IE 11 is not supported. For an optimal experience visit our site on another browser.

Toyota aims to make Prius mainstream

Time was when you couldn’t get your hands on Toyota’s funky-looking Prius sedan without putting your name on a long waiting list at a dealership. Now Toyota wants to pay you for taking one off its hands. By’s Roland Jones.
2007 Toyota Prius
A pair of unsold Prius sedans sit on the lot of a Toyota dealership in the southeast Denver suburb of Centennial, Colo. Toyota is offering low-interest loan and lease incentives to boost sales.David Zalubowski / AP file
/ Source:

Time was when you couldn’t get your hands on Toyota’s funky-looking Prius sedan without putting your name on a long waiting list at a dealership, or by paying thousands of dollars over book price for a used version. Now Toyota wants to pay you for taking one off its hands.

In an effort to turn the Prius hybrid more appealing to mainstream drivers, Toyota is offering low-interest loan and lease incentives to boost the vehicle’s U.S. sales by at least 50 percent. The incentives, which start nationwide this month, offer no-interest loans for 24 months and leases for as low as $219 per month.

The boxy Prius, which runs on both a gasoline-powered engine and an electric motor, has won praise for its low emissions, advanced technology and high fuel economy. It was the first mass-produced hybrid automobile and it has become a favorite for environmentalists.

Toyota’s plan is to broaden the appeal of the Prius to more mainstream consumers, according to Bill Kwong, a company spokesman. Toyota wants to sell more vehicles and reduce the wait time and high premiums consumers often had to endure, he said.

“Customers sometimes had to wait four to six months for a Prius and that led to customer dissatisfaction, so we want to make them happier,” Kwong said. “We also want to make the Prius more affordable for consumers, and if they are on the fence over purchasing a Prius hopefully [these incentives] will push them over.”

Slower sales of the Prius may have also forced Toyota to offer the inducements. Sales of the hybrid were flat in 2006, down to 106,971 units from 107,897 in 2005, according to data from Global Insight, a market intelligence company.

“(These incentives) really show that the potential for hybrid sales is not unlimited, as some have said,” noted Rebecca Lindland, a Global Insight analyst. She said that while Toyota wants sales to increase to 160,000 units in 2007, Global Insight has a more conservative forecast of  125,000 to 135,000.

“The reason we have a hard time getting to the 150,000 number is there is increased competition in the overall hybrid market, and also when you do the economics of ownership, it’s not always the best purchase for a lot of people,” Lindland said.

While today’s Prius hybrid has a stated Environmental Protection Agency mileage return of 50 or 60 miles per gallon, that is only achievable when the vehicle is used around town or in stop-and-start driving in heavy traffic. Using the Prius on the highway or for long-distance driving will yield lower mileage.

What’s more, the EPA’s new fuel economy testing procedures are expected to cut fuel economy estimates for cars like the Prius by an average of 8 to 12 percent beginning this year.

Lindland also says that consumers are starting to question the additional expense of buying a hybrid, asking if they are saving money in the long run. She calculates that regular consumers who buy hybrid versions of popular passenger cars like the Honda Accord, which can cost some $3,000 more than a regular model, will need 10 to 12 years to break even in fuel savings, assuming the price of gas remains within the $2.50 to $3 range.

“We feel that there are a limited number of consumers for whom hybrids like Prius really fit into their lifestyles,” Lindland said. “But delivery trucks, or garbage trucks — they are perfect for this type of vehicle because they do short city trips in stop-and-go traffic and they don’t do a lot of highway driving. That’s perfect for a hybrid.”

Toyota’s Kwong counters that overall hybrid sales for the company are increasing, rising from 146,560 in 2005 to 191,742 last year. He also notes that flat sales of the Prius in 2006 can be attributed to supply issues related to starting production of the new Camry hybrid.

The popularity of hybrids surged last summer, peaking in July at an annual rate of nearly 1.5 million units according to automotive shopping Web site, as gas prices hovered near record highs. But sales of hybrid vehicles have fallen sharply since August as the price of gas has declined.

Toyota has also run up against a federal limit of 60,000 vehicles that are eligible for tax credits of up to $3,600. The credits, provided under a 2005 federal energy bill, have helped fuel sales of its hybrid vehicles and will expire at the end of this year unless Congress renews them.

Gas-electric hybrids may not be the most environmentally friendly choice for American car buyers, according to a list of the “greenest” 2007 model vehicles released Tuesday by the American Council for an Energy-Efficient Economy.

Honda’s Civic GX, a $25,000 vehicle that runs on natural gas and is sold in California and New York, topped the list, beating all gas-electric hybrids based on a “green score” derived from fuel economy and health and global warming impacts. Toyota’s Prius and Honda’s Civic Hybrid took the second and third spots in the annual list.

Natural gas is a much cleaner-burning and less expensive fuel than gasoline, but it is also much harder to find. So Honda offers a refueling pump for homes with a natural gas connection. GX buyers are eligible for a $4,000 federal tax credit, while buyers of the pump are eligible for a tax credit of up to $1,000, Honda says.

Still, Toyota remains on track to overtake General Motors as the world’s biggest carmaker this year. This week, the Japanese auto giant reported record quarterly sales, driven by strong sales of popular models like the Camry sedan and its Lexus luxury line.