Jim Armitage: How Toyota engineered itself on to the right road

The Prius overtook the Civic and Accord. High petrol prices are cited as the cause

One of the big problems in GE's businesses around the world has been the difficulty in persuading cash-strapped nations to keep splurging on green energy. This is because GE makes much of the kit that goes into the turbines on wind farms. The breakneck pace of expansion of this green industry has somewhat petered out as governments run out of money. Good news for those of us who prefer our countryside unblemished. Bad news for GE. Oh yes, and the environment.

As with so much of alternative energy, wind farms have largely grown up out of extremely generous tax allowances aimed at boosting countries' renewable energy credentials.

Trouble is, when the tap turns off the state largesse, new projects dry up. In GE's case, that is happening in the US, big time. A generous tax credit that has built many a windmill across America is expected to be killed off at the end of the year. In anticipation, firms have scrapped turbine orders hand over fist.

GE is the biggest maker of wind turbines in the country – and one of the most powerful lobbying groups. All that hobnobbing in Washington paid off while the tax credit lasted, but now look – falling US orders for turbines meant overall sales orders at its industrial division were down 5 per cent over the latest quarter at $21.5bn.

What a difference, then, to see how a green technology not entirely reliant on subsidies can thrive if the design is right. In California, the Toyota Prius has just become the best-selling vehicle this year.

The Prius overtook Honda's Civic and Accord to take pole position. High petrol prices (which to us still look dreamily low) are cited as the cause. Really? A Prius costs $25,000 in the US – a whopping price tag for a fairly noisy five-door hatchback. At US petrol prices, you'd have to drive an awful lot to recoup that extra price. No, I reckon there must be more going on. Californians are just willing to pay more for great engineering that makes you feel good about yourself. No tax credits required.

The author drives a Toyota Prius

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