Hybrid credit gone for Toyota, fading fast for Honda

Honda is the leader in another fuel-efficient auto area, the compressed natural gas, or CNG, vehicle. The energy legislation that created the hybrid credit also included tax breaks for three other fuel-efficient vehicles: advanced lean burn, fuel cell and alternative fuel.

Alternative-fuel vehicles run on compressed or liquefied natural gas, liquefied petroleum gas, hydrogen or any liquid that is at least 85 percent methanol. Honda's Civic GX operates on compressed natural gas and its 2005 through 2008 model years have been certified as tax-break eligible by the IRS.

CNG vehicles have two advantages over hybrids when it comes to taxes. The credit is usually larger and it does not phase out.

Home highway advantage
Domestic manufacturers have remained a lap down to Toyota and Honda in the hybrid race. That's why the provision penalizing the Japanese hybrid leaders was added to the energy bill.

But it hasn't helped as much as lawmakers or Detroit executives might have liked. Judging from the numbers so far, not to mention the Big Three U.S. automakers' financial woes, industry analysts say that it will be years before buyers of American brands face any tax credit reductions.

Energy conservation advocates generally appreciate the tax effort to encourage drivers to switch to fuel-saving hybrids. Many, however, say that politics trumped a more aggressive -- and to their way of thinking -- a more sound, approach to reducing U.S. driver dependence on gasoline.

"It's obvious that our government has a problem with creating an energy policy with any kind of vision," says Bradley Berman, editor of "The creation of the 60,000 cap was by and large designed to cut some slack to Detroit automakers, who are way behind."

Berman says the credit isn't likely to convert someone who was not even considering a hybrid. At best, it will simply make a potential hybrid buyer look a little more closely at all the alternative fuel makes and models.

Overall automotive costs are a bigger drive when it comes to picking a particular car, says Berman.

"Gas prices have a greater impact than the tax credit. People tend not to think of a large purchase in the big picture over the course of several years," he says.

"There are too many factors -- maintenance, resale value, interest rate on your loan -- that have a pretty significant impact over the long-term analysis of whether an auto purchase is a sound financial decision."

Cindy Knight, environmental communications administrator for Toyota in Los Angeles County, agrees, saying it was difficult for Toyota to determine whether the company's hybrid-leading sales were helped more by the tax break or high gasoline prices.

"We think that the tax credit is really nice," says Knight. "But we're not sure that it really influences a buyer. There's a combination of factors that makes a hybrid a popular choice right now."


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