Toyota’s chief engineer, Akihiko Otsuka, chose a curvy test-drive course near Mount Fuji to demonstrate the smooth handling of the prototype of the remodeled Prius hybrid, set to reach showrooms in May.
He proudly told reporters about its outstanding mileage—80 kilometres per gallon—roof solar panel, collision safety features and how fun it was to drive.
But throughout the recent event at Fuji Speedway, Otsuka was just as intent on stressing how the Prius performed better than the new, hot-selling rival hybrid from Honda, the Insight. But he was surprised at the upstart’s price—US$2,000 to $4,000 less than the current Prius model.
Welcome to the new price war in hybrid vehicles.
Toyota’s Prius, the long-reigning hybrid king, faces its toughest competition yet in the Insight, whose sales have already topped 21,000 in just a month-and-a-half in Japan—more than triple Honda Motor Co.’s target.
The Insight starts at US$19,000 in Japan, and $19,800 in the U.S., where it arrives in showrooms this month.
The current model of the Prius now sells for $22,000 in the U.S. and $23,000 in Japan. The remodeled third-generation Prius is a bigger car with a more powerful engine than the current incarnation and would have otherwise been expected to bear a higher price tag.
Otsuka said Toyota was considering pricing the new model lower than the current model, while declining to disclose the price. However, the stronger yen has made price-slashing difficult in the U.S.
For the longer term, Toyota is also developing a smaller hybrid that will compete more directly with the Insight, he said.
The battle among hybrids comes amid a steep drop in auto demand that has hit Japan’s top brands hard.
The price war will also cut into profit margins from hybrids, already slimmer than those from regular vehicles, said Yasuaki Iwamoto, analyst with Okasan Securities Co. in Tokyo.
Toyota has also cut costs required to make its hybrid system by about 20% to 35%, Otsuka said, declining to give specific numbers. To keep the starting price tag low, frills and perks for the new Prius will likely be offered as options, according to Toyota.
An ingenious feature of the Prius is the solar panel on the roof, which powers an air-ventilation fan that works automatically while the car is parked so its owner doesn’t have to get into an uncomfortably hot car.
Otsuka wasn’t shy about his determination not to get beaten by the Insight.
It’s no accident the marketing slogan for the new Prius is, “the only hybrid for the earth,” he said. He really believes Prius will continue to be the best in mileage, drivability and brand power.
The Insight gets 64 kilometres per gallon in city driving and 69 kilometres on highways, not as good as the 77 kilometres in city driving and 72 kilometres on highways for the Prius already on sale. The revamped Prius gets 80 kpg, according to Toyota.
