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Toyota Hybrid Tax Credit to Decline as Sales Climb

By Joe Benton
ConsumerAffairs.com

June 8, 2006

• GM Invests In Electric Car Engine Plant • GM Increasingly Viewed As "Green" By Online Consumers • Honda Plans New Hybrid for Earth Day 2009 • Hybrid Technology a Presidential Campaign Issue • Hybrid Parking Perk Under Fire in Los Angeles • Tax Credit for Honda Hybrids Dwindles • Honda Civic GX Natural Gas Car Tops Greenies' List • D.C. Auto Show Goes Green • Iowa Testing Hybrid School Buses • Hybrids Star at Detroit Auto Show • How Green Can Your Drive Get? • Hybrid Universe Expanding Rapidly • ExxonMobil Claims New Hybrid Battery Technology • Honda Hybrid Tax Credit Fades Away • Diesels, Hybrids Top RAND Study • Cadillac Touts Huge Green SUV Machine • Next Generation Prius to Stick with Nickel-Hydride Power • Honda Plans Prius-like Hybrid • Hybrid Cop Cars for Aspen • Chrysler Plans Hybrid Unit • Lithium Ion Batteries to Power Mercedes Luxury Hybrid --- • More ...

For consumers considering a Toyota Prius, now is the time to act. The hefty federal tax credit attached to the hybrid will soon go down and the amount a consumer can pocket could well decline before clearing the ample waiting list at a nearby Toyota dealer.

The Japanese automaker has sold more than 60,000 hybrid cars and sport-utility vehicles to U.S. consumers so far this year, which means the credit for Toyota hybrids will begin to phase out over a lengthy period until it is gone altogether.

The way the tax law was written, the tax credit will be reduced by 50 percent the quarter after the quarter in which the 60,000-unit sales mark is reached.

That means that consumers have until the end of September to buy a Toyota hybrid and still qualify for the 100 percent credit of $3,100.

On October 1 the tax credit for Toyota hybrids will be cut by 50 percent.

The credit will stay at 50 percent for two quarters, then fall to 25 percent in the subsequent two quarters before ending. For Toyota hybrid buyers, the tax credit expiration is Oct. 1, 2007.

Neither Ford nor Honda, the other two hybrid manufacturers, is even close to the 60,000-unit threshold so far this year.

At $3,100 the Prius carries the largest tax credit available. Honda’s Civic Hybrid receives a $2,100 credit and the Ford Escape hybrid a $2,600 credit.

Worldwide, Toyota has now sold 504,700 of the Prius hybrids in just more than 8 years.

Toyota first offered a gasoline-electric hybrid in 1997. The company plans to eventually sell a million hybrid vehicles a year.

The automaker also intends to offer the hybrid powertrain across its entire line-up. Sales of all of Toyota’s hybrid vehicles, including the Lexus badge, passed 600,000 units at the end of March, according to Toyota.

Honda is Toyota’s closest rival in the hybrid market. Honda has sold 150,069 hybrid units since the company launched the two-seater Insight model in November 1999.

Honda has announced plans to end production of the Insight.

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