Hybrids Could Hit 20% of Car Market by 2010

Car buyers could adopt hybrid and alternative-fuel vehicles at a much faster rate than the auto industry and oil refiners are expecting, says a recent study by consulting firm Booz Allen Hamilton.The entire automotive industry should track consumer behavior and weigh longer-term actions carefully

Gas prices have hovered around $2 a gallon for months, making it more economical to buy a car with a gas-electric hybrid engine, even if it costs more. Hybrid engines use standard gas-engine technology at higher speeds and use power from the battery to propel the car at speeds lower than 25 miles an hour. Auto makers have been charging about $3,000 to $5,000 more for the engines.

At current gasoline prices, the premium paid for hybrid technology will be offset in five years by gas savings and tax rebates, the study by the consulting firm said. If buyers demand hybrid technology at the same pace as they demanded air bags and antilock brakes they were first introduced, cars equipped with hybrid engines could make up 20% of the overall car market by 2010 and 80% by 2015.

Several new hybrids have entered the marketplace this year or soon will be on the market. Japan's Toyota Motor Corp. has had much success with its Prius and said it plans to boost manufacturing of the small sedan to 100,000 vehicles next year. The company also will launch a hybrid version of the Lexus RX400h sport-utility vehicle in early 2005, which will be about $4,000 more than the base version.

Ford Motor Co., based in Dearborn, Mich., recently introduced a hybrid version of the Escape small SUV that costs nearly $7,000 more than the base model. According to Ford's Web site, the base Escape is priced at $19,995 and the hybrid is $26,970.

The study said oil refiners could face a significant drop in demand for gas and should plan for a potential downturn. Auto makers as well should start planning for a changing marketplace.