By 2006, Toyota and Honda hybrid models alone could account for 10% of the over two million midsize passenger vehicle sales in the US, proving that hybrids are no longer a niche market, ABI Research said.

Reports indicate Toyota will introduce a hybrid version of its Camry model to the US in 2006, with a sales target of 100,000 vehicles. This follows an announcement from Honda that a hybrid version of its Accord model will go on sale in the US for 2005.
"This changes the game," says ABI analyst Dan Benjamin. "Honda and Toyota are the market leaders, as the Accord and the Camry are the dominant vehicles in the mid-sized segment. Other automakers will try to keep pace with their own hybrids, but those without proper development will either be forced to license hybrid technology or try and market diesels as a competing technology."

Diesels will be used by manufacturers such as DaimlerChrysler and Volkswagen in lieu of hybrids. However, existing diesel offerings in the US market cannot match current hybrids in terms of performance, economy, or cleanliness, and will have to be improved upon to remain competitive. Diesels must also be equipped with expensive exhaust treatment systems to comply with upcoming US Tier 2 emissions standards.

Ford and Nissan will license hybrid technology from Toyota, while GM will use their own. The act of licensing technology can have its limitations, as the licensee may only have access to earlier versions of the technology.