2006 TOYOTA PRIUS
AP
The Toyota Prius, the first hybrid to go on the market in 1997, still commands more than half of hybrid sales, although its lead has fallen as more options have come on the market.
updated 1/5/2006 6:15:49 PM ET 2006-01-05T23:15:49

Automakers are rolling out several new hybrids at this year’s North American International Auto Show as hybrid sales continue to grow at a phenomenal pace. But consumers are finding out that hybrids are more expensive and may save less fuel than they thought, which could put the brakes on future hybrid sales.

General Motors Corp. is making one of the most visible pushes, introducing two models with different types of hybrid power systems at the show in Detroit. Toyota Motor Corp. will introduce its new hybrid-powered Camry, while Ford Motor Co. will show off a sporty concept vehicle with a diesel-electric hybrid system it says gets up to 65 miles per gallon. Subaru also will have a hybrid concept at the show, which opens to the public Jan. 14.

Some industry analysts say these vehicles and others coming to market in 2006 will spur more phenomenal growth for the U.S. hybrid market, which has increased by more than 140 percent in the past year alone. But others wonder if that growth will begin to stall, since hybrid vehicles remain far more expensive than their gas-powered counterparts.

“As people live with them and maybe do some math, and if prices stay at the premium stage, you’re just going to see sales slow,” said Rebecca Lindland, an auto analyst with the Waltham, Mass.-based consulting firm Global Insight.

R.L. Polk analyst Lonnie Miller said demand for hybrids is partly driven by supply, so as automakers introduce more hybrids, the growth of the segment will continue. Nine models are available now and five more are expected on the market this year, Miller said.

“There’s a new generation of people really paying attention to hybrid, and a lot of new adopters because they’re seeing them in more vehicle categories,” Miller said.

Tax breaks and other perks also could fuel hybrid growth. Hybrids are $3,500 more expensive on average, Lindland said, but federal tax credits that are new this year allow buyers to save between $250 and $3,150 per hybrid based on the vehicle’s gas mileage, although the tax credit phases out after the automaker sells 60,000 hybrids. And Travelers Insurance announced Thursday that it will start giving hybrid owners a 10 percent discount because they tend to be lower-risk drivers.

Miller said his latest figures show U.S. hybrid sales grew by 143 percent for the 12 months through October 2005, the latest figures available. A total of 187,042 vehicles were sold in that time, compared to just 5,187 vehicles in the same time period five years ago.

Miller said the Toyota Prius, the first hybrid to go on the market in 1997, still commands more than half of hybrid sales, although its lead has fallen as more options have come on the market.

Will demand cool?
Despite their fast growth, hybrids still command just 1.1 percent of the U.S. market. Miller said growth could easily cool off if there aren’t enough options on the market, but he predicts hybrids will command 10 to 12 percent of the U.S. market in five years, or around 2 million vehicles.

Lindland predicts hybrids will only reach the 1 million mark by 2010. She said hybrids do well in stop-and-go city driving, because they can switch to electric mode when they need less power, but they tend to save less fuel on the highway, so drivers who want to save gas in all types of driving should be considering diesels.

If hybrid technology develops and the price goes down from the $3,500 premium, the business case for buying a hybrid will improve, Lindland said. But she doubts hybrid sales will double this year as they did last year.

Whatever customers eventually choose, automakers want to give them options. So visitors to the Detroit show will see hybrids out in force.

GM is introducing the 2007 Saturn Vue Green Line hybrid, the first GM vehicle with its new gas-electric system. The hybrid version of the mid-size SUV will go on sale this summer and will use as much as 20 percent less fuel than a traditional Saturn Vue, GM says.

GM, which has been criticized in the past by some environmental groups for not offering more hybrids, is promoting the Green Line as a less expensive alternative to hybrids already on the market from Toyota and Ford. The Green Line’s hybrid system adds around $2,000 to the cost of a Saturn Vue, compared to a $3,500 premium or more for other hybrids, and will allow the Green Line to sell for under $23,000. That compares to a starting price of $33,030 for the similarly sized Toyota Highlander hybrid.

The Green Line’s system is similar to other gas-electric hybrids in that it saves on gas consumption by shutting off the engine while idling, gives the vehicle a boost of electric power during acceleration and captures electrical energy when the vehicle is braking. GM brought down the price by making a simpler system that doesn’t run on electric power for as long as other hybrids, spokeswoman Susan Garavaglia said.

GM sacrificed some fuel economy with that change, but Garavaglia said GM wants consumers to have a choice in the type of hybrid system they buy. The Green Line will get an estimated 27 mpg in the city and 32 mpg on the highway, compared to 33 mpg in the city and 28 mpg on the highway for the Highlander.

GM also is introducing a Chevrolet Tahoe SUV with a more advanced system that GM says will improve fuel economy by 25 percent. The hybrid Tahoe is expected to go on sale in 2007.

Toyota, which has the best-selling hybrid on the market with the Toyota Prius, will attempt to expand its hybrid dominance with the hybrid Camry, its first hybrid sedan. Jim Press, president and chief operating officer of Toyota Motor Sales USA Inc., said Wednesday that Prius sales doubled this year thanks to heightened consumer interest in fuel costs and the environment this year, and he also expects the Camry to be a strong performer.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 2.79%
$30K home equity loan FICO 5.78%
$75K home equity loan FICO 4.54%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.57%
13.57%
Cash Back Cards 17.91%
17.91%
Rewards Cards 17.15%
17.15%
Source: Bankrate.com