Gas prices, geopolitics fuel alternative vehicles - East Valley Tribune: Business

Gas prices, geopolitics fuel alternative vehicles

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Posted: Sunday, November 27, 2005 5:23 am | Updated: 9:44 am, Fri Oct 7, 2011.

With gasoline prices soaring, Tempe residents Richard and Evangeline Keefe had been thinking about buying a gas/electric hybrid car.

But they hadn’t gotten around to it until their son, a member of the National Guard Reserves, was called to duty in Iraq.

Then and there, Evangeline insisted they go out and buy a hybrid to do their small part to reduce the nation’s oil imports.

"That was the motivator," Richard said. "Our dependence on foreign sources of oil seems to make it more likely we will get involved in conflicts around the world."

Like the Keefes, many hybrid car owners didn’t buy them just to cut their trips to the gas pump. They believe they’re helping to solve a major geopolitical problem facing America.

"If everybody in the U.S. drove a hybrid vehicle, we could cut gas consumption in half, and we wouldn’t have to rely on Mideast oil," said Thom Bohlen, a Scottsdale architect and owner of two hybrids. "That is a tremendous advantage, as I see it."

A lot of consumers see it the same way. The number of hybrids sold in the U.S. is rising rapidly — from 9,350 in 2000 to 88,000 last year and 171,497 through October of this year. By 2010, 5 to 6 percent of all vehicles sold in America will be hybrids, assuming that high gasoline prices persist, according to ABI Research.

The Toyota Prius, a car designed from the ground up to be a hybrid rather than just having the hybrid technology tacked on to an existing model, accounted for more than half of the hybrid sales in the U.S. so far this year, according to Hybrid.com.

Still, the decision to purchase a hybrid isn’t a slam dunk for many drivers. They cost from $3,000 to $6,000 more than similarly equipped conventional vehicles, which means they many not pencil out economically even with the gasoline savings. Money magazine figures gasoline would have to average $9.20 a gallon to pay off the additional cost of a Honda Accord hybrid in five

years.

But the magazine also figures a Prius could result in overall savings over five years when compared with a conventional Toyota Camry.

But the demand for Prius exceeds the supply, requiring buyers to wait weeks for delivery. And the price of gasoline has been retreating in recent weeks. If that trend continues, the time needed to offset the initial higher price will stretch even longer.

But the federal government, mindful of the national security benefits to reducing oil imports, is encouraging hybrid technology by offering improved tax incentives next year that will help offset the higher initial cost. And the price of gasoline isn’t likely to go down too far.

"In the long term, fuel will be more scarce," said Don Karner, president of Electric Transportation Applications, a Phoenix company that tests hybrid vehicles for the U.S. Department of Energy.

"It will be more expensive for the oil companies to recover it, and that will be reflected in the price at the pump."

Tucson resident Betty Fink said she and her husband bought a Prius in 2003, but traded it in because it proved to have some unexpected problems. When they were away from home on vacation and left the car in their garage for several weeks, it wouldn’t start when they came back because the starter battery wasn’t recharged. Also, the back seat wouldn’t fold down because of the room that was needed for storage batteries. That made it difficult for her husband to store his golf bags in the trunk.

Still, she said they plan to buy another hybrid vehicle, although maybe not a Prius.

"It (hybrid technology) is a wonderful idea," she said.

Brett Henkel, general sales manager for Big Two Toyota in Mesa, said Toyota brought out a new version of the Prius in 2004 that solved some of the problems of the original.

The storage batteries are smaller and repositioned to avoid blocking the back seat, he said.

Also a procedure that can be followed to keep the engine battery charged when the vehicle isn’t used for awhile, he said.

Karner believes the technology of hybrids is sufficiently mature to make them reliable vehicles and not cause much heartburn for early adopters. But he added they probably won’t solve the nation’s energy problems single-handed.

"A lot of people are looking for a silver bullet to kill the oil issue, but there is no single answer," he said.

"Hybrids are a step in the right direction, but there are other alternative fuels, mass transit, pure electric vehicles. All of those have a potential place in solving the oil issue."

Tax incentives

• Hybrid car buyers in 2005 can claim a $2,000 one-time deduction on their 2005 tax returns. Because the tax break is a deduction, its value varies, depending on the buyer’s tax bracket. If you’re in the 33 percent tax bracket, a $2,000 deduction will reduce your tax bill by as much as $600. If you’re in the 15 percent tax bracket, it could be worth $300.

• Beginning Jan. 1, 2006: A new energy bill signed by President Bush contains a revised federal tax incentive program for hybrid cars. The new incentives — full-dollar tax credits — are more valuable than the current tax deductions, which are a reduction of taxable income. The credit will be worth from $500 to $3,400, depending on the vehicle’s fuel efficiency. But the law sets a tax credit limit of 60,000 hybrids per carmaker, which means that motorists considering a Toyota or Honda hybrid, the most popular makes, shouldn’t delay too long in making a decision.

What’s the catch?

Hybrid vehicles save gasoline and produce fewer emissions, but there may be some reasons why they aren’t for everyone. Among the drawbacks:

• Economics is an issue. You may not be able to offset the higher initial purchase price through the gasoline savings. That will depend on future gas prices, the amount you drive, how much you pay for the car and the size of the tax incentives you receive. It’s better to buy just because you like the vehicle.

• The amount of gasoline savings will vary depending on how you drive. If you like to drive fast, make jackrabbit starts or run the air conditioner a lot, your mileage results may not match your hopes.

• You may not be able to get your car as quickly as you like because of the wait for some, but not all, models. Some buyers report dealers demanding extra money to move higher on the waiting list. You may need to be patient to get the best deal.

• Interior spaciousness can be a problem for big people on some models.

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