Curious tire-kickers in need of an extra nudge to try new hybrid technologies may welcome the rebate offered in the federal budget, but the offer is unlikely to rev up the majority of cost-conscious Canadian car buyers, industry watchers say.

"I don't think the shift is going to be earth shattering by any means," said Rohan Lobo, senior manager of automotive research for the marketing group J.D. Power and Associates.

"It will help, but you're not going to see a huge influx of people into hybrids or flex fuel vehicles by any stretch — and the reason is the rebate doesn't even meet the premium people pay for these vehicles."

The federal government on Monday introduced the rebate program in its budget, offering rebates for the purchase of new cars that use fewer than 6.5 litres of gasoline for every 100 kilometres driven and minivans or SUVs that consume fewer than 8.3 litres (based on 55 per cent city driving and 45 per cent highway driving). The mail-in rebates on these vehicles will be $1,000 and will increase $500 for every half-litre reduction in fuel consumed per 100 kilometres, to a maximum of $2,000. Rebates for the Toyota Prius hybrid and the Honda Civic hybrid are set at $2,000.

The changes are effective March 20, although not all car dealers are charging the levy or offering the rebate at the point of sale. Anyone buying one of the affected vehicles over the next few weeks has to keep the receipt and the government will settle the bill at a later date, according to Transport Canada officials contacted by CBC News Online.

Department of Finance officials added that the rebate amount is not subject to sales tax; the rebate will be applied before tax is charged on the transaction.

Large gap between hybrid and conventional cars

Hybrid cars boost fuel efficiency by using two motors — a combustion engine and an electric motor. At the 2007 Canadian International Auto Show, the Toyota Camry hybrid was named the car of the year by the Automobile Journalists Association of Canada — the first time a hybrid vehicle has ever won the honour.

Despite critics' praise, hybrids have failed to catch on with Canadians, who tend to favour compact cars with traditional combustion engines. The most recent figures suggest that hybrids made up about 10,000 of the 1.6 million vehicles sold in Canada in 2006, according to Desrosiers Automotive Consultants.

Julie Gelfand, the president of Nature Canada, said the rebates are a good start, but they still fail to bridge the gap between hybrid and conventional cars.

"The price difference is almost $10,000 more for the Prius [over a Corolla]," she said, noting that consumers will pay about $8,000 more for a hybrid vehicle even with the rebate taken into account. "I'm not convinced that the level is there yet to really push for the new technology."

Paul Parker, a University of Waterloo professor of geography and environmental studies, has been driving a hybrid car for more than six years. The rebates will likely boost interest, but any shifts will be a negligible change in the makeup of the entire car fleet, he said.

"Things like hybrid vehicles are now a decade old," Parker said. "They really [comprise] … less than one per cent of the new vehicles being sold. If we say let's have a really successful incentive program that will take that up by a factor of two, three, or four — you're still talking only a couple per cent of the automotive market."

Gas guzzle penalties unlikely to bring change: Parker

While the Conservatives have introduced a plan to levy a penalty on the most-polluting commercial cars, Parker said the government could have pushed further with a more severe initiative.

"If you're talking about a maximum of a $4,000 penalty on an $80,000 Hummer, that's like a five per cent premium. Many people that would be interested in the Hummer would say, 'Well, it's five per cent, I'll pay that five per cent anyway and not make any change.'"

While shopping for a new car in Calgary, consumer Ken Schneider said he planned to buy a full-size van, despite a possible $4,000 penalty.

"I've had a large-type vehicle for almost 30 years and I don't plan on changing," Schneider said. "My dad had large vehicles when I was growing and I just stayed with them."

Schneider is typical of the average car buyer who isn't willing to trade in his old car for a vastly different model, said Chris Travell, vice-president of Maritz Research's automotive group, explaining that migration between vehicle types is uncommon.

"It's unrealistic to assume that someone will sell their SUV and buy a subcompact vehicle — that typically does not happen," Travell said.

"You don't see huge jumps between segments. What is more reasonable is, and we've seen this in the data, somebody who is considering buying a mid-size car, an intermediate-size car, will now look at a subcompact or compact vehicle."

New technologies 'worth the cost'

Still, some car dealers are hopeful the rebate will spur some consumers to test the new technology. Dave Clark, owner of Clark Toyota in Summerside, P.E.I., said the new rebate coupled with an existing provincial sales tax incentive might attract more buyers.

"We have the up-to-$3,000 provincial sales tax incentive on P.E.I.; a lot of provinces don't even have that yet," Clark said.

"With that $3,000 provincial sales tax credit and, for example on our Toyota Prius, another $2,000 federal credit, now all of a sudden that car will become quite a bit more popular, and maybe we'll see increased sales of that car this year."

Industry analyst Dennis Desrosiers said he supports the concept of a rebate for advanced technologies like hybrids, clean diesel, and certain E85 cars that run on a blend of ethanol and gasoline.

"The resistance to these vehicles is price," Desrosiers said in a release. "They cost more to buy because of the technology. Many believe they are worth the extra cost not because of the fuel you save, but because they offer much better overall performance and fuel efficiency. But most consumers can't get by the price issue."

Model	Variation	Rebate
Toyota Prius hybrid	4dr hatchback	$2,000
Honda Civic hybrid	4dr sedan	$2,000
Toyota Camry hybrid	4dr sedan	$1,500
Nissan Altima hybrid	4dr FWD sedan	$1,500
Toyota Yaris	2dr hatchback CE	$1,000
Toyota Yaris	2dr hatchback RS	$1,000
Toyota Yaris	4dr hatchback LE	$1,000
Toyota Yaris	4dr hatchback RS	$1,000
Toyota Yaris	4dr sedan	$1,000
Toyota Corolla	4dr sedan CE	$1,000
Toyota Corolla	4dr sedan sport	$1,000
Ford Escape hybrid	4dr FWD	$2,000
Ford Escape hybrid	4dr 4x4	$2,000
Toyota Lexus RX 400h hybrid	4dr AWD	$1,500
Toyota Highlander hybrid	4dr AWD base	$1,000
Toyota Highlander hybrid	4dr AWD 7-passenger limited	$1,000
Chrysler Jeep Compass	4dr FWD sport/north	$1,000
Chrysler Jeep Compass	4dr FWD limited	$1,000
Chrysler Jeep Patriot	4dr FWD sport/north	1,000
Chrysler Jeep Patriot	4dr FWD limited	$1,000
Toyota Lexus GS 450h hybrid	4dr sedan	$1,000
Vehicles identified by auto industry analyst Dennis Desrosiers as being eligible for rebates.

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