This is an excerpt from EERE Network News, a weekly electronic newsletter.

September 05, 2007

Tax Credit for Honda Hybrids to be Halved on January 1st

Photo of a Honda Civic Hybrid.

Honda's best-selling hybrid, the Honda Civic Hybrid, will suffer a drop in federal tax credits in 2008.
Credit: Honda

Honda Motor Company has sold more than 60,000 hybrid vehicles that qualify for the federal tax credit, so the tax credits for the automaker's hybrid vehicles will be cut in half as of January 1st, 2008. The U.S. Internal Revenue Service (IRS) announced last week that as of the second quarter of this year (that is, the end of June), Honda had sold 58,872 hybrid vehicles that have qualified for the federal tax credit. But Honda sold another 2,753 hybrids in July, pushing its total to 61,625. According to rules established by the Energy Policy Act of 2005, the federal tax credit maintains its full value through the end of the first quarter following the quarter in which the automaker sells its 60,000th qualified vehicle. That means that Honda has the remainder of this quarter and next quarter left, and on January 1st the tax credits will be reduced by half. For the second half of 2008, the tax credits will be cut in half again, and they'll be eliminated in 2009. Buyers can currently earn federal tax credits of up to $2,100 by buying a Honda Civic Hybrid, although those credits may be limited by the alternative minimum tax. See the press releases from the IRS and Honda.

Honda has also earned IRS certification for its 2005 and 2006 Honda FCX fuel-cell vehicle. The IRS announced in late July that the Honda FCX could earn a federal tax credit of $12,000. The only problem is, you can't really buy a Honda FCX, and only a select few people and companies are being allowed to lease it, so it's hard to see how anyone can actually earn the credit. Meanwhile, the tax credit for Toyota and Lexus hybrids ends on October 1st, but other hybrid makers won't have to worry about phase-outs for some time. As of the end of the second quarter, Nissan's qualified hybrid sales are at just 5,222, General Motors Corporation (GM) is at 9,454, and Ford Motor Company is at 33,547. For comparison, Toyota Motor Sales sold 70,641 hybrids in the second quarter alone, and have sold a total of 344,083 qualified hybrids. See the IRS press releases on the Honda FCX and the quarterly sales for Toyota, Nissan, GM, and Ford.