updated 2/26/2007 12:42:04 PM ET 2007-02-26T17:42:04

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, 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, plus expiration of some tax credits on Toyota hybrids, said Lonnie Miller, director of industry analysis for R.L. Polk.

Miller expects the growth to continue, though, because demand is still strong and three new hybrid models are in the works this year.

Among those models is General Motors Corp.’s dual-mode hybrid, which uses two electric motors and a V-8 engine to get as much as 23 miles per gallon in a pickup truck or sport utility vehicle.

“If the traditional truck buyer can be wowed by the hybrid, that’s going to get a lot of people excited,” 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.

Miller said Toyota resorted to sales incentives to sell the Prius, which is an indicator that the market might be cooling. But he still expects growth, perhaps to 300,000 vehicles in 2007.

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 with Los Angeles the top market at 30,989, according to R.L. Polk.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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