With gas prices having declined slightly in the past few months, but remaining relatively high due to ever-increasing energy demands, the movement to develop more fuel-efficient modes of transportation, and especially Hybrid Electric Vehicles (HEVs) continues apace. News circulated that some industry analysts were predicting worldwide demand for HEVs to rise to 3.9 million by 2015, and to nearly double that number by 2020. Cost disparities between HEVs and conventional light vehicles – which are currently estimated at between $1,000 and $3,000 – were expected to decline significantly as production volumes increased.
These predictions of future "boom days" for the automotive industry in the hybrid segment were tempered somewhat by the realization that the current market for HEVs in the United States, which is expected to be the largest and most lucrative market for the vehicles, declined between August (when gas prices peaked at over $3 a gallon) and December. As gas prices fell, so did HEV sales – 31% in reaction to the 24% decline in fuel costs during the same period. In contrast, total passenger vehicle sales in the US only declined 19.5% during the same period.
Other domestic issues were effecting the US HEV market as well. The federal tax credits previously issued to those who purchased HEVs are being scaled back and phased out. In previous years, buyers received a tax deduction when they bought certain hybrid models. This year, however, they could receive a more-valuable tax credit. Those subject to the alternative minimum tax will not be allowed to take the hybrid credit. The phase out of the credit begins in the second quarter after each manufacturer's HEV sales (measured from January 1 of this year) reaches 60,000. Toyota passed that milestone in the second quarter, resulting in buyers of its HEVs in the fourth quarter of this year (or the first quarter in 2007) only receiving half the original credit. In the next two quarters, the credit declines to 25%, with no credit being issued after that. Although the automobile industry has been calling for Congressional action to once again increase incentives, the Congress has been slow to act thus far.
In California, which is by far the largest regional market for HEVs within the US, there has been a similar decline in government support for the industry. The state originally agreed to issue 75,000 carpool lane stickers (which allow drivers of high mileage hybrids use the carpool lanes even if they have no passengers), but those permits ran out. The state has only agreed to issue another 10,000 after January 1st.
Despite these setbacks, the overall direction of the auto industry is definitely focused on the HEV technology. The Los Angeles Auto Show, one of the world's largest, focused most of its advertising fanfare on the environmentally-friendly side of the emerging automotive technology. Toyota made the biggest news at the show, announcing that it is considering a plug-in hybrid. General Motors also announced that it would be producing a hybrid version of the Saturn Vue sport utility, but failed to be specific as to when. Nissan Motor Co. announced a week later that it would be developing its own HEVs. The company, the last of the Japanese big three automakers to develop an HEV, plans to start selling the vehicles by 2010. The carmaker stated that it is working on a new lithium-ion battery which will be used in the vehicles.
