By Blaine Harden
Washington Post Foreign Service
Tuesday, June 9, 2009
TOYOTA CITY, Japan -- Memo to the beleaguered U.S. car industry: As the recession eases, torment from Toyota may increase.
Designers of the Prius, the curiously shaped hybrid that since 1997 has allowed up-to-the-minute Americans to advertise their eco-correctness, are going after the Average Joe.
The third-generation Prius is not just for "some special people," said Wahei Hirai, Toyota's managing officer for design. "This is a mainstream car."
The new model is more powerful than its predecessors, with more headroom, a bigger trunk, better gas mileage and a lower price. It is only now being rolled out in the United States, but judging from exceptionally brisk Japanese sales and effusive early reviews, the car looks like a hit. In May, the Prius was Japan's best-selling car.
To keep up with surging domestic demand, overtime has been brought back at the two plants that assemble the car. Workers have been transferred in from factories around the country. Production has grown to 50,000 cars a month, but customers in Japan must wait three to four months to drive home a new Prius.
The car's sudden popularity comes in a country where the recession has been roughly twice as severe as in the United States and where car sales have been slumping for years. Sales here have been helped by new tax incentives.
Yet, the real test for the new Prius is the United States, where sales of earlier models have historically dwarfed sales in Japan or Europe. As Toyota executives, engineers and designers explained to reporters during a two-day tour here, the world's largest car company has spent 4 1/2 years tweaking the Prius so it can become much more than merely an "eco-icon."
"We are not forsaking the people who want to make an environmental statement," said Paul Nolasco, a Toyota spokesman who helped lead the tour in and around Toyota City. "But the objective of the Prius is to get the family to the mall, not to see how far you can go on so many drops of gas."
The car is hardly a gas hog. It is rated at 50 miles a gallon, 10 miles better than its principal hybrid competition, the Honda Insight. The Insight was the best-selling car in Japan in April, costs less than the Prius and also seems likely to bedevil Detroit's comeback hopes.
A legion of Toyota brass explained during hours of PowerPoint presentations that the new Prius has been designed to elbow its way into the upper ranks of the U.S. passenger car market, where the No. 1 and No. 2 bestselling cars last year were the Toyota Camry and Honda Accord.
Toyota sold about 437,000 Camrys last year, while sales of the second-generation Prius lagged well behind, at about 159,000. Its buyers were mostly Americans in their 50s and 60s.
But even the new larger Prius faces tough challenges in the United States this year. Gasoline prices are running about $1.50 a gallon lower than last year, making hard-pressed consumers less likely to pay extra for a hybrid. And sales across the industry have been plunging. Prius sales in the United States fell to 10,091 in May, down 30.1 percent from May 2008. For the year to date, sales of the Prius in the United States have skidded to 42,753, down more than 45 percent from the first five months of 2008.
Moreover, Honda has crafted an ad campaign designed to appeal to younger car buyers, an audience Prius has had trouble reaching. The campaign -- whose slogan is "The hybrid for everyone is here" -- features popular music and images young people driving to an outdoor music concert or to the beach.
Prius engineers and designers said that cracking open the family-sedan market in these environmentally stressful times is not yet a job that an all-electric car can handle.
Battery technology has not developed to the point where it can provide most commuters with the range, acceleration and comfort they demand, said Masatami Takimoto, an executive vice president in research and development.
"Fundamental issues are unsolved," he said, noting that Toyoto sees gasoline-electric hybrids like the Prius -- not all-electric, plug-in cars -- as the "core" of its future, at least until there are significant breakthroughs in battery development.
The company, though, is hedging its bet by investing heavily in a joint battery project with Panasonic, and it plans to sell a small all-electric car by 2012.
While Toyota sees the hybrid as its main meal ticket for the medium-term, General Motors is hoping to move beyond hybrid technology with the Volt, which it calls an "extended-range electric vehicle."
Its batteries can take the car 40 miles between charges and a small back-up gasoline engine can take it more than 300 miles. But the estimated cost of the Volt, which GM expects to bring to the market late next year, is about $40,000. The third-generation Prius is selling for between $22,000 and $28,000, depending on options.
In its all-electric mode, the Prius can go 1.2 miles.
Toyoto, in effect, says so what?
Its designers say they have made a gas-sipping, low-emission car that's fun to drive, accommodates large people in the back seat and has room in the trunk for three golf bags.
If the Prius proves as popular in the United States as it seems to be in Japan, Toyota does have a problem, company officials acknowledged. Collapsing U.S. car sales in the past year forced Toyota to put off plans to open a factory in Mississippi that could assemble the Prius.
"Yeah, supply is going to be an issue," said Nolasco, the company spokesman.
Staff writer Steven Mufson contributed to this report from Washington.