Hybrid Revolution At A Stand Still
Wednesday, October 4th, 2006
As the highest-volume and most famous gas/electric hybrid, the Toyota Motor’s Prius sedan sets the tone for the hybrid market. Unfortunately its American sales are down 3% this year? What is this saying? Are buyers suddenly less worried about fuel sonsumption? Have they stopped liking the looks of the car? Or more likely, the demise of a $3,000 tax credit is to blame. Hybrids are simply not the deals that they used to be.
The federal tax code has massive ramifications for car sales. The high gas prices have hit SUV sales, but the sales did drop before the gas prices shot up. They declined, at least at first, because business owners’ tax breaks on large trucks and SUVs dried up. Now, the tax code is affecting hybrid sales, and the Prius is not the “gotta have it” car it used to be. While customers used to endure the price markups and the waiting lists, these days someone will rarely find people willing to pay more than the manufacturer’s suggested retail price for new Prius models.
The hybrids are known for combining traditional gasoline-powered internal-combustion engines with the assistance of electric motors. “Full hybrids,” such as the Prius, can run on electricity alone, while the “mild hybrids,” such as the Chevrolet Silverado Hybrid pickup, cannot. The electric assistance helps cars to use less fuel and emit fewer pollutants into the air.
The Prius, at times, burns absolutely no fuel. At stoplights, its engine will shuts off and the car will switch to battery power. The car also has “regenerative” brakes, which capture thermal energy created by braking and convert it into potential energy for the car to use. Sounds pretty great, right? But people who are interested in hybrids are running into several obstacles. For one thing, if you only buy American cars, and you don’t want to drive a pickup truck, there are only three hybrids from which to choose, and all of them are SUVs. For another, hybrids have premium prices. The base price of the Ford Escape Hybrid SUV is more than $6,000 higher than that of the regular Escape. The base price of Lexus‘ GS 450h hybrid sedan is $11,000 higher than that of the regular GS.
Another obstacle is the small number of hybrids that are on the market, and the low rate at which new ones come out. This has not been a great year for hybrids because of the rareness of new-model introductions. When the annual hybrid buying guide was published last October, the list had ten models on it.
This year’s list has 13 models, meaning only three new hybrids have come out since then: Lexus’ GS 450h sedan, General Motors‘ Saturn Vue Green Line SUV and Toyota’s Camry Hybrid sedan. Two of the world’s largest automakers, DaimlerChrysler and Nissan Motor, still do not offer hybrids. Now Daimler’s Dodge subsidiary does sell a hybrid Ram pickup to fleets, but the general public is unable to buy it. New Nissan, Dodge, GMC and Toyota hybrids are all slated to enter the market in 2007.
There is a rumor that Lincoln is working on a hybrid version of its new MKX SUV, but Lincoln declines to confirm any reports. Early next year, Lexus will begin selling a hybrid version of its new LS flagship sedan. This hybrid will have more power than a Corvette and will continue a trend in which automakers use hybrids’ electric motors to enhance the performance, not just increase mileage and improve fuel emissions.
The hybrid tax credit was a hot offer, which replaced a $2,000 tax deduction that applied in 2005 (tax credits are more valuable than tax deductions). But for Prius models delivered after this month, the credit will be cut in half. The Prius continues to run in short supply, and in some places there are still two-month waiting lists, so if you take delivery of a Prius on Oct. 1, having made the deal on Aug. 1, you will have lost out on the incentive. The tax credit was created to encourage hybrid sales, but the IRS feels that once a manufacturer sells hybrids in high volumes, it no longer needs the discount.
When an automaker’s hybrid sales for the year reach 60,000 units, the clock begins to tick. The full credit applies through the calendar quarter following the quarter in which the 60,000-unit point is reached; Toyota Motor and its Lexus subsidiary, together considered one manufacturer, reached that point in May. After the three-month grace period, the IRS cuts the credit by 50% for the next six months. Then it cuts the original credit by another 25% for the next six months. After that, it cuts off the whole deal. With any hope this will not kill any chances for the hybrids to return.
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October 17th, 2006 at 11:11 am
thank you very mach..
October 17th, 2006 at 10:00 pm
its cool..