The Toyota (TM) Prius: Supercar Hits A Road Block

Last year, Toyota (TM) announced with pride that it had sold one million units of its Prius worldwide. The car is a hybrid and one of the most successful vehicle launches in the Japanese company’s  history.

Consumers like the blend of a “green” engine that helped the environment and offsets high fuel prices.

But, as the car business enters 2009, the Prius has gone onto life support.

According to Bloomberg, “Toyota Motor Corp. (TM) is poised to introduce its 2010 Prius, the world’s top-selling hybrid, into a shrinking U.S. auto market that now includes a cheaper, revamped competitor from Honda Motor Co. (HMC).”

Is is any wonder? The drop in fuel prices and fall-off in car sales may be hurting Prius sales, but the pricing of the car is an even bigger problem. The typical hybrid costs about $5,000 more than a gasoline-powered version of the same model. The price is due to the additional technology and parts needed to add hybrid capacity. In a recession, even if the Prius gets better gas mileage and helps the environment, very few consumers are willing to pay a large premium for the privilege of owning one.

The market did not turn against the Prius so much as the Prius priced itself out of the market.

Douglas A. McIntyre