Where Is the Hybrid Car Heading?

(FORTUNE Magazine) – Hybrid cars aren't just for eco-friendly Hollywood stars anymore. Higher prices at the pump are raising interest in the energy-efficient (if pricey) cars nationwide. Here's what is going on:

1. Are high gas prices driving up sales? It looks that way. Although the roughly 200,000 hybrids sold in 2005 accounted for only 1% of all vehicles sales, that was more than double 2004's total. According to Ford, combined sales of the Ford Escape (above) and Mercury Mariner doubled in April over March because of incentives and rising gas prices.

2. Is Toyota still dominating the competition? Yes. Hybrids were 6.6% of its sales in April, and the Japanese giant will soon offer hybrid versions of every model it makes. Its Lexus division has just unveiled a GS 450h sedan (below) that uses a hybrid drive to get V-8 acceleration with fuel economy more typical of a four-cylinder car. It goes from zero to 60 mph in just five seconds.

3. What are the other automakers doing about it? Banding together. General Motors, DaimlerChrysler, and BMW have launched a joint venture called Global Hybrid Cooperation to produce a system for all three. Derived from a GM design for buses, it will make its first appearance in a Chevy Tahoe model going on sale in fall 2007.

4. Are purchase prices coming down? Not soon. The premium for hybrids is still $3,000-and-up per car. Toyota chairman Hiroshi Okuda recently said he'd like to halve that by early next decade.