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GASOLINE-ELECTRIC HYBRID
VEHICLES CREATE STIR

How much do some people want a gasoline-electric hybrid car? Enough to pay thousands of dollars more than the manufacturer's suggested price.

On Internet auction site eBay Inc., sellers areadvertising Toyota Motor Corp.'s 2004 model year Prius at thousands of dollars above the list price. Prius, which according to government tests gets up to 60 miles from a single gallon of gasoline, is a popularhybrid that the industry sees as a bellwether for that segmentof the market.

In some cases, used models are selling on eBay for more than those that have never been out of the showroom. In early September, a new Prius with the second-highest package of options had attracted a starting bid of$27,465, more than $5,000 above the list price.

Another Prius, slightly used with 1,250 miles on theclock, was bid at $28,500.

"Demand has been overwhelming," said Kevin Kolozsy, a salesman at Joe Heitz Toyota in Clarksville, Tennessee. The dealership gets about 10 calls a week from buyers looking for a Prius, but it has only been getting new vehicles from the manufacturer at a rate of about one a month. Record-high U.S. fuel prices have prompted consumers to turn their attention to the growing array of vehiclesdesigned to run on gasoline and electricity.

Hybrids use batteries to power themselves at slower speeds. The batteries charge automatically from the electric motor and by capturing energy that is usuallylost while braking.

TINY BUT GROWING MARKET SHARE

Last year, U.S. sales of gas-electric hybrids reachedonly 43,435, or 0.26 percent of the 16.7 million cars andtrucks sold there. But J.D. Power & Associates expects U.S. hybrid sales to reach 87,000 this year and more than double to 183,000 next year. They should increase to 412,000, or about 2.5 percent of the market, by 2008 and account for 5 percent to 10 percent of U.S. vehiclesales by 2015, the Troy, Michigan-based consulting firm said.

Already demand is exceeding supply. Toyota reports a waiting list of about six months for the Prius. Demand for these gas-sipping vehicles has been so high that Toyota isn't even using a Long Beach, California, warehouse where it planned to park any unsold Priuses, according to Brendan Bell, a Sierra Club researcher who

studies global warming. Besides Prius, U.S. consumers can now choose from only three other hybrid models - Honda Motor Co.'s Civic and Insight, which in 1999 became the first gas-electric carto be sold in the United States, and Ford Motor Co.'sEscape sport utility vehicle, which began production lastmonth.

Ford is already looking to increase production capacity, given the high interest. Demand for the Escape "is going to be similar to thePrius," said David Friedman, a researcher who studiesalternative transport at the Union of Concerned Scientists. "Peopleare not going to be able to get enough of it."

HYBRIDS A FAD?

Consumers will soon be able to choose from more models, including hybrid versions of Toyota's Highlander andLexus RX SUVs and of General Motors Corp's Chevy Silverado and GMC Sierra pickup trucks. But Jim Hossack, senior consultant with AutoPacific Inc.of Tustin, California, calls the current interest inhybrids a fad. The price of hybrids - averaging $3,000 more than conventional vehicles - will prevent widespreadacceptance, he said.

As a result, he added, sales are unlikely to exceed 10 percent of the overall U.S. light vehicle market in thelong run.

Hossack also said Toyota is subsidizing the Prius as a public-relations exercise to create goodwill for thebrand from consumers, businesses and governments.

The potential of the hybrid market will also depend on whether federal and state governments are willing toimpose stricter fuel economy and emissions standards and to provide bigger tax breaks, another financial incentivefor consumers to buy the cars. The current federal tax deduction of $1,500 for hybrid buyers is worth only $300for a taxpayer in the 20 percent bracket and nowhere near offsets the extra cost of buying a hybrid vehicle, saidBell, the Sierra Club researcher.

Moreover, the deduction is set to be eliminated in three years, he said.

For now, though, demand for the market-leading Prius continues to create a market where used models can sell for more than the new list price. "It's very unusual," Kolozsy, the Tennessee salesman, said. "I've never seen anything like it in theindustry."

Written by: Jon Hurdle, Planet Ark


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