New tax credits favor heavy vehicles
 

In a Wired News article here

http://www.wired.com/news/autotech/0...tml?tw=rss.TEK

they explain the new tax credits being introduced for energy efficient vehicles next year.

Their main story theme is that the calculation ends up giving a better credit to SUV hybrids than it does to car hybrids even though the car hybrids get much better economy. This is because the credit is doled out based on how much better your car does as compared to a car of similar weight, not just fuel economy in general. Apparently the govt is hoping that if people are just hell-bent on buying an SUV they'd really like them to buy a fuel-efficient SUV. One would think that they'd give the best rewards for the most fuel efficient vehicles and ignore the weight -- but that's not the way it works.

In any case, here's the guidelines for how they come up with the credit:

The tax credit has two angles... one for getting better fuel economy than a vehicle of comparable weight (a 2002 veheicle weight baseline is used for the comparison). That's $400 for each 25% better fuel economy.

The second angle provides a greater savings for heavy vehicles that are expected to use less gas over the life of the car. That's $250 for each 600 gallons the vehicle is expected save over it's lifetime.

The Prius ends up getting more than double the tax credit of the Insight because the Prius is a "heavier" car -- even though the fuel economy of the cars are quite similar. That's not as shocking as the news that the 33mpg highway Toyota Highlander 2wd Hybrid gets $2600 while the 57mpg highway Insight gets a little under $1500.

There's also cap on the physical number of units that can qualify for the tax credit before the tax credit gets ramped out. The Toyota Prius is so popular that it's likely to hit the cap sometime around midyear of 2006. Other companies are likely to go for years before they hit the cap. I guess if you want the full tax credit on the Prius, get your order in early.

Re: New tax credits favor heavy vehicles
 

Yeah, the weight thing in some ways doesn't make a lot of sense, but in other ways it does make sense, so until manufactureres start adding bricks of lead to bump them into another category I wouldn't worry about it too much. The limit on the number of cars that qualify was intended to boost sales of domestic hybrids, so it kind of sucks for most people who want a reasonable car like the Prius since the domestics aren't offering cars yet...

Here's some estimates:

https://www.greenhybrid.com/share/fi...es-current.png