Glenn Mercer

Debunking PHEV Mythology

As far as I can see you hold resale value percentages fixed for all types of car. I don't have a problem with using this leveling assumption, because these things are very hard to forecast, but I should note that a) resale value percentages DO vary a lot in the real world, and that b) probably in a fuller model one would adjust resale values as gas prices fluctuate, both on an absolute basis and on an options basis. That is, on the absolute basis: as gasoline prices rise so would resale values for more efficient vehicles, and perhaps quite sharply (since one still gets the same dollar savings on fuel with a used HEV (e.g.) but by buying a used car pays much less in capital outlay); and on an options basis: if I think oil prices will possibly spike, buying a Prius now to "cover" myself later has some (probably minimal) option value, given I might think if oil goes to $200 a barrel Toyota will sharply raise the price of a new Prius. So I am not criticizing the model per se, but pointing out that in the world of cars the resale-value loop is a key factor to take into account (some would argue most of Toyota's market share gain over the last 30 years has been due to the logic of "I pay more for it upfront but I claw it back on resale").