The Car Industry Shake-Out And The Rise Of The Hybrid

Most major car companies offer hybrid vehicles. They get better gas mileage and throw off less pollution. They tend to be more expensive than gas-powered models because of their relatively complicated technology. That makes them harder to sell in a tough economy. The fact that gas prices have fallen from above $4 a year ago to about $2.50 now  should also undermine hybrid sales.

None of that has stopped the Toyota (TM) Prius from being the top selling car in Japan.

It is the second month that the hybrid has been at the top of the best seller list. Reuters reports that “Toyota sold 27,712 Prius cars last month, up nearly 25 percent from June.” The Japanese government give car buyers certain incentives to purchase fuel-efficient cars, the Asian country’s answer to the American “cash for clunkers” program.

Toyota’s problem right now is that it cannot build enough hybrids for its home market causing long waits for the Prius. It is another example of large car companies failing to catch a sense of the market for which vehicles will do well and which will not. Japan is still in a deep recession but consumers there have shown that demand for cars is not dead if the cars are the right cars.

The Prius is sold in America. The current model is the third generation of the product. As auto sales pick-up as they did in July, and as the US government offers incentives for consumers to buy fuel-efficient cars, Toyota may face the some problem it has in Japan. By misjudging the market, it is losing sales opportunities.

Douglas A. McIntyre