SUV Tax Breaks, Chinese Fuel Efficiency and Hybrid Cars

Honda announced today that it was going to produce about 45,000 hybrid cars for the U.S. market in 2005, and the Japanese automaker expects to sell about 20,000 of its soon-to-be released Accord Hybrid Cars.

Last year, Honda sold about 20,000 Civic Hybrid Cars, and it expects to sell about the same amount this year. The Honda Insight should make up the rest of the sales.

There has been much buzz about the introduction of the Accord Hybrid, and if it sells anything like the Prius hybrid car, Honda should expect to raise production quickly. Of course, the Prius is not targeted for as an affluent segment as is the Accord.

According to Honda, the Accord Hybrid's target "is an affluent, well-educated professional of around 50, with a household income of 100,000-plus." Therefore, the Accord hybrid will not be expected to be as popular as the Prius.

Of course, the world is a changing, and hybrids appear more and more to be the direction of the future of cars.

For the first time ever, China has introduced fuel-efficiency standards, "moving to control soaring oil consumption and ensure foreign automakers share their latest technology" said the Chinese government according to an AP wire.

According to the report, the Chinese standards will be stricter than the U.S., and are more similar to the requirements imposed by California on automakers to help fight pollution.

Earlier this month, China also announced that it would form a partnership with Toyota to build hybrid cars for the Chinese market.

Ultimately, similar to California, China's regulations will require 'new cars' to meet their standards, which will probably be another slap in Detroit's face.
As Japan continues to dominate the hybrid market, the transition to meeting higher fuel efficiency should be much simpler than for the American Big 3 - still obsessed with SUVs.

SUVs; however, are about to take another hit. According to yesterday's Wall Street Journal, "Congress, with the backing of the Bush administration, now appears to be ready to close a big loophole that gives small businesses big tax breaks on those vehicles."

As SUV sales continue to decline, even after 1000's of dollars in incentives, their profitability is waning. Moreover, new regulations, such as California's and China's, are sure to inspire other states and countries to create the same kinds of requirements.

Corporate leadership at the Big 3 better take notice. While their lawyers might be able to bully U.S. regulations, they probably won't be able to affect foreign policy.

Times are a changing!