Sales of Hybrid Cars Continue to Rise

From AFX News Limited

DETROIT — U.S. sales of gas-electric hybrid vehicles rose 28 percent from 2005 to 2006, but the rate of growth is starting to slow, according to a company that analyzes automotive industry data.

Consumers bought 254,545 hybrids last year as gasoline prices hit $3 per gallon or more for much of the year. That is up from 199,148 in 2005, according to nationwide auto registration data compiled by R.L. Polk & Co. and released on Monday.

The rate of growth was the second-slowest since 2000, due in large part to car buyers having more environmentally friendly options, Lonnie Miller, director of industry analysis for R.L. Polk, said in a statement.

"Automakers still have obstacles to overcome to prove the merit of owning a hybrid, including educating customers about developing hybrid technology," Miller said.

Hybrids accounted for about 1.5 percent of U.S. vehicle sales last year, with Toyota’s Prius leading the segment with 42.8 percent of registrations, R.L. Polk said. A hybrid version of Toyota’s Highlander sport utility vehicle ranked second.

But last summer, Toyota Motor Corp. hit the legal production limit — 60,000 vehicles — for its hybrids to receive full federal tax credits. A 2005 federal energy bill provided up to $3,600 in tax credits to U.S. consumers who buy hybrids. But the tax credits for Toyota and Lexus hybrid vehicles were cut in half beginning in October. The $3,150 credit for the Prius, the largest hybrid tax credit available, shrank to $1,575 on Oct 1.

Toyota officials said their U.S. hybrid sales in October dropped to the lowest levels since March, attributing the decline in demand in part to the reduced tax credits.

Hybrids have the ability to switch between internal combustion engines and electric motors to power themselves, with batteries that recharge during driving. They deliver better gasoline mileage than conventional vehicles.

California led all states in hybrid sales with 67,533 last year. Los Angeles was the top market at 30,989, according to R.L. Polk.