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Ironically (at least in the Alanis Morissette sense) the latest US government energy bill, which went into effect this year, will soon favor hybrid car producers who are not Toyota. According to The Energy Policy Act of 2005 (EPACT), signed last August, the tax credit buyers receive for purchasing a hybrid car begins to phase out after an automaker sells 60,000 of the eligible vehicles between January 1, 2006 and the end of 2010.

The full tax credits will be available until a manufacturer reaches 60,000 vehicles sold (60,000 for Toyota, 60,000 for Ford, etc.). Once a manufacturer has sold 60,000 vehicles, a one-year "phase out" will begin after the next complete calendar quarter; 50% of the credit will be available for that manufacturer's hybrids in the first two quarters of the phaseout period and 25% in the final two quarters.


According to the Detroit News, Toyota is on track to hit the 60,000 mark in the first half of 2006. That means the Prius's deduction, currently $3,150, will drop to $1575 in the fourth quarter of 2006. That deduction reduction would be good news for Ford, whose Escape Hybrid and Mercury Mariner Hybrid are eligible for a credit of $2,600 for the two-wheel-drive version ($1,950 for four-wheel-drive models) this year (a 30% improvement over 2005), giving them a slight edge over the dominant Prius in the marketplace later in the year if the Prius oversells its credits as projected. (Ford sold 1,403 Escape hybrids and 148 Mariner hybrids in December 2005).

State and Federal Hybrid Incentives []

Toyota Prius hybrid outselling its tax credits [The Detroit News]

Hybrid Tax Credit Raised For 2006 [MPH]

Dividing the Conqueror: US Firm Suing Toyota Over Hybrid Patents [internal]

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