By Sean McLain
TOKYO -- Toyota Motor Corp.'s latest Prius hybrid has a problem:
gasoline prices.
When the Prius first went on the U.S. market in the late 1990s,
it was a hit among celebrities like actor Leonardo DiCaprio who
flaunted their environmental bona fides with the hybrid
gas-electric car.
The latest version, which hit roads in December last year, is
more fuel-efficient than ever, getting 54 miles to the gallon. In
Toyota's home market of Japan, it tops the sales charts. But sales
are down in the U.S., as cheap gasoline dent the car maker's
strategy of presenting itself as the leader of an
environmentally-friendly future -- with the Prius as the
vanguard.
U.S. sales of the Prius are down 26% this year through
August.
At Longo Toyota in El Monte, Calif., the largest Toyota
dealership in the U.S. by volume, Prius sales have fallen by 11%
compared with last year. "But that's not because of the car," said
Brendan Harrington, Longo Toyota's president. "The entire market
has dramatically shifted to light trucks and SUVs with gas under $3
a gallon."
Americans are now more likely to trade in a hybrid or an
electric vehicle for an SUV than they are another hybrid or
electric vehicle, according a survey conducted by automotive
research firm Edmunds.com in April.
"There is a direct correlation in the price of gasoline and the
interest of consumers in hybrids," said Brian Maas, head of the
California New Car Dealers Association, which represents over 1,000
dealers in the biggest U.S. market for the Prius. "When gas was $4
[a gallon], the Prius was No. 1. Gas is $2.50," Mr. Maas said.
It is especially frustrating for Toyota because its strategy is
generally a success in Japan. Through August, the new Prius and a
smaller related model -- called Aqua in Japan and the Prius c in
the U.S. -- sold 304,000 units in Japan, tops in the nation and
three times the U.S. sales even though the U.S. car market is far
bigger.
One reason is higher gasoline taxes, which make the price of a
gallon of gas in Japan around $4.50.
"The sense of value is different in the U.S. and Japan toward
eco-friendly cars," said Hisashi Nakai, head of Toyota's technology
communications group. In the U.S., people want larger cars because
they drive more, he said, while in Japan, "hybrids sell well
regardless of the gas prices."
Despite fuel efficiency improvements and reduced hybrid system
costs, global Toyota hybrid sales are slowing after having peaked
at around 1.3 million units in 2013.
Toyota's U.S. August sales were down 5% in a month where rivals
General Motors Co. and Ford Motor Co. saw their sales fall more
sharply.
Toyota isn't the only manufacturer facing difficulties selling
hybrids in the U.S. Sales of Nissan Motor Co.'s Leaf electric car
are off 36% this year through August. Sales for the vehicles
overall are down 14.4% for the year, according to Hybridcars.com
and market-research firm Baum and Associates.
The weak market for hybrids and electric cars, except from Tesla
Motors Inc., also doesn't bode well for GM's fourth quarter launch
of its Chevrolet Bolt electric car.
Still, even accounting for the overall decline in the market,
Prius sales are sputtering in the U.S. Sales of the flagship Prius
sedan are down 9.6% for the year, compared with a 50% decline for
the seven-seater Prius v and a 45% decline in sales for the Prius
c.
Toyota is trying to compensate for the shift in consumer tastes
by selling more pickup trucks, but the factories that produce those
vehicles are running out of space. The company builds Tacoma and
Tundra trucks at factories in San Antonio, Texas, and Baja
California in Mexico.
"The San Antonio factory is the most capacity-constrained Toyota
factory in the world," said Christopher Richter, a Tokyo-based auto
analyst at brokerage firm CLSA.
Toyota's Mr. Nakai said the company believes that eventually
Americans will want to buy the same cars as its Japanese customers,
pointing to U.S. government efforts to tighten fuel emissions
standards.
But even in Japan, fuel efficiency alone isn't enough to move
cars off the lot anymore.
Despite the Prius' position in Japan, "our honest feeling is
that it could have sold better," said Yasutomo Kato, head of new
car sales promotion at Toyota dealer Tokyo Toyopet. It wasn't until
Toyopet focused its Prius sales pitch on new safety technologies
like automatic braking and collision warning sensors that buying
started to pick up, Mr. Kato said.
Toyota's Prius is partly a victim of its own success. These days
there are plenty of hybrids and other environmentally friendly cars
from rivals, including all-electric models from Tesla. Toyota sells
a hybrid Camry and RAV 4 SUV, and for those who want to show off
the latest technology it has the hydrogen fuel cell-powered Mirai
sedan.
Despite last year's redesign which gave the Prius a sportier
profile -- Toyota calls the car "daring" and "edgy" in its brochure
-- some say it is starting to look a little dated.
"The Prius is a great concept, but Toyota has really put more
energy in to the mechanics of the hybrid vehicle rather than the
styling," said Chris Redl, who runs the Japan-focused hedge fund
Siena Carnico Capital LLC.
"The people with money buy a Tesla," he said.
Write to Sean McLain at sean.mclain@wsj.com
(END) Dow Jones Newswires
September 07, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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