As automakers work to comply with fuel-economy standards, they’re increasingly turning to hybrids. Last week, for example, Toyota announced that it would make 21 hybrid models by 2015, up from 12 now. Automakers have grown more enthusiastic about hybrids because the cost of making them has plummeted.
Several years ago, Toyota’s Prius hybrid cost the consumer about $6,000 more than an equivalent conventional car — and even at that price, the company was losing money on every one it sold. The difference is now $2,500, and the car is profitable, says Mike Omotoso, an analyst with LMC Automotive. The drop in cost is due to an accumulation of incremental technology improvements, along with economies of scale. And advances going forward — better batteries, electric motors and power electronics and transmissions — could cut costs by another 50%.
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