New Toyota Prius Has To Address Tough Market and Tough New Rival
By Michelle Krebs April 10, 2009By Bill Visnic
ORLANDO, Florida -- Acknowledging that low gasoline prices have hampered hybrid sales growth and that rival Honda Motor Co. could be a threat to its dominance in the hybrid-electric vehicle market, a Toyota Motor Sales U.S.A. Inc. executive says the company remains confident hybrids are a strong growth opportunity.
At a media preview of the heavily redesigned 2010 Prius hybrid here, Ed La Rocque, Toyota's national car marketing manager, confirms Toyota has a plan to address Honda's new Insight hybrid, the recent U.S. launch of which has whipped analysts and industry watchers into a frenzy because the Insight's base price ($19,800) undercuts the current Prius by thousands.
The Insight went on sale March 23. Toyota's 2010 Prius hits showrooms in late May, and
although pricing hasn't yet been determined, Toyota sources hint there won't be much change, even though the new Prius is much improved. So the new Prius will remain markedly more expensive than Honda's Insight.
La Rocque told AutoObserver Toyota is "looking at bringing in" a decontented version of the new third-generation Prius to go head-to-head (or close) with the Insight.
"They [Honda] have not been shy to say they're coming after the Prius in this market," La Rocque said.
The Insight racked up an impressive number of orders prior to its launch in Japan, and to combat its early popularity -- and price advantage -- Toyota will keep the current-generation Prius in production and offer it at a lower price than the redesigned 2010 model.
That strategy won't fly in the U.S., though, so La Rocque said Toyota likely will try to hustle to the market a barer-bones version of the 2010 Prius with a price closer to the Insight. But Toyota probably won't go overboard -- "We believe the Prius is much more car," he said.
"It will be interesting to see what sort of buyer the Insight attracts," he adds. He said hybrids typically are bought either because of their fuel economy -- or simply because it's a hybrid.
La Rocque said there is a difference in hybrid buyers now than in previous years because of the economy. He said customers are focused as much on practicality and value as they are in making an environmental statement.
"I think the spectrum of the market is broader [now]," he said. But "value," the rival Insight's purported strong point, has not necessarily been a purchase-driver for Prius. La Rocque said the top three Prius selling points are fuel economy, environmental friendliness and its high-technology content.
La Rocque admits, too, the retreat of gasoline prices has been more than a fender-bender for hybrid sales. Dropping demand has led to uncharacteristic incentives for the Prius, not to mention most of Toyota's other hybrid models. He said the recent incentives for the Prius have caused as much angst internally at Toyota as there has been in the media.
"There's no denying hybrids -- and high-mileage [conventional] cars -- are impacted by the fluctuation in gas prices."
But he said Prius incentives have come largely in the last six months of the current model's lifecycle. And the unfortunate reality: almost all Toyotas need incentives to sell at the moment.
That won't be the case for the new 2010 Prius, however.
"We have no plans to launch this car with incentives. Absolutely not," said La Rocque, adding that the outgoing 2009 Prius still has the lowest days' supply of any Toyota model.
But to hit its full-year sales projection of 180,000 Priuses, Toyota isn't likely rely only on the Prius' considerable reputation [it's by far the world's best-selling hybrid] -- or its improved 50-mpg combined fuel-economy rating -- as the threat from Honda's low-priced Insight is real.
"We know today, more than ever, this is a very price-sensitive market," La Rocque said.
Photos by Manufacturers
1. The redesigned 2010 Prius goes on sale in May with a much higher fuel-economy rating than Honda's new Insight, but a much higher price, too. (Courtesy of Toyota Motor Corp.)
2. Honda's Insight hybrid is Public Enemy No. 1 for Toyota: It's cheaper than the Prius and strikingly similar in appearance, too. (Courtesy of Honda Motor Co. Ltd.)
3. New Prius interior is higher content and impressively designed and assembled. (Courtesy of Toyota Motor Corp.)
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