Prius still king as hybrid auto sales rise

NEW YORK (CNNMoney.com) -- The Toyota Prius remained America's most popular gasoline/electric vehicle even as sales of hybrids rose 35 percent in the first quarter of 2007 compared to last year, according to a new report from J.D. Power and Associates.

Sales of diesel-powered vehicles, already a larger portion of the market than hybrids, are expected to grow even faster.

2007 Toyota Prius

A total of 187,000 hybrid vehicles were sold in the United States in the first six months of 2007, according to J.D. Power. Sales of hybrid vehicles are expected to decline slightly in the second half of the year but, nevertheless, J.D. Power expects a total of 345,000 to be sold over the whole year. That would compare to 256,000 sold in 2006.

"High gas prices during the first half of 2007, coupled with automakers lowering the price premium for most hybrid models, have given the hybrid market a boost," said Mike Omotoso, senior manager of global powertrain forecasting for J.D. Power and Associates.

Lower prices for hybrids, as well as sales incentives, have helped make hybrids a more economically viable choice for consumers wanting to save money on fuel.

The Toyota Prius accounted for slightly more than half of all hybrid vehicles sold in the first half of 2007. Toyota (Charts) has recently begun offering sales incentives on the Prius which, for years, had been selling so well that even used models were in high demand.

"Toyota realized that they had to offer incentives for the Prius to offset the decrease in the federal tax break, which decreased from more than $3,000 in 2006 to less than $1,000 in 2007," said Omotoso. "The incentives helped Toyota maintain a strong sales pace for the Prius."

A recent J.D. Power consumer survey showed flagging consumer interest in hybrids, but interest remains strong enough to maintain a continued rise in sales.

"While consideration for hybrids is falling, interest in hybrids is still strong among consumers, and projections indicate steady growth for this segment in the coming years," said Omotoso. "Bringing additional hybrid models to the market will serve to fuel that interest."

Despite increasing competition from other hybrid models - including seven new models expected to enter the market later this year - J.D. Power expects the Prius to remain the sales leader for several more years. Among the new hybrid models expected this year are hybrid versions of Ford's Ford Fusion and Mercury Milan sedans and hybrid versions of General Motor's (Charts, Fortune 500) full-size SUVs.

J.D. Power expects hybrid vehicles to make up 4.6 percent of the total new vehicle market by 2010 when there will be as many as 65 hybrid models for sale in the U.S.

Diesel vehicles, including heavy-duty pickups such as the Ford (Charts, Fortune 500) SuperDuty, already make up about three percent of the new vehicle market, Omotoso said.

That percentage is expected to rise to about five percent by 2010, said Omotoso, with most of that growth coming from newly introduced passenger vehicles such as a diesel-powered Honda (Charts) Accord that will replace the current Accord Hybrid.