Study: Hybrid cars will pay for themselves over time

With higher gas prices and tax incentives, some hybrid vehicles make economic sense, Edmunds.com says.

DETROIT (Reuters) -- Some hybrid cars will make up for their premium cost because of higher gas prices and tax credits from the U.S. government on the more fuel efficient vehicles, a study released Tuesday shows.

Hybrid cars and trucks, which get improved mileage in city driving by running on a combination of gas and electric power, cost between $1,200 and $7,000 more than traditional versions of the same vehicles, according to auto Web site Edmunds.com.

Edmunds.com is a partner providing data and content for CNN.com's automotive Websites.

But a fuel economy study by Edmunds.com showed that the scales were starting to tip in favor of hybrids.

"High gas prices and generous tax credits now offset the high sales prices of some hybrids, assuming owners keep their hybrids for a few years," said Alex Rosten, an analyst with Edmunds.com.

The shift is significant because analysts have said that higher sticker prices were constraining hybrid sales.

Hybrids currently account for 1 percent of new car sales in the United States. But Japan's Toyota Motor Corp., the hybrid market leader, sees its annual hybrid sales topping 1 million units soon after 2010.

The consumer-focused automotive Web site said that, assuming vehicles were driven 15,000 miles per year and gas was priced at $3 per gallon, owners of the Toyota Prius and Ford Motor Co.'s Escape Hybrid would break even within three years.

Buyers of the Saturn Vue Green Line from General Motors Corp., the Toyota Camry and the Civic Hybrid from Honda Motor Co. would break-even within six years, Edmunds.com said.

But federal tax credits for hybrid buyers are being phased out on the most popular models.

Under a provision of the tax code, buyers of a Toyota hybrid after Sept. 30 will only qualify for half of the tax credit for which they would have previously qualified.

Tax incentives will also be cut on other hybrids after auto makers sell 60,000 of the vehicles -- a sales threshold Toyota has reached.

The tax credit on Toyota and Lexus hybrids is scheduled to drop to 25 percent in April 2007 and then be eliminated in October 2007.

In another study released Tuesday, auto industry tracking firm CSM Worldwide cited higher gas prices as one factor driving a shift toward more efficient six-speed transmissions.

CSM forecast that automatic six-speed transmissions would account for 60 percent of the U.S. car and truck market by 2012, up from less than 5 percent today.

GM has already announced plans to shift to a new family of six-speed transmissions for upcoming models.

CSM said three-quarters of the new cars from GM, the world's No. 1 automaker, would feature the six-speed transmission by 2012.

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