Michigan's Hybrid Economy: Automakers Push a Gas Tax ANN ARBOR, MI (The Environment Report) - Ken Butman's Ann Arbor Michigan dealership has been selling the fuel-efficient Suzuki hatchback for a couple of years. But the cars didn't get really popular until last spring, when gas prices jumped. Butman ordered a big shipment to keep up with the demand.

Butman: "These are the Suzukis. These little cars get good gas mileage. And they're so cute, look at them. Look at this one here it's got a little rack for your skis look at that."

But those cars the ones that Butman ordered close to a year ago most of those cars are still here. They're still sitting on his lot, really not moving.

Butman: "It was strange because they were so hot; for a while there couldn't give a big car away and everybody's rushing to the small cars and then just as quickly about when the price of gas came down again, we saw a complete reversal. Like a light switch that's how fast it cut off."

It's been like that all over the country. Dealers who last year had waiting lists for hybrids and small cars suddenly have a lot of extra inventory. Sales of hybrids are way down from last April, mostly because gas costs about half what it did last year.

Brett Smith is an auto analyst with the Center for Automotive Research. He says consumers only switch to fuel-efficient cars when gas prices are high. When prices drop again, so do sales of those cars.

Smith: "Look at what's happened every time we've had an energy crisis. We've gone to smaller cars for a couple years, and then the consumer has gone back to larger cars. Why? Because at that fuel price, they can get away with it. They can justify it."

It's a real problem for dealers. And it also worries auto manufacturers who have poured money into developing hybrids. They have a lot of new models due to come out this year. And that's why some people who sell cars have begun to push for a way to make driving them more expensive. They're asking for an increase in the gas tax. Now, dealers and auto executives might not seem like the first bunch to line up behind a tax hike. Traditionally they've lobbied hard against anything that makes driving more expensive. But a high tax, and therefore higher gas prices, could get all those extra hybrids moving again. Michael Jackson is the CEO of Auto Nation. That's the nation's largest chain of dealerships. Jackson wants to see gas at $4 a gallon. That's the level which many analysts say consumer behavior changes. And Jackson thinks the government can keep prices at that magic number with a floating tax. Auto makers have been a little more cautious, but some top executives at American companies have called Jackson's idea smart and worth looking into. Smith says they believe that higher gas taxes could stabilize the market for fuel-efficient cars. That could make investment in new technologies a safer bet.

Smith: "The car companies rarely will come out loudly and say things like We think there needs to be a gas tax.' But almost all of them will gladly say, Look, if you want people to drive more fuel-efficient vehicles, the best way to do it is a gas tax.'"

For now though, it might not take a big tax to bring gas prices back up. Oil trader Anthony Grazanti is the president of GRZ energy and he says an economic recovery would do pretty much the same thing.

Grazanti: "You're going to see demand start increasing for oil. Shouldn't be any doubt about it that once this economy starts to pick up, say beginning of next year or the year after that, you're going to see oil prices start to go higher."

And that means that you'd see prices at the pump going up too. Now, proposing higher gas taxes, especially of a couple of dollars a gallon, well that can mean career suicide for politicians, so a big hike in the gas tax seems iffy. But if gas prices rise as the economy recovers, well, dealers might see those fuel-efficient cars move off the lot.
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