A recent report published by J.D. Power and Associates Automotive Forecasting Services has predicted a dramatic increase in the sales of hybrid-electric vehicles between 2005 and 2012. The report forecasted the increase of figures by as much as 268 percent.

Consumers purchased approximately 212,000 hybrid vehicles in 2005 and are expected to purchase nearly 780,000 by 2012. Even though there is expected to be a large increase in the sales of hybrid-electric vehicles, hybrids will remain a small share of the U.S. vehicle market. The report shows that hybrid vehicles comprised 1.3 percent of the U.S. light-vehicle sales in 2005 and will comprise 4.2 percent of the market share by 2012.

One of the main factors contributing to the expected increase in hybrid sales is a variety of choices provided to the consumer interested in purchasing a more economically friendly vehicle. There is a significant increase in the number of models available in new market segments to consumers. In 2000, the hybrid-electric market was only comprised of two models and sold fewer than 10,000 vehicles. However, in 2005, there were eleven models available to consumers which contributed to the increase in sales to nearly 212,000. Fourteen models are expected to be available to consumers in 2006.

Another factor leading to the increase in hybrid sales is the introduction of tax credits for hybrid vehicles. In 2005, consumers who purchased hybrid vehicles were eligible for a $2,000 maximum tax deduction. The new tax credit, which went into effect with vehicles sold as of January 1, 2006, can have a value of up to $3,600 per vehicle. However, the tax credit is based on a timed sliding scale and is limited to the first 60,000 vehicles sold and put into service. The new law states that the tax credits will end in 2010, if they have not been utilized.

The 60,000 limit applies to all tax-credit-eligible hybrids and alternate fuel vehicles sold by each manufacturer, not per model. In addition, the tax credit will not be the same for all vehicles. The credits will be calculated per vehicle model and will be formulated based on both fuel savings and reduced emissions.

Estimates for Current Hybrid Models
Make and Model Estimated Tax Credit
Ford Escape Hybrid (2wd)/(4wd) $2,600/$1,950
Honda Accord Hybrid $650
Honda Civic Hybrid (auto)/(manual) $2,100/$1,700
Honda Insight (auto) $1,450
Lexus RX400h $2,200
Toyota Highlander Hybrid (2wd)/(4wd) $2,600/$2,200
Toyota Prius $3,150

Estimates for Future Models (calculations are based on the estimated vehicle figures)
Chevrolet/GMC Silverado/Sierra ‘08 $900
Chevrolet/GMC Tahoe/Yukon $1,800
Lexus GS450h $1,300
Mercury Mariner Hybrid $1,950
Nissan Altima $1,300
Toyota Camry $1,300

While the exact hybrid tax credit amounts will be determined by the IRS, the American Council for an Energy Efficient Economy (ACEEE) has provided these estimates to help consumers plan financially.

More information on hybrid tax credits can be found at www.aceee.org/transportation/hybtaxcred.htm.

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