Hybrid Sales Still Growing But More Slowly

DETROIT February 26, 2007; Reuters reported that sales of hybrid vehicles rose 28 percent in 2006 but growth in the segment dominated by Toyota Motor Corp.'s Prius is starting to slow, according to retail sales data released on Monday.

R.L. Polk & Co., which collects and analyzes auto registration data on a state-by-state basis, said the Prius accounted for almost 43 percent of new hybrid sales in 2006.

Overall, U.S. consumers bought 254,545 hybrids in 2006, up from 199,148 a year earlier as gasoline prices spiked to over $3 per gallon last summer and sales of gas-guzzling trucks and SUVs sputtered, according to the R.L Polk data.

But the percentage growth for hybrid sales was the second slowest since 2000, when annual sales were less than 8,000 vehicles, R.L. Polk said.

"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," Lonnie Miller, director of industry analysis for R.L. Polk said.

The retail sales data, which are considered more definitive than the monthly tallies released by the automakers, come as Toyota faces a more challenging climate for Prius sales.

California, which leads the United States in hybrid sales, earlier this month announced it would stop granting hybrid cars a pass to drive in car-pool lanes and avoid congested highway lanes.

In addition, federal income tax credits for Toyota-made hybrid vehicles, including those from its luxury Lexus brand, started to be phased out from October last year.

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.

General Motors Corp. and other automakers are moving ahead with plans for all-electric vehicles that promise a reduced reliance on oil because they will be able to draw a charge while parked from a standard electric outlet.

"With several models debuting over the next two years, and many more in the works for the near future, Toyota market share will be challenged," Miller said. "We will see if it can maintain its foothold at the top."

In January, Toyota began offering its first sales incentives on the Prius, including interest-free loans for 24 months.

The automaker has said it expects Prius sales to rise by more than 70 percent this year and plans its first-ever advertising campaign focused on the vehicle.

According to the R.L Polk data, three major California cities -- Los Angeles, San Diego and San Francisco -- together accounted for 22.3 percent of all U.S. hybrid sales in 2006.

Los Angeles, the second-largest U.S. city by population, accounted for 12.2 percent of hybrid sales, more than any other market, the data showed.

California was followed by Florida, Texas, New York and Virginia in terms of their share of the U.S. market for hybrid vehicles, R.L. Polk said.