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Hybrid Sales Slow as Gas Prices Rise

Even the Segment-Leading Prius Sees Slower Sales

By Joe Benton
ConsumerAffairs.com

February 27, 2007

• Tax Credits On Ford Hybrids Phasing Out • Small Car Market Faces Potentially Large Problems • Ford Plans Car That Parks Itself • Drivers Wanted: Mini Developing Electric Model • GM Invests In Electric Car Engine Plant • GM Increasingly Viewed As "Green" By Online Consumers • Honda Plans New Hybrid for Earth Day 2009 • Hybrid Technology a Presidential Campaign Issue --- • More ...

Sales of hybrid vehicles are still climbing but at a slower rate. Sales were up 28 percent in 2006 and were dominated by the Prius but Prius sales are now slowing down as well, even as gas prices surge once again.

Nevertheless, Prius sales accounted for almost 43 percent of all new hybrid sales in 2006 as U.S. consumers bought 254,545 hybrids. That number is up from 199,148 in 2005.

Gasoline prices spiked above $3 per gallon last summer and industry analysts suggest the price spike helped move hybrids as sales of gas-hungry trucks and SUVs slowed to a crawl.

Taken as a percentage of sales, the growth for new hybrids was the second slowest since 2000 when annual sales were less than 8,000 units, according to R.L. Polk & Company which tracks new car and truck sales in the U.S.

"Automakers still have obstacles to overcome to prove the merit of owning a hybrid, including debunking the myth that hybrids are only needed when gas prices rise," said Lonnie Miller, director of industry analysis for R.L. Polk.

The R.L. Polk research and data are considered more definitive than the monthly sales numbers released by automakers and come as Toyota is working harder than ever to maintain Prius sales.

There are other factors impacting hybrid sales in general and Prius sales in particular. California, the No. 1 hybrid market in the country will stop granting hybrid cars a free pass to drive in car-pool lanes and avoid congested highway lanes, at just about the same time the federal income tax credits for Toyota hybrid vehicles is starting to be phased out.

The current generation of hybrid vehicles switch between a traditional gasoline engine and a battery-powered system recharged during braking in order to increase fuel efficiency.

In January, Toyota began offering its first sales incentives on the Prius, including interest-free loans for 24 months. Toyota is counting on Prius sales to rise by more than 70 percent this year and plans its first-ever advertising campaign for the vehicle.

"The Prius continues to set the pace for this category. However, with several new models debuting over the next two years, and many in the works for the near future, Toyota market share will be challenged," said Miller.

Sales of hybrids in California are followed by Florida, Texas, New York and Virginia.

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