Federal Government Goes Gaga Over Hybrid Vehicles

Hybrid vehicles remain a small part of the automobile market, largely ignored by consumers who are turned off by their higher prices. Yes, the Toyota Prius remains the most popular hybrid, but sales of this car have lagged in recent years. Collectively, the hybrid market appears to have peaked, but there is one entity propping it up: the U.S. federal government.Fed PowerAccording to the Nov. 24, 2010, issue of the San Francisco Chronicle, the federal government is a significant buyer of hybrid vehicles, purchasing one-quarter of all hybrids produced by the Ford Motor Company and General Motors since President Barack Hussein Obama took office in January 2009. The president, a huge advocate of green vehicles including electric cars, has authorized the purchase of more than 14,000 hybrids from the two largest domestic automakers.Those models include the Ford Fusion, Ford Escape and Chevrolet Malibu. Indeed, 64 percent of Malibu hybrid sales came from the federal government, a model GM dropped after the 2009 model year.Government ProppingIn essence, the federal government has taken it upon itself to bolster an automotive segment that simply cannot stand on its own two feet. Hybrids are great at saving gas, but their price premiums, ranging from $3,000 to $8,000, are keeping consumers away. The automakers need to charge extra to recoup the cost of the technology, some of the money consumers get back in the form of savings at the pump and tax credits.Analysts worry that federal government involvement will create a dependency for automakers in a market where they need to learn to rely upon consumer interest. The Toyota Prius and Honda Insight have also been purchased by the U.S. government, but in quantities much smaller than Ford and GM.Electric VehiclesAs much as the federal government has been involved with purchasing hybrids, the Obama administration's involvement with electric vehicles may shatter that. The Nissan LEAF and Chevrolet Volt are the first of a wave of electric cars coming to the market, with big corporations such as General Electric snapping up thousands of models over the first year.Down the road, to sustain growth, federal involvement may quickly become apparent, especially if consumer sales prove weak. Should the government decide to eliminate the $7,500 tax break for these vehicles, then sales are likely to fall sharply. Don't expect anyone to do that unless, of course, Tea Party activists decide to curtail spending.