Money doesn't grow on trees, but it does grow from something else green -- hybrid vehicles. From expensive pet projects, Honda and Toyota have refined the state of hybrids into a money-making venture for their companies. Now, with sales posting long-term growth trends, these vehicles and the profits they bring have become an increasingly integral part of the company.
Some suspected the price war between 2010 Toyota's Prius, priced at $21,750, and the 2010 Honda Insight, priced at $20,470, would hurt the companies' bottom lines. However, recently revealed information from the Japanese newspaper Nikkei indicates that both hybrids have a profit margin of approximately $3,100.
This figure seems especially staggering given that last year GM reportedly lost $1,271 per vehicle sold, while Ford lost $451 per vehicle sold. Toyota managed a profit, but only $1,715 per vehicle sold, while Honda pulled in $1,259 on average per vehicle.
Part of the advantage of hybrids is that there's less discounting and more demand, though production numbers are lower. The vehicles also are typically priced higher. However, the new models from Honda and Toyota that toe the psychologically significant $20,000 price level are coming much closer to traditional sedan prices than ever before.
According to the Green Car Congress, a hybrid advocacy group, hybrids have finally achieved profit parity with small-engine gas-only vehicles, all while prices have dropped.
Assuming that the numbers are accurate, the new state of hybrid profitability represents a win-win situation -- a win to customers, who pay less for gas and score lower prices; a win for businesses who are turning bigger profits; and a win for the environment, with less fossil fuels burned, reducing emissions of carbon and refining-stage emissions of sulfates, nitrates, and other compounds naturally trapped in oil deposits.
It also offers hope to the electric vehicle industry, which, like the hybrid industry in its early years, features losses per vehicle and fledgling technology.
quote: Someone woke up on the wrong side of the bed.
quote: Regardless of if that number is accurate, the interesting thing to me was this...
quote: According to the Japanese newspaper Nikkei (via Green Car Congress), each hybrid that Honda and Toyota sell earns the respective company about $3,100 in profit. Of course, Toyota also sells the Lexus hybrids, which bumps up the average, and the numbers are calculated using 2008 sales of the second-generation Prius, but this is still good news for the Japanese automakers.
quote: The Nikkei report said that Toyota appears to have earned gross profits of around ¥100 billion yen (US$1 billion) on its sales of second-generation Prius hybrids last year. Toyota’s gross profit margin on the sales of the next-generation 2010 Prius are projected to be in the single digits in the first year.
quote: The gross profit earned on the Insight is still low when factoring in the large R&D costs involved in its development. However, the profit margin on its hybrid operations has risen to the level where Honda can count on it to generate the fourth-largest revenue stream behind its luxury, midsize and small car operations.
quote: quote:The gross profit earned on the Insight is still low when factoring in the large R&D costs involved in its development. However, the profit margin on its hybrid operations has risen to the level where Honda can count on it to generate the fourth-largest revenue stream behind its luxury, midsize and small car operations. So now you have the source article saying that Honda’s continued efforts at refining and improving on its hybrid design will now bring it solidly into last place as far as its automobile sales are concerned
quote: I'm not sure how 4th largest suddenly turned into last... did you forget Honda also makes Vans, Trucks, and SUVs?
quote: Unless you were figuring in R&D costs in which case it is reasonable to assume that a technology as relatively young as hybrid technology would still be expensive. I doubt the folks at Honda are expecting them to recoup R&D costs in a year.
quote: Sorry, should have said “car” sales. But is that *really* the only thing you got out of all that? Or are you now just fixating completely on trying to find minor technicalities in what I say for the sake of argument? Honestly, read all the articles completely linked in the dailytech article and tell me you still agree that you would call the Prius and Insight “Cash Cows.”
quote: I honestly don’t know what you are trying to convey here. The article stated gross margin, which is the difference between selling the thing and the cost to build the thing in the factory. It does not include R&D, tooling or other project costs.
quote: First, I didn't know we were having an argument.
quote: which was just to say that seeing the actual numbers of profit for domestic compared to foreign was interesting.
quote: All of which pertained to hybrids, which again, my post had nothing to do with.
quote: Exactly, which is why I coudn't understand what was so upsetting about the profit margins. It seemed to me like you went from attacking Dailytech to attacking Honda hybrids.
quote: I never agreed that they were cash cows, but having a profit at all with a relatively young tech is still respectable.
quote: My main point is that dailytech is rife with Mick- stories that border on the "blatantly untrue", while routinely crossing clean past "journalistically devoid of integrity."