"Top 5 global hybrid markets" and "Top 5 US hybrid markets" based on vehicle registrations January – March 2007.

In May, Toyota sold a whopping 24,009 units of the Prius, the highest sales level yet for the iconic gas-electric vehicle. "We had huge Memorial Day blowouts. In three days, we sold 40 Priuses. That’s more than twice as many as usual," said Toby Parks, sales team leader, Toyota of Berkeley. "You have the hottest selling vehicle. You have available inventory for that vehicle. You put special pricing on it. They’re going to move." Record-breaking gas prices certainly have an impact, as well.

This level of sales activity removes most remaining questions about the ability for vehicles with gas-electric technology to move into the mainstream. Many industry executives and analysts had assumed that hybrids would not go beyond 2% of the new car market until the end of the decade—if ever—and therefore investment in the technology was unwarranted. In May, the 2% ceiling, which hybrids have not broken since their introduction almost eight years ago, was surpassed.

In May, the Prius was the ninth most popular vehicle in the United States, and the sixth most popular passenger vehicle. The Prius was Toyota’s third biggest seller by volume.

Looking beyond Prius, May reveals another critical factor in the growth of the hybrid market: high rates of buyers opting for hybrid versions of conventional vehicles (also known as "take rates.) This month, 11% of Honda Civic buyers, 19% of Saturn Vue buyers, and 28% of Highlander buyers chose hybrid powertrains. A year ago, 7% of Toyota Camry buyers wanted the hybrid version; in May, it was 14%.

If hybrid versions were offered on the 10 most popular vehicles of the vehicles (listed above), hybrid sales could rise to 10-15% of the market without much difficulty. Before we get too giddy about May numbers, we should remember that simply having a hybrid version of a popular model may not be enough. The Honda Accord Hybrid’s take rate last month was just over 1%. Honda recently announced that the company will not offer a hybrid version of the redesigned Accord, after killing off the Honda Insight last year.)

To sustain hybrid sales, carmakers will need to convince buyers that the hybrid version is substantially "better" than its conventional counterpart. In today’s market, this means offering noticeably higher fuel economy and some all-electric drive capability.

US Sales

Our information is based on hybrid sales as reported by the manufacturers. For each model, this month’s sales are shown compared to sales in the previous month and at the same time last year. We also examine hybrid market share by model and manufacturer. The historical sales graph for top-selling hybrid models shows estimated 2006 volumes based on sales-to-date.

Hybrids sold in the U.S. (May 2007): 47,096

U.S. hybrid sales for May 2007 by manufacturer and model

U.S. hybrid market historical sales (1999 – 2006) with 2007 forecast

Regional Data

Source: R. L. Polk & Co.

Curious where hybrid buyers live? We present the data in two ways. First, we list the 15 cities and states that boast the largest numbers of new hybrids on their roads within the past year. For example, residents in the New York City area put over 10,000 new hybrids on the road in 2006. Second, we adjust for population and look at hybrids per person (in states) or per household (in metro areas). This lets us include cities like Portland, OR: a city that has fewer overall vehicles (and thus fewer hybrids) but has more hybrids per capita than anywhere else.

• States with the highest hybrid sales
• States where hybrids are most popular
• Metropolitan areas with the highest hybrid sales
• Metropolitan areas where hybrids are most popular

Looking Ahead

Prius sales keep climbing, but who’s buying them? Conventional wisdom says that the typical Prius owner lives in a left-leaning state on one of the country’s coasts. After Toyota sold over 19,000 Priuses last March, we took a closer look. After adjusting for population, we found that the leading states for Prius purchases were Oregon, Vermont, California, and Washington (in that order). No surprise there. But a little further down the list, there were some unexpected results. Wisconsin and Iowa made the top 15, and Kansas wasn’t far behind. In fact, last March, buyers in the Midwest accounted for almost 20% of all U.S. Prius registrations.

The Prius is still far more popular in San Francisco than in Sioux City. But the March registration numbers show that the Prius is catching on in places that have not traditionally been viewed as promising hybrid markets. In March, car shoppers in Iowa were more likely to purchase a Prius than shoppers in Washington, DC, a fact that begins to dismantle some stereotypes. And even small Midwestern cities like Ames, IA (population 51,572) now boast Prius clubs.

Midwestern gas prices, which are traditionally higher in California and the West Coast, are also catching up. In the last week of May, the Midwest region saw a 41% increase compared with this week last year. That’s the largest year-over-year percentage increase for any region, according to Energy Information Administration.

The hybrid wave apparently breaks in California and washes into the heartland—as new waves of hybrid interest continue to hit the West Coast. "Gas prices bring more awareness to the Prius," said Toby Parks, sales team leader, Toyota of Berkeley. "The next huge spike in the car is going to come at $4 gallon." After a period of dealership incentives during past few months, Parks expects to begin selling Priuses over invoice again. "Consumers should expect to pay $1,000 more than if they would have bought the car two weeks ago. It’s strictly supply and demand."

The spread of hybrids into America’s heartland may fit well with GM’s hybrid plans. In May, GM announced that the redesigned 2008 Saturn Vue Greenline will offer a version with the GM-Daimler-BMW two-mode hybrid drivetrain. This will give GM a lineup of three full-hybrid SUVs (a compact and two-full-sized) that may be well received in areas like the Midwest where domestic brands remain strong. The Ford Escape Hybrid may also get a boost if hybrid sales in this region take off. In May, sales of the Ford Escape were up 10% over last year, a possible indication that buyers with preferences for domestic brands are entering the market.