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Carmakers pushing new hybrid models

BRISK BUSINESS Hybrid models are seeing phenomenal growth, but industry analysts see trouble ahead as consumers realize such cars aren't as fuel-efficient as they thought


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 put the brakes on future hybrid sales.

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

Some industry analysts say these vehicles and others coming to market this year will spur more phenomenal growth for the US 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 far 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, Massachusetts-based consulting firm Global Insight.

R.L. Polk analyst Lonnie Miller said demand for hybrids is partly driven by supply, so as automakers introduce more hybrids, the growth of the segment will continue. Nine models are available now and five more are expected on the market this year, Miller said.

"There's a new generation of people really paying attention to hybrid, and a lot of new adopters because they're seeing them in more vehicle categories," Miller said.

Tax breaks and other perks also could fuel hybrid growth. Hybrids are US$3,500 more expensive on average, Lindland said, but federal tax credits that are new this year allow buyers to save between US$250 and US$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 Thursday that it will start giving hybrid owners a 10 percent discount because they tend to be lower-risk drivers.

Miller said his latest figures show US hybrid sales grew by 143 percent for the 12 months through October last year, the latest figures available. A total of 187,042 vehicles were sold in that time, compared to just 5,187 vehicles in the same time 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 US market. Miller said growth could easily cool off if there aren't enough options on the market, but he predicts hybrids will command 10 to 12 percent of the US market in five years, or around 2 million vehicles.

Lindland predicts hybrids will only reach the 1 million mark by 2010. She said hybrids tend to save less fuel on the highway, so drivers who want to save gas in all types of driving should be considering diesels.

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