As consumers worry over higher petrol prices, US carmakers reportedly welcomed a House of Representatives vote on Thursday that may lead to generous tax credits for hybrid cars and other environmentally friendly vehicles.
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The Detroit News said carmakers have been pushing for the tax credits for years, saying they will entice consumers to buy vehicles equipped with expensive petrol-saving technology, which typically adds thousands of dollars to a car or truck’s price tag.
The newspaper said the US proposal passed the Senate in May as part of a wide-ranging package of corporate tax breaks and the House passed a similar bill on Thursday on a 251-178 vote – even though the House left the car tax breaks out of its version of the bill, carmakers and other supporters believe they will be restored in conference committee.
According to the Detroit News, under the Senate plan, consumers would receive a tax credit of up to $US1,000 for hybrid petrol-electric powered vehicles and $4,000 for fuel-cell vehicles which are under development but are not in the retail market yet – diesel-powered vehicles were not included.
The report said General Motors and DaimlerChrysler have pushed lawmakers to include diesel in the tax credit mix while Toyota and Ford have been content to shower most benefits on hybrids.
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By GlobalDataThe Detroit News noted that the Thursday House vote is the latest twist in a protracted legislative battle that has frustrated carmakers and environmental groups.
The report said the tax credits are strongly supported by the Bush administration, have bipartisan backing on Capitol Hill and were a major element of an energy bill that passed both the House and the Senate last year but that legislation collapsed when the two chambers could not resolve differences.
Without tax credits, the Detroit News noted, carmakers fear consumers will baulk at paying higher prices – hybrid technology will add about $3,300 to the price of a Ford Escape and diesel engines can also add to the price of a car.
The newspaper said an existing clean-fuels tax deduction will be phased out after 2006 without reauthorisation from Congress – under the programme, the IRS [tax authority] allows a $1,500 deduction for hybrid cars but, next year, the deduction will drop to $1,000.
The Detroit News said the tax credits still face hurdles – lawmakers are under tremendous pressure to keep costs down on a bill that has been derided as a ‘pork-laden’ corporate giveaway.
Critics of the tax credits reportedly said long waiting lists for the Toyota Prius show that the market for hybrids is doing just fine without help from the government but tax-credit advocates point to credits the Japanese government provided when Toyota and Honda first marketed hybrids there.
The UK government already offers buyers of alternative fuel cars some up-front benefits from its so-called Powershift scheme.
Phil Martens, Ford vice president for product creation, told the Detroit News tax credits will help create enough consumer demand to ensure that hybrids succeed for more than the first year or two while they also signify something bigger and more broad — support for the country as a whole for cleaner vehicles.
“It’s a bit frustrating that we don’t as a nation recognise that these types of transformational changes require support from all parties,” Martens reportedly said.
