Can Car Makers Make a Profit Off of Hybrid Cars

Apparently they can. Toyota and Honda (according to the Nikkei via GCC) are making about $3,100 on every hybrid they sell, which is similar to what they make on small gas powered vehicles.

Which is why it's not surprising to see comments like this in the NY Times:

Honda is also hoping to increase revenue this year with the Insight, a new, low-cost hybrid vehicle introduced in March that could challenge the leading model in the hybrid market, the Toyota Prius. Toyota has said it would cut prices on its next Prius models to compete better with the Insight.

Honda expects to make money off of the Insight in the coming year. Toyota expects to make money on every hybrid they sell. Ford expects to start making a profit on their hybrids this year.

The initial cost in research is expensive, there's no doubt. But building and selling hybrid cars can be profitable. It just takes time.

According to the Nikkei report, the gross profit on the Honda Insight is still 'low' when factoring in the large development costs. But Honda can now 'count on it to generate the fourth-largest revenue stream behind its luxury, midsize and small car operations.'

And that's why Toyota can afford to cut the price on their new 2010 Toyota Prius to compete with the Insight. Meanwhile GM is talking about a $40,000 Chevy Volt. By getting in on the hybrid ground floor, Toyota, Honda, and Ford are reaping the rewards.