2016 Toyota Prius - Mileage Dropping

My Prius has 31k miles and is driven mostly hot,hot Phoenix. Over the last two months I noticed the mileage has dropped from 54.8 to 50.4 . Is this normal battery degradation over time?

No, it is more likely lower air density with temperature.

Or possibly you just put a new set of tires on that are not as good for mileage as the original set.

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Try driving without using the air conditioning for a week, see if you get desirable fuel economy.