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Hybrid buyers score big incentives in Energy, Highway bills . . .

November 22, 2010

The Highway and Energy bills signed by President Bush last week include numerous treats for hybrid buyers.  

According to The Wall Street Journal, included in the Energy bill is a federal tax credit for hybrid buyers that could total as much as $3,400.


And the federal Highway bill, otherwise known as the Transportation Reauthorization Bill, gives states the right to open high-occupancy vehicle lanes to hybrids even if there’s only one person in the car. 

For consumers, the tax provision replaces a $2,000 deduction, which was a reduction in taxable income, with a tax credit that instead reduces the tax bill itself. The new tax credit also applies to diesel cars, provided that they are engineered to reduce polluting emissions.


But the tax credit comes with a bit of a twist that could benefit domestic brands, which currently lag in the hybrid market. Congress has set a cap of 60,000 on the total number of people who can claim the tax credit from any one automaker between the years of 2006 and 2009. 

The result could be that Toyota and Honda—two of the current leading hybrid sellers—may run through their tax credits before 2009, just as domestic manufacturers are gearing up their own hybrid sales.


General Motors and DaimlerChrysler don’t have any hybrids now. So, by 2008, shoppers might be able to take a tax credit if they buy a GM hybrid, but not one from Toyota. Ford expects to sell 20,000 Escape SUVs and about 4,000 Mercury Mariner hybrids a year, which means the tax credit might last long enough to cover all its hybrid sales in the 2006-2009 window. 

Nonetheless, Toyota is pleased with the tax break.


"We understand the politics of the situation and we understand Congress has a limited budget to work with," said Toyota spokeswoman Martha Voss. "We do think our customers will see a significant benefit." 

A provision in the highway bill gives special consideration to Ford and its new Escape hybrid. As originally drafted, the bill required hybrids to get 45 mpg in order to use HOV lanes. Under than rule, the Escape wouldn’t have qualified.


But Sen. Jim Talent (R-Mo.), who has an Escape plant in his state, lobbied successfully to allow hybrids to use HOV lanes if they get at least 50 percent better mileage than their conventional counterparts.