Toyota Says Market Has Room for 2010 Prius and New Honda Insight
March 02, 2009
By John O'Dell
Gas is down around $2 a gallon again. Honda is about to introduce a $19,000 (give or take) hybrid. The economy's in the tank. People are pinching pennies like crazy. And new-car sales are at their lowest levels in decades.
Sounds like a great time for Toyota to hit the market with its third-generation Prius, a car likely to be priced thousands of dollars above its prime competitor, the new Honda Insight hybrid.
But that's exactly what Toyota's doing. Toyota expects the 2010 Prius, which arrives in showrooms in June, will reverse the model's sliding sales and bring 100,000 buyers into the market in the last seven months of this year.
The automaker is banking on the new Prius' larger size, vastly improved interior, upgraded ride and handling and stellar fuel economy -- it has won an EPA rating of 50 miles a gallon in
the city, 49 on the highway and 50 mpg overall -- to carry the day.
The Honda Insight is a distant second with an EPA rating of 40 miles per gallon in the city, 43 on the highway and 41 mpg overall.
While acknowledging Honda as a worthy competitor, Toyota group vice president and general manager Bob Carter says the Prius team just doesn't see the compact Insight as competition.
Separate Markets
"We're marketing on two different levels," he said. He points out the fuel-economy differences and the fact that the Insight is a compact while the 2010 Prius, with 5 cubic feet of additional cabin space in virtually the same exterior footprint as the second-generation car launched in 2003 (as an '04 model), can finally lay claim to being a true midsize sedan.
Its combined cabin and cargo space now totals 115.6 cubic feet, squarely in the middle of the federal standard that classifies midsize cars as those with 110-120 cubic feet of combined interior volume.
The Insight, by comparison, is at the bottom of the compact class, with 100.9 cubic feet of combined interior volume (the federal standard for compacts is 100-109.9 cubic feet).
The Prius also is likely to be considerably more upmarket than the Insight, which Honda has said will come to market at under $20,000.
Toyota hasn't set pricing yet, but the '09 Prius, last of the second-generation cars, starts at $22,720. It is likely the new model will begin in that territory as well: Toyota would be hard-pressed to launch with a significantly higher starting price in this economy.
Tech, at a Price
Toyota also is offering a package of high-tech options for its star hybrid that could drive
pricing significantly higher.
All models come with three selectable driving modes -- EV, for low-speed all-electric driving when the battery pack is well-charged; ECO, which damps down the throttle opening to save on gas at the expense of acceleration; and "Power," for unhindered performance -- and a revamped instrument panel that displays a wealth of information to help drivers maximize fuel economy. More details on the Prius' green credentials can be found on AutoObserver's sister site, Green Car Advisor.
Big-ticket options include a solar roof that powers interior cooling fans; radar cruise control that warns of impending rear-end collisions and helps slow the car if such a crash becomes unavoidable, and an electronic lane-keeping assist system that gently tugs you back into your proper lane if it senses the car drifting over the lane marker.
Toyota continues to offer the computer-controlled self-parking system, but it has been upgraded so the car essentially parks itself once the driver lines it up.
Those items, part of an optional technology package (although the solar roof can be ordered alone), are likely to push the price of a fully loaded 2010 Prius well above the $30,000 mark.
Carter, though, doesn't see a problem, even in this market.
Too Ambitious?
He said Toyota's marketing mavens look hard at present economic conditions before setting a goal of 100,000 sales for the rest of this year and 180,000 for the first full-year of sales.
The optimism has Edmunds.com market analyst Jessica Caldwell shaking her head in doubt.
"With people so price sensitive this year, that just seems too ambitious," she said. "They would have to average 14,000 new Prius sales a month for the rest of the year to hit 100,000, and they haven't sold at that level since last July."
Caldwell acknowledges that there is likely some pent-up demand for the 2010 Prius; new, improved models of popular cars usually are greeted by a sales surge when first introduced. But with the 2010 Honda Insight also available, at a significantly lower price, "it just might be a stiff competitor, the value proposition in the market," she said.
Source: Edmunds.com
Younger, Sportier
"Honda has a hipper, younger image than Toyota, and that could help the Insight."
Indeed, a number of reviewers who have driven both cars say that while Toyota has done a good job of improving the Prius' ride and handling, the Insight is a sportier car that's more fun to drive.
Also working against the Prius, Caldwell says, is that the hybrid market now is made up chiefly of mainstream buyers who don't really care that much about the technologies involved as long as they can get good gas mileage and are helping the environment.
"The early adopters and the techies" who would flock to a Prius loaded with all the options the company is offering on the 2010 model "are only a small part of the market now," she said.
Room for All
Toyota, however, sees plenty of room in the market for both cars.
"The midsize segment, even in this down market, is about 2.4 million cars a year, and the compact market is 2 million," said Carter. "And in a combined market of 4.4 million, we can sell every Prius we can make and they can sell every Insight and there still will be market left for others."
That would include Ford Motors Co., which is launching its midsize Ford Fusion and Mercury Milan hybrids this month and will be looking to take customers away from Prius.
While sanguine about the competition, Toyota isn't ignoring it, either.
"The consumer still needs to know that it is available and what it offers," he said. "We consider the Prius a critical car for Toyota and we'll be mounting a marketing campaign that is comparable to the campaign for the Venza," the crossover Toyota launched last year as an '09 model.
Major Campaign Coming
The company will launch a full-fledged new car advertising campaign -- network and cable TV, radio, print and Internet -- for the 2010 Prius as its rollout progresses, Carter said.
Right now, three months before the cars hit the dealerships, Toyota is using "alternative" marketing channels including mini-ads on Twitter and various Internet chat groups and Web sites, including its own.
The marketing message, he said, is that the 2010 Prius remains the industry's fuel economy and CO2 emissions leader by a wide margin and is hitting the market with three additional strengths: its unique exterior styling, new levels of interior comfort and refinement, and industry-leading technology.
Time will tell whether Carter's right and the new Prius will continue the model's domination of the hybrid market in the face of mounting competition. The second-generation models collectively account for slightly more than half of all hybrids sold in the past six years, an impressive record albeit one accomplished with only a few competitors to worry about.
One thing we can say now is that no matter how the hybrid sales race turns out, the consumer is going to be the big winner.
John O'Dell is senior editor of Edmunds' Green Car Advisor.
Photos by Toyota
1 - The 2010 Toyota Prius is larger than the previous generation.
2 - The 2010 Toyota Prius has a vastly upgraded interior.
3 - The 2010 Toyota Prius can be loaded up with lots of tech features.
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