by Jon Mandle on July 30, 2005

I recently traded in a 2000 Toyota 4-Runner to buy a new Prius. It’s great. My gas mileage tripled – over its 1500 miles so far, it has averaged around 50 mpg. The sight-lines take a little getting used to – or maybe it’s just the adjustment after climbing down from an SUV – but it handles well and I’ve had no problem with power. I’m very happy with it and its “super ultra low emissions.”

It will also be nice to claim a tax credit next April. However, starting next year, a provision of the new Energy Bill will cap at 60,000 per company the number of hybrids that can claim a credit. “This year alone, Toyota projects it will sell 140,000 hybrids.”

During the two quarters immediately after the cars and trucks of the automakers become ineligible for the full credit, buyers would receive 50 percent of the credit. The next two quarters after that, the credit is 25 percent. The credit is phased out entirely at the end of the fifth full quarter after the automaker sells 60,000 hybrids or advanced diesels.

“By capping the credit, Congress has limited the incentives available to companies that have been at the forefront of hybrid technology” – namely, Toyota and Honda. Way to get those incentives right, guys!

Meanwhile, Toyota is taking full advantage of its remaining incentives. The new Lexus hybrid uses its additional electric power not to increase its gas mileage, which in real world conditions stays exactly the same as its gas-powered equivalent, but to boost its horsepower. (However, the additional power seems to be largely offset by the increased weight of the hybrid system.) And, yes, it still does qualify for the tax incentive – up to the 60,000 cut-off, of course.



Andrew C. 07.30.05 at 10:20 pm

I’m all in favor of having hybrid technology used to boost performance at constant gas consumption as well as to reduce consumption for equivalent performance. Anything that gets engineers working with hybrids will encourage them to think about how to tweak them for improved performance on whatever metric they think is important. Even if all we get is a bunch of SUVs with marginally better gas mileage we’ll still be ahead. Just getting the technology deployed is the first and most important step. Once people are using it and the initial research is paid for the technology will steadily improve due to market pressures. The single step I’d most like to see is a hybrid vehicle in NASCAR. Not only would it boost the profile of hybrids with people who might otherwise view them as hippie cars, it would also serve as a powerful incentive to refine the technology. Auto makers are willing to spend huge sums to win races, and the technology trickles down fairly quickly to the rest of us.

As to the tax incentive limitation – It’s brilliant strategery to show the terrorists we mean business. Or something.


phil 07.30.05 at 11:27 pm

On the other hand, carmakers have been abusing the taxbreak, claiming it on cars that use hybrid technology to increase power/acceleration/etc. rather than to get efficient mileage.

Nothing would stop Congress from keeping the incentive there for cars that get more than, say, 45mpg. Except, of course, the same interests that keep Congress from improving CAFE standards.


almostinfamous 07.31.05 at 1:32 am

just buy a hummer, write it off on your taxes and revel in the joy of screwing over the environment that little bit more… its not like anyone in power really cares anyway.


Jim Harrison 07.31.05 at 2:12 am

What am I missing? It sure looks like the world is headed for a heck of bumpy ride because of dwindling oil; but instead of serious action, we get another pork dumpling of an energy bill.

I’m aware that getting accurate stats on oil reserves is essentially impossible at this point, but is it really credible that peak production is still a couple of decades off or that the technology and institutions are in place for an orderly transition to a drastically different economy?


Maynard Handley 07.31.05 at 4:53 am

Removing the tax credit is a minor idiocy, but let’s not ignore the big picture here. Toyota and Honda are still going to be years ahead of any American company as oil rises to $70, 80, 90, 100 a barrel, and will be laughing all the way to the bank as they sell to China, India, Europe, and, yes, even that minority of the American population that is not insane.

Meanwhile if you are retired and dependent on a GM or Ford pension, good luck you poor bastard. Is there any sign on the horizon that either of those companies have a clue how to cope with the 21st century? Buying votes in congress will keep them alive for a few more years, but they cannot change the reality of the world oil supply and demand.


Tim Worstall 07.31.05 at 8:24 am

Depends what the incentive was for as to whether the cap is reasonable or not. If it was to get the technology from lab into mass production then once mass production has been achieved, stopping the tax credit seems reasonable. You know, here is a subsidy to get to x, once x is reached, stop subsidy.

New entrants to the market still get the subsidy, established players (those already doing mass production) do not, thus encouraging said new players and possibly further refinements to the technology or altogether new approaches, something we might actually want at this stage of a new technological development.

If you’re willing to believe that Congress can actually pass clever little laws this might be one of them.


ZF 07.31.05 at 8:34 am

Can any economist explain why there are so many more hybrids sold in the US than in the EU, where gas costs 4x as much???


saurabh 07.31.05 at 11:47 am

jimmy h – 2010 seems to be emerging as the consensus date for the peak. Exxon Mobil actually came on board. You can read about it here. But, as other people have pointed out (e.g. Matthew Simmons, who I wrote about a bit here) there’s no one who really knows what the “down side” of a production curve looks like. So it might make sense to burn our candle at both ends for the next decade and transition to nuclear power by then. Might.

On a related note, I heard the other day that nuclear power can’t be adjusted to match load – it has to produce at a constant rate. WTF? Meaning it can only ever produce to match off-peak load. If the differential between peak and off-peak power consumption is 50%, that means 50% of your power production has to come from non-nuclear sources. Can this be true? I suppose one could always increase off-peak production (e.g. by producing hydrogen only at night, or something), but still… ugly.


abc 07.31.05 at 1:23 pm

re: zf

Europe has lots of small diesels that get very good mileage.


Jim Harrison 07.31.05 at 1:24 pm

The state of oil reserves may be a mystery to me, but I know from peak power loads.

Nuclear power production can’t be ramped up and down to follow load. Wind and solar, obviously, are at the mercy of the weather. Coal plants are a little more flexible, but they are most efficient when run steadily. Which, by the way, is why there was such a rush to develop turbine generators run by natural gas, though the popularity of this solution is one of the factors that led to the recent run up in natural gas prices.

Load leveling, as it’s called in the trade, is the holy grail of the utility business. The industry has explored a large number of ways of storing power including compressed air in caves; pumping water up hills; enormous fly wheels; banks of batteries; superconducting tanks of liquid helium; and, as you mentioned, hydrogen production. These expedients have varying prospects, but my impression is that the problem is essentially unsolved. Existing technology is useful and will improve, but it is at best uncertain whether it can be scaled up enough to meet needs. The hydrogen economy bit, puffed by Bush last year, is extremely speculative for a host of reasons and certainly will not be practical for decades even on an optimistic view.


cranky 07.31.05 at 8:36 pm

zf: Smart cars.

My parents, who live in British Columbia, just bought a Smart car. They had to sign an agreement that they wouldn’t try to sell it in the US for 12 months. Anyone know why?


derrida derider 07.31.05 at 10:19 pm

My comment to a friend when I saw my first Prius ad was that their marketing pitch was utterly wrong. They should be selling them as having *power boosters*, not fuel savers – they’d be selling them by the million now if they had.

I’d market them as you would a turbocharger – nobody tries to sell turbocharged models as fuel savers, but instead as “hot” cars. Though in fact most turbocharged cars are not big V8s – they tend to have smaller engines or be diesels.


Brian S. 07.31.05 at 10:39 pm

Watch that passenger-side blind spot on the Prius, it’s pretty big (crank the right side mirror out). And remember to downshift in the mountains – after 500-1000′ of drop, the battery’s fully charged and the brake pads will be doing all the work.

Other than a few minor quibbles like these, I’ve been very happy with my Prius.


agm 08.01.05 at 3:26 am

C’mon, matching peak loads. Just use capacitors. Lots of big capacitors. Hell, maybe even flux capacitors.


antirealist 08.01.05 at 4:50 am

And remember to downshift in the mountains…

How do you downshift? I thought it had a continuously variable transmission.


Alex 08.01.05 at 5:32 am

Of course, the really good thing about hybrid propulsion seems to have been missed. If you’re using the engine to generate electricity, you may as well go the whole hog and have a diesel-electric powertrain; gets rid of the weight of the mechanical transmission, the frictional loss of all those gears , and means you can have permanent all-wheel drive and fully independent suspension (no axles! and hence even less weight!) easily. And you can do traction control and such, putting the functions in software. Does anyone know if any of the hybrids have done this? And if not – why not?

And furthermore, surely someone ought to put a more efficient engine, say a Volks or Peugeot turbodiesel, on the front end of the electric chain?


jet 08.01.05 at 8:28 am

Maynard Handley,
GM will be standing on top in 2010. They are investing far more than Toyota and Honda (or anyone else) in Auto Fuel Cell technology. In 2010 when oil peaks (maybe), GM should be on target for their fuel cell only fleet. Hybrids are transatory technology, and will probably only have two or three generations of vehicles.

Derrida Derider
Just a thought, but wouldn’t people just laugh a the thought of a “power-boosted” 45hp engine?


Cranky Observer 08.01.05 at 9:23 am

> My parents, who live in British Columbia, just
> bought a Smart car. They had to sign an agreement
> that they wouldn’t try to sell it in the US for 12
> months. Anyone know why?

Most likely related the safety and import regulations for large manufacturers. Smart/Daimler cannot import the SmartCar to the US in its current form as it does not meet safety standards. An individual can get an exemption (first thing Bill Gates has done in a long time that I approve of!), but if individuals buy them in Canada and immediately apply for the exemption, the US regulatory agencies may view that as Daimler trying to bypass certification. Penalites for a large mfgr would be severe in that case.



Cranky Observer 08.01.05 at 9:27 am

> GM will be standing on top in 2010. They are
> investing far more than Toyota and Honda (or
> anyone else) in Auto Fuel Cell technology.

GM has been investing in new technology for approximately 100 years. Along about 1975 they stopped actually bringing any of it to market, choosing to leave it in the lab in the hopes of finding the Next Big Thing(tm). While GM is “hoping” on fuel cells, Toyota and Honda are designing real hybrids and getting real vehicles on the road, gaining real design, engineering, manufacturing, and service experience. If and when the time comes for fuel cells, Toyota will plug them right into their hybrid designs while GM brings out another EV1.



Andrew C. 08.01.05 at 10:03 am

Alex – my dream car is a vehicle about the size and configuration of a subaru forester with diesel-electric AWD, separate motor/generators integrated into each wheel, regenerative braking, traction control, independent all wheel ABS, ability to recharge batteries from household AC, ability to run on battery alone for modest distances, built in power output jacks (standard household AC) so I can run power tools using the car as a generator, and an emergency service similar to GM’s OnStar. None of this is new technology, it just needs someone to integrate it into a vehicle. I suspect the market for a vehicle like this would be substential, since it would serve the Mommy-Wagon market as well as the outdoorsy young person market. Excellent gas mileage is just a nice side effect.


Alex 08.01.05 at 10:44 am

Indeed. I can’t work out what it is that holds them back: putting power in the wheel cuts out so many other design constraints, to start with. Another point is that such a vehicle would be ideal for conversion to fuel cell/all electric propulsion, or as an intermediate point using a small gas turbine (turbines are the most efficient prime mover) to generate the electrickery. It could run at its best efficiency speed all the time, not being connected to the roadwheels – in fact, that’s another huge advantage!

So – why is everyone still hung up on driveshafts and diffs?


Cranky Observer 08.01.05 at 11:11 am

> So – why is everyone still hung up on driveshafts
> and diffs?

Partially because there is a very large sunk investment that existing players can’t just walk away from (sunk cost fallacy notwithstanding).

Partially because existing auto company engineers are really really stupid and can figure out the design you propose. Hmmmm – perhaps not? I am no fan of the US auto companies’ strategic decisions, but the technical people I know who work there are very very good. The work that Ford did on the physics of combustion from 1970-1990 is nothing short of amazing, for example.

So – perhaps it is a little harder than you think? Half-shafts and drive shafts absorb shock, for example. What happens to your direct-coupled electric motor, which must have tight tolerances to be efficient, when that wheel drops into a 5 cm pothole at 120 kph? Just as one example. I would think that if anyone could do this it would be Honda, but they haven’t shown any signs of going down this road yet.

Still, I think the entrenched mentality may have something to do with it. Got about 2 billion USD? We could start a new car company to do what you propose.



alex (a different one) 08.01.05 at 1:53 pm

We’re going to be looking at differentials and halfshafts for a long, long time because:

#1. They are well understood in terms of reliablity. Anything that goes into a car has to last for a decade, minimum.

#2. They are cheap. A halfshaft with CV joints will cost US$120 retail. OEM price is probably under US$40. Look up what two meters of 0-gauge high-flexibility welding cable costs. Suspension bushings are rubber, so budget for large ground straps as well. Remember you are going to have to make weatherproof seals on both ends.

I’m not even going to get into what the motor itself would cost considering that it would need to be submersible. But you will not see an actual hub-drive car for decades, if ever.


jet 08.01.05 at 8:56 pm

GM just might be taking this more seriously than you think.

Getting rid of the transmission, IC engine, axles , etc are probably going to mostly offset the costs of 4 sealed electric engines (aren’t sump pumps the same concept?), the 4 direct drive drive shafts, and seals.

Either way, GM has 300 engineers working on their hydrogen car. Sounds pretty serious to me.


derrida derider 08.01.05 at 9:12 pm

‘wouldn’t people just laugh a the thought of a “power-boosted” 45hp engine?’ – jet

No, because for the NASCAR market you wouldn’t quote the 45hp of the petrol engine but the combined output of the engine plus electric motor – and with electricity it’s easy to make peak (as against sustained) output very big (those “300 watt” cheap stereos you see in WalMart typically have a sustained output on the order of 5-10 watts). Jet obviously does not work in advertising.

As for hub-drive electric motors, the unsprung weight of the motors on the hubs would totally ruin the ride and handling. If you make it sprung, your gonna need CV joints, shafts, etc anyway.


Jake McGuire 08.01.05 at 10:29 pm

It’s not even that misleading to quote peak output, since the only time most cars see more than very-part-throttle is for brief acceleration or what have you. Which is also why hybrids are much better for in-city driving than highway driving.

jet: for GM (total employees: 300,000), 300 engineers is not a huge amount. And it’s hard for me to put into words just how questionable the sentence “At the moment, [electrolyzing hydrogen from water] takes more electricity than the hydrogen would ultimately generate” is. The limitation that you can’t get more electricity from running hydrogen through a fuel cell than you used to electrolyze it from water is more rigid than the speed of light, which is saying something.

The author is certainly seriously confused, and possibly seriously misled – it’s unclear which. Regardless, as an indication of GM’s seriousness, the article is not compelling.


rajH 08.02.05 at 12:35 am

it’s hard for me to put into words just how questionable the sentence “At the moment, [electrolyzing hydrogen from water] takes more electricity than the hydrogen would ultimately generate” is.

jake, the article (I assume you’re referring to the Wired article) actually refers to extracting hydrogen from “natural gas or other fuels”, not to electrolysis of water.

I do agree, though, that the efficient production of hydrogen is probably a far bigger roadblock than issues like building a hydrogen storage/delivery infrastructure, or the efficiency of the fuel cells themselves.


jet 08.02.05 at 7:59 am

“Jet obviously does not work in advertising.” And I wake up every morning, gasp with horror that I might be in advertising, then sigh in relief that it was just a really bad dream.

“As for hub-drive electric motors…” but what if each motor only weighed 5-15 Kilograms? Cars will be seriously lighter when they don’t include 500-1000 pounds of engine,transmission, supporting frame, etc. Since they won’t require 150-250hp to be fun and sporty, the electrics can be small and built into the hub. Probably not the engineering fiasco many think it is.

I think Rajh is much closer to the real problem. What happens when it is the middle of summer and every available power plant is at 100% just to power all the air conditioners? How will the hydrogen be produced?


Jake McGuire 08.02.05 at 1:34 pm

Jet, seventh paragraph from the end. Search for “At the moment.” As in, “At the moment, [hydrogen production must obey the second law of thermodynamics].”

Internal combustion engines also weigh less than equivalent power fuel cells, and gas in a tank weighs less per stored unit energy than hydrogen in a metal hydride storage canister or high-pressure tank.

As near as I can tell, GM’s AUTOnomy stuff is more or less pure marketing fluff, aimed largely at regulators.


frankis 08.02.05 at 8:06 pm

Almost as unassailable as the 2nd Law, Jet, is the maxim that for cornering performance and certainly for comfort, reduction of unsprung weight is the aim. In this quest a single kilogram is a huge thing, so I think we’ll never see in-hub motors on passenger cars and certainly not on performance ones. Presumably inboard (at the end of a shaft driving the wheel) electric motors with a high power/weight fuel cell and software control of traction, braking and regeneration is the holy grail, promising all the benefits mentioned by people above, but provision of cooling to the high power motors without drowning them in rain and puddles is a serious engineering challenge. The right fuel cell doesn’t yet exist of course so as long as present hybrids need their heat engine for power, the parallel drive configuration as seen in the Prius is practical and affordable.

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