Hybrid car sales growth slows as Toyota tax breaks shrink

U.S. sales of gas-electric hybrid vehicles rose 28% from 2005 to 2006, but the rate of growth is slowing, an analysis of automotive industry data indicates.

Consumers bought 254,545 hybrids last year as gasoline prices hit $3 or more per gallon 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 Monday.

The rate of growth was the second-slowest since 2000, in large part because of car buyers having more environmentally friendly options and the expiration of some tax credits for Toyota Motor Corp.’s hybrids, said Lonnie Miller, director of industry analysis for 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 them 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 a 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% of U.S. vehicle sales last year, with Toyota’s Prius leading the segment with 42.8% of registrations, Polk said. A hybrid version of Toyota’s Highlander SUV ranked second.

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

Toyota executives 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, an indicator that the overall market might be cooling. But he still expects growth, perhaps to 300,000 vehicles this year.

Hybrids have the ability to switch between internal combustion engines and electric motors, 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, Polk said. Los Angeles was the top metropolitan market at 30,989 vehicles.