The success of hybrids and the electric vehicle industry are discussed. Other substitute products are examined to detect how they have been able to reduce hybrid vehicles' advantage: fuel efficiency.

The threat of substitutes is exhibited in this case. The emergence and rapid transformation of the car industry is discussed. Causes and implications are also briefly addressed.

Read the following case and answer the questions that follow.

Hybrid cars such as the Toyota Prius have seen tremendous success since the first hybrids were introduced in the late 1990s. Yet, the market share of hybrid cars in the U.S. fell from an all-time high of 2.8 percent in 2009 to 2.4 percent in 2010 and even further to 2.2 percent in 2011. These results are even more surprising given that the number of hybrid models on the market has increased each year from 17 in 2009 to 30 at the start of 2011. This was an inflection point allowing the substitutes to consolidate their market position. Many traditional players expanded their offering of hybrids as everyone watched the rise of Tesla Motors with a fully electric vehicle. Obscuring the market further was the rapid uptake of autonomous technology. The market was changing.

At a glance the market for electric vehicles seems dominated by Tesla, but in fact BMW is the world leader. Tesla has managed to displace Toyota, and the market rapidly moved from hybrid to electric. In 2016 Ford earned record profits of $10.6 billion but was warned by analysts to scale back estimates for the 2017 and beyond. The market is seen as fundamentally shifting away from vehicles operated by fossil fuels – consumer demand for electric is robust with upcoming consumers focused on minimizing their carbon footprint. The substitute was becoming the market.

The primary reason environmental and cost-conscious consumers prefer gasoline-powered over hybrid cars is rather simple. Engines of gasoline-cars have increasingly challenged the key selling attribute of hybrid cars: fuel economy. While hybrid cars still slightly out-compete modern gasoline cars in terms of fuel economy, consumers increasingly don’t see the value of paying as much as $4,000 extra for a hybrid when they can get 40 mpg on the highway in a gasoline car, such as the Hyundai Elantra or the Chevrolet Cruze. Electric cars remain expensive and limitations of range remain a pressing concern for many consumers.

Will the gasoline or hybrid be taken out by the electric vehicle, or will autonomous technology introduce transportation innovations that radically changes the industry. J.D. Power’s most recent U.S. Green Automotive Study suggests that some customers would rather wait and invest their dollars in this new generation of electric cars. Customers holding out for electric cars that won’t use any gasoline at all and the technological advancement of gasoline engines caused the unexpected comeback of the gasoline car. The McKinsey Institute asserts that given the widespread game-changing disruption already on the horizon there is no integrative perspective on how the market will look in 10 to 15 years. Everybody better buckle up for the fast pace of change!

1.) Since 2009, the market share of hybrid cars in the U.S. has ________.

• decreased

• stayed flat

• increased

• surpassed traditional cars

2.) What advantage of hybrid vehicles have gasoline-powered vehicles begun to neutralize?

• compact size

• use of alternative energy

• fuel economy

• auto accessories

3.) Which of the following is a reason for the sluggish sales of hybrid vehicles?

• reduced energy standards by hybrid vehicles

• lack perceived value by consumers

• Technology is too fast-paced.

• minimal competition in the hybrid market

• replacement by electric vehicles

4.) Which of the following products would not be considered a substitute to the hybrid car industry?

• Hyundai Elantra

• Nissan Leaf

• Chevrolet Volt

• Chevrolet Cruze

• Toyota Prius