THE GAS MISERS

The new Prius appears to be moving rapidly out of its green niche. Sales in the United States shot up by 153 percent in the first half of this year, by a whopping 874 percent in Europe; in Japan they increased tenfold. According to Esmond, once skeptical rivals are now jumping on the bandwagon. "I don't want to say they're scrambling, but they are trying to quickly put together their own hybrids," he says.

So far Honda has given Toyota the only competition for the hybrid market with the Civic and the Insight. But the first hybrid SUV, Ford's Escape, hits the streets in September. Nissan recently announced that its hybrid Altima sedan will arrive next year. Later this year Dodge plans to roll out a diesel-electric pickup. GM plans hybrid models of the GMC Sierra and the Chevy Silverado. Honda plans to unveil a hybridized Accord in the fall. Hyundai says its hybrid will be ready in "the near future." According to CSM Worldwide, a Detroit-based research firm, by 2007 there will be some 22 hybrid options for popular models, including even Hummer's H2.

In America the lust for the largest gas guzzlers seems to be slowly waning. Though SUVs are still the top-selling vehicles, the mix of SUVs is tilting toward smaller models. And because big SUVs have driven the average gas mileage of the American fleet down to 20.4 miles per gallon, its lowest level in two decades, the Big Four automakers risk falling afoul of fuel-efficiency regulations. That's one reason many of the new American hybrid designs are for SUV models. But the bigger reason is Toyota. "We can't just sit here as a major corporation and say, 'Trust us, you'll get a fuel cell from us and in the meantime, we're not doing anything'," says GM vice chairman Bob Lutz. "With more and more of our competitors playing the hybrid card, there was just no way we could ignore that."

Europe has been slower to respond. It has already chosen diesel as its cleaner, more efficient fuel, and the diesel market is dominated by German carmakers. Indeed, one reason Toyota pursued hybrids was that it was so far behind in the diesel market. But growing sales of the new Prius could change all that. Lindsay Brooke, an analyst at CSM, says every big car company has to be thinking that "if the Japanese kick-start this thing, you've got to have this technology on the shelf, especially if the fuel price really rises."

The Prius faces two critical turning points before it can be called a true mass-market car. It needs to be profitable, and practical. When Toyota first introduced the Prius, it was reportedly losing $3,000 on each car. The company now says the line is profitable, but analysts aren't convinced. "I know engineers at rival carmakers who've done total teardowns of the Prius--comprehensive, bolt-by-bolt cost analysis," says Brooke. "Toyota is getting close to breaking even," probably within the next five years.

Reaching that point takes longer for the consumer. Most hybrids sell for $2, 000 to $3,000 more than comparable sedans, and drivers would need at least 10 years and 100,000 miles to recoup that much in gas savings, analysts say. But those who say hybrids must narrow that gap to boost sales ignore the power of instant gratification: Richard Pearce says he pays $10 a week in gas, compared with his neighbor's $60.