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Date: Thu, 4 Aug 2005 23:00:31 -0400
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Subject: [Clips] Free Parking for Hybrids
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<http://online.wsj.com/article_print/0,,SB112312329180704734,00.html>

The Wall Street Journal

August 4, 2005
AUTOS


Free Parking for Hybrids

By LAURA MECKLER
Staff Reporter of THE WALL STREET JOURNAL
August 4, 2005; Page D1


Drivers of hybrid cars are being offered a range of lucrative benefits --
from tax breaks to free parking -- in return for buying one of the
fuel-efficient vehicles.

The most recent additions are in two major bills currently awaiting
President Bush's signature. A bill designed to boost energy production also
replaces a federal tax deduction for buying a hybrid with a more generous
tax credit that theoretically could total as much at $3,400. A separate
highway-construction bill gives states the right to open
high-occupancy-vehicle lanes to hybrids even if there's only one person in
the car.

* Hybrid Incentives:4 See a list of incentives for owners by state.

* Tax Breaks:5 See a list of clean-fuel vehicle deductions from the IRS.

* More Options:6 Learn more about hybrid models now available and coming soon.



These federal incentives join a raft of others already approved by state
and local governments. At least 20 states have already passed incentives to
encourage consumers to buy hybrids. In New Mexico, any hybrid that gets at
least 27.5 miles per gallon is exempt from state sales tax. New York
provides a state income-tax credit worth $2,000. The city of San Jose,
Calif., offers free parking in city lots and at meters. More sweeteners are
probably on the way: Several state legislatures are currently considering
additional incentives.

It's happening at a time that hybrid cars are growing in popularity among
consumers -- and auto makers are scrambling to meet demand. So far, just a
few auto makers have hybrid vehicles on the road, led by Toyota Motor
Corp., which this year expects to sell 100,000 of its popular Prius
hybrids. Yesterday, Toyota signaled the rapidly growing importance of the
new class of cars by saying it plans to introduce 10 more hybrid vehicles
in the next decade, with the expectation that they will eventually account
for one in four of its U.S. sales. Honda Motor Co. and Ford Motor Co. also
have hybrids on the market, though in smaller numbers.

The soaring popularity of hybrids -- which use a combination of electrical
and gasoline engines to power the wheels -- represents an important shift
among auto makers. Amid high fuel prices, sales of profitable gas-guzzling
sports-utility vehicles have cooled and manufacturers are starting to
respond to consumer demand for more efficient vehicles.

Policy makers are eager to spur demand for hybrids because they get good
mileage, reduce emissions and cut dependence on foreign oil. However, their
added complexity means they typically cost a few thousand dollars more than
their conventional counterparts -- and the savings at the pump aren't
enough to make up for the higher prices.

Supporters of the provision in the highway bill to open HOV lanes to
single-occupant hybrid vehicles argue that the lanes currently are
underused, and opening them to hybrids will give the technology a big
boost. But skeptics worry that the move will clog the HOV lanes, which were
designed to encourage carpooling. In northern Virginia, where hybrids have
been allowed on HOV lanes since 2000, local officials now are lobbying the
state legislature to ban them. "We've been flooded by calls from carpoolers
saying there are hybrids everywhere," says Joan Morris, spokeswoman for
Virginia Department of Transportation.

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. President Bush is
expected to sign the energy bill into law.
Ford Escape hybrid


The size of the tax credit depends on a formula that takes into
consideration how fuel-efficient the engine is, compared with a comparable
car from the 2002 model year. If the car is 25% to 50% better, the buyer
gets a $400 credit. The credit grows to $1,600 for cars that double the
fuel efficiency of a comparable 2002 vehicle. The tax credit also takes
into consideration how much fuel a vehicle is estimated to save over its
lifetime. Taken together, the total benefit can climb to $3,400.

But there's a twist to the law. In a move that could benefit domestic
brands -- which currently lag behind their Japanese rivals 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 auto maker between the years of
2006 and 2009. The result could be that Toyota and possibly Honda -- two of
the leading sellers of hybrids right now -- may run through their tax
credits before 2009, just as domestic manufacturers are gearing up sales of
their own hybrids.

General Motors Corp. and DaimlerChrysler AG don't have any hybrids now, but
hope to have something on the market by the 2008 model year. So, by 2008,
shoppers might be able to take a tax credit if they buy a GM hybrid, but
not if they buy one from Toyota. "Clearly, this bill is aimed at helping
the domestic companies," says Dan Sperling, director of the Institute of
Transportation Studies at the University of California, Davis.

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.

A House Republican aide who worked on the issue said lawmakers capped the
credit to keep the cost to about $800 million over five years, but added
that they also hoped to help newcomers -- the domestic manufacturers --
break into the hybrid market.

Ford's chief lobbyist, Dan Brouillette, adds that Congress was interested
in helping newcomers. "Congress intended to provide some competition in the
marketplace," he says.

Toyota says it is pleased that the hybrid tax break is there at all. "We
understand the politics of the situation and we understand Congress has a
limited budget to work with," says spokeswoman Martha Voss. "We do think
our customers will see a significant benefit."

The provision in the highway bill gives special consideration to Ford,
which recently introduced the Escape SUV hybrid. As originally drafted, the
bill required hybrids to get 45 mpg in order to use HOV lanes. Under that
rule, the Escape wouldn't have qualified. Sen. Jim Talent, a Missouri
Republican who has an Escape plant in his state, successfully lobbied for a
change to require hybrids using HOV lanes to get at least 50% better
mileage than their conventional counterparts.

It's unclear how significant an impact the various incentives -- such as
state sales-tax breaks and HOV privileges -- are having on people in the
market for a new car. Daniel Polakoff, a retired health-care manager from
outside Sacramento, Calif., bought a Toyota Prius last year simply because
it gets good mileage, roughly 60 mpg in city driving. But it wasn't until
after he bought it that he realized he was entitled to a $2,000 federal tax
deduction. "It was found money," he says.

Write to Laura Meckler at laura.meckler@...
URL for this article:
http://online.wsj.com/article/0,,SB112312329180704734,00.html

Hyperlinks in this Article:

(4) http://www.ucsusa.org/hybridcenter/incentives.cfm
(5) http://www.irs.gov/newsroom/article/0,,id=104549,00.html
(6) http://www.fueleconomy.gov/feg/hybrid_news.shtml

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R. A. Hettinga <mailto: rah@...>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'
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--
-----------------
R. A. Hettinga <mailto: rah@...>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'