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Author: jck101 Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 18427  
Subject: Government at its finest re hybrids Date: 6/22/2006 5:13 PM
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http://www.nytimes.com/2006/06/21/business/21leonhardt.html?_r=2&oref=slogin&oref=slogin

The first thing to understand about the hybrid tax credit is that it was never really intended to reduce oil imports from the Middle East or slow the effects of global warming. The credit was created to prop up Detroit while giving conservation a nod.

Last summer, when Congress was completing an energy bill, Toyota's and Honda's hybrids were already winning people over in the marketplace, and it was clear that any tax credit would go overwhelmingly to buyers of Japanese cars. So members of Congress, with help from Detroit's lobbyists, came up with an ingenious solution. They created a cap, a maximum number of hybrids that any single manufacturer could sell — 60,000 — before a clock started ticking, causing the credits for that carmaker to begin disappearing two quarters later.

The idea, Mark Kemmer, a G.M. lobbyist, told Automotive News, was to keep any one company from getting "a runaway benefit."

Toyota hit the 60,000 mark last month, less than five months after the Jan. 1 start of the program, and the credits for its hybrid buyers will be cut in half on Oct. 1. (Because there are waiting lists for the Prius and Camry Hybrid, people who buy one in August or September may get their car after Oct. 1.) On April 1, 2007, the credits will be cut in half again. On Oct. 1, 2007, they will vanish. Honda, for its part, will probably hit the cap next year.

And the Big Three? Combined, they have sold fewer than 15,000 eligible vehicles so far, all by Ford, largely because their hybrids have not impressed buyers. Rather than building highly efficient hybrids like the Prius, Detroit has tinkered with gas guzzlers like the Chevrolet Silverado, adding hybrid technology to them so that they get slightly better mileage.

Come next year, then, the government will pay you to buy a Silverado hybrid (which gets about 16 miles per gallon) or a Ford Escape Hybrid (which gets about 26, according to Consumer Reports), but not a Prius (44) or a nonhybrid Corolla (29).


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