When Doug Hacker decided he needed a car that would improve gas mileage, he figured a Toyota (TM) Prius hybrid was the way to go. Many of his co-workers at Procter & Gamble’s (PG) soap research lab in Cincinnati drove Priuses and bragged about getting more than 50 miles per gallon. After a little research of his own, Hacker made a surprising discovery: While more costly hybrids still win the mileage competition, he could save more money by buying a Ford (F) Fiesta powered by a technology that’s been around for 151 years—the internal combustion engine. That’s because the efficiency of conventional engines has improved so much that the mpg gap is closing, making it harder to justify paying more for gas-electric hybrids.

“I was surprised to see that cars like the Fiesta were actually about a nickel cheaper to run per mile than the Prius,” says Hacker. He bought a Fiesta for $16,400 instead of a $23,015 Prius. He’s averaging 37 mpg, which he says is on par with the real-world mileage of his Prius-driving friends who don’t take extreme measures to boost their mpgs. (“To get 50 miles per gallon, some dress like Eskimos because they don’t want to turn the stinking heat on,” says Hacker.)

As automakers use new and not-so-new technology to wring efficiency from traditional motors, plug in hybrid electric vehicles are falling out of favor. Hybrids fell to 2.2 percent of the U.S. auto market last year, from 2.4 percent in 2010, after peaking at 2.8 percent in 2009, says researcher LMC Automotive. The reason is simple: Consumers don’t want to pay as much as $6,000 extra for a hybrid when they can get 40 mpg on the highway in a standard car, such as a Chevrolet Cruze or Hyundai Elantra. And even more conventional cars with hybrid-caliber mileage are coming this year, thanks to advancements that enable engines to burn fuel up to 20 percent more efficiently. “Internal combustion engines are giving hybrids a run for their money,” says Mike Omotoso, a hybrid forecaster at LMC.

Read the entire article at: Businessweek

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