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The Honolulu Advertiser
Posted on: Friday, January 6, 2006

Detroit rolling out more hybrids

By Dee-Ann Durbin
Associated Press

DETROIT 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 slow future hybrid sales.

General Motors Corp. is making one of the most visible pushes, introducing two models with different hybrid power systems at the Detroit show. 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 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.

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 yesterday 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 with just 5,187 vehicles in the same 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.

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 percent to 12 percent of the U.S. market in five years, or around 2 million vehicles.

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 midsize 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.