Lexus’ new hybrid sport coupe, the LF-LC concept, unveiled at the Detroit Auto Show

It’s not often you hear luxury automotive executives speaking out against the relevance of hybrid technology. In many cases it has been the luxury manufacturers who have championed the development of alternative fuel technologies, and been some of the first brands to market hybrid vehicles.

The word alone has come to represent the angel to the fossil fuel’s proverbial devil – a word that consumer’s unquestionably associate with ‘doing the right thing.’ Consequently it’s rather unfashionable to challenge the hybrid – alongside anything else thought to improve the health of the planet – particularly by luxury automakers; the deep pocketed purveyors of gas-guzzling dreams.

But as the North American International Motor Show rolls on, so too does the discussion surrounding the commercial merit of hybrid vehicles. A further investigation of the facts uncovers neither a compelling value proposition for brand or consumer, and a hybrid movement driven more by government mandates than strategic common sense.

Media reports suggest that hybrid technology on a commercial scale yields relatively low profits, despite government subsidies and tax incentives designed to make it more attractive. Margins aside, sales are declining from an already small percentage – 2.2 per cent of U.S. auto sales in 2011, from 2.4 per cent in 2010 (LMC Automotive).

Carmakers have realised they can give buyers what they want without the expense of electric motors and batteries. Where past auto shows have been stocked with gas-electric hybrids and SUVs, slow hybrid sales have brought a dose of reality to the industry – 2012’s Detroit motor show is about smaller cars and improving fuel economy in traditional gasoline engines (Bloomberg).

As lower-cost combustion engines become more efficient, the high cost of hybrids remains unchanged. Research proposed by the Boston Consulting Group identifies the cost of improvements to an internal combustion engine – that could improve fuel economy by 40 per cent – at $2,000 to $2,500 per model. The battery in an electric car adds $10,000 to the price of a car at current technology costs, leaving a theoretical $7,500 gap for the purchase of a very similar consumer sentiment – doing the environment some ‘good’.

Mercedes-Benz unveiled its latest diesel/electric hybrid, the E-300 BlueTECH

Maybe such a quip is less audible at the luxury end of the market, where consumers are less cost-sensitive and willing to pay for a product that best matches their values. But what about when performance or comfort is challenged? Are luxury buyers ready to compromise on the reasons these cars cost have traditionally cost as much as they do, in the name of the environment?

Audi of America doesn’t seem to think so. When evaluating its portfolio of products for the U.S. market, the German giant chose diesel over hybrid technology, for its Q5, A6, A7 and A8 models. President, Johan de Nysschen, revealed to Forbes that such a choice protected the “phenomenal drivability of the car,” arguably one of the key cornerstones of the Audi brand.

Mr. de Nysschen went on to reveal that a gasoline-powered V8 4.2 A8 with 372 horsepower already offers better fuel consumption than the hybrid products in the same segment from Mercedes, BMW and Lexus – a car that could be made even more efficient with Audi’s clean diesel technology.

“Not necessarily because diesel is cleaner,” explains former Motoring Editor of X&Y; Magazine, Ben Zachariah, “but because biodiesel is a technology that is gaining significant momentum. Biodiesel has vastly improved emissions, and is 100% renewable”.

“Diesel is also a technology that has been developed significantly over the past century, whereas the idea of developing electric cars has only been taken seriously in the past fifteen years. Not only that, we have a worldwide infrastructure to accommodate biodiesel – think of all the underground tank storage for biodiesel at petrol stations, versus non-existent plug-in stations for electric cars.”

So where does that leave luxury hybrids? Sales are slight, profits are low, technology is young, infrastructure needs expansion and fuel-efficient gasoline engines are becoming more environmentally competitive. Could we propose that without such effective marketing of the ‘hybrid’ concept, and without the financial incentives provided by the U.S. federal government, luxury automakers might be developing more profitable, innovative and market competitive low-emission vehicles?

Audi’s A8 – a V8 4.2 A8 with 372 horsepower is said to offer better fuel consumption than the hybrid products in the same segment from Mercedes, BMW and Lexus

Potentially. But that theoretical world is not the one in which we live; the social implications and the government pressure is real.

But Audi’s decision to prioritise less fashionable technology, succeeds in highlighting the need for a future solution that ensures the sustainability of the business, just as much as it does the environment. Governments should not define future solutions anymore than brands should take development cues exclusively from what the competition is doing. One must only consider game-changing superbrand Apple, in the case for thinking outside the square.

“We think that we can attain our compliance requirements without additional hybrids,” said Mr. de Nysschen. “I think that if the Promised Land is somewhere in the future, where we truly have zero-emission vehicles, I don’t know whether those are battery powered or whether they are fuel cell or where it might take us – maybe something new that we haven’t thought of yet”.

“What I do know is that right now we face profound technical and cost challenges to making that equation work. And it seems to me that if the government wants to set targets that need to be attained – that is where it should start. They shouldn’t then, on top of it, choose the technology”.