right. In short, as more firms enter a given industry, output increases even as the price remains steady. The fast-food industry, for example, exploded in the latter half of the twentieth century as more and more fast food chains entered the market. Additionally, on-line stock trading has increased as more firms have begun delivering that service. Conversely, the supply curve shifts to the left as the size of an industry shrinks. For example, the supply of manual typewriters declined dramatically in the 1990s as the number of producers dwindled.

Toyota to lease 500 plug-in Prius hybrids globally
Reporting by Chang-Ran Kim
Wednesday June 3, 2009

TOKYO (Reuters) - Toyota Motor Corp said on Wednesday it would begin leasing 500 plug-in hybrids based on the Prius model globally by the end of this year, primarily for government and corporate use.

Toyota, the world's biggest automaker, said in a statement it would lease 200 in Japan and 150 each in the United States and Europe, including 100 in France.

Plug-in hybrid cars can be cleaner than regular hybrids because they can be charged to run purely on electricity, but the need for more batteries makes them expensive.

Toyota's plug-in cars would be the brand's first to employ lithium-ion batteries, which are costly but can store more energy than nickel-metal hydride batteries used in most gasoline-electric hybrid vehicles.

Among other carmakers, bankrupt General Motors Corp is planning to launch its much-hyped Chevrolet Volt plug-in hybrid next year.

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