Consumers will tend to hold off their purchases if there is a new and significantly improved model coming soon. This is particularly true for electronics and automobiles. Word of the third generation Prius has been known as far back as 2006, and while the economic downturn played a significant role in cutting sales of the older Prius, the waiting game may have had a larger impact than previously thought.
Toyota had already decided to increase production of the Prius to 600,000 units per year in late May after seeing huge sales in Japan. The company has had to begin weekend production of the Prius in order to make a dent in demand. Increases in fuel economy and horsepower had led many to delay their purchases of the Prius until the 2010 model was available. However, many potential customers also switched to Honda's Insight hybrid, which topped the Japanese sales charts in April.
In the two months since, hybrids have continued their sales dominance, with the 2010 Toyota Prius and Honda Insight both posting strong sales. The Toyota Prius seized the top spot in May, with sales of 10,915 cars.
This month, though, it set an even more impressive mark, becoming the first hybrid in Japan's history to outsell all other vehicles. The Honda Insight's previous sales record had excluded popular mini-vehicles with engines of up to 660cc. Those mini-vehicles were easily outsold by the Prius, thanks to sales of 22,292 units.
Honda continued to do well, with its Insight Hybrid coming in fourth place. Honda's Fit, a fuel efficient traditional offering came in second place, with 13,016 vehicles sold. The sales of Toyota and Honda's hybrids were helped by relatively high worldwide gas prices, which drove Japanese consumers to take fuel economy more seriously. Japanese tax breaks have also helped convince users to switch to hybrids.
Hybrid vehicles have yet to crack the top of U.S. sales charts, but some believe it’s only a matter of time before a foreign hybrid like the Toyota Prius, or a domestic like the Ford Fusion pushes towards the top.
All of this bodes well for those hoping of a restart of Toyota's $1.3 billion Prius assembly plant currently under construction in Blue Springs, Mississippi. Toyota has already spent over $300 million on the plant. The building shell itself is finished, but the tooling and production machinery will be installed at a later date. Parts suppliers have also halted building expansion and tooling operations until Toyota commits to a restart date.
The case for a restart is particularly strong since New United Motor Manufacturing Inc. (NUMMI) appears destined for a shutdown. The joint venture between Toyota and General Motors will cease to produce the Pontiac Vibe, which is based on Toyota's Matrix. It also produces the popular Toyota Corolla and Toyota's Tacoma truck, production which could shift to Blue Springs. Production of the Toyota Yaris hybrid is also a possibility.
quote: 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: 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 (I guess the Honda Hybrid guys can finally can stop taking heat from the lawn mower engine guys about profits at the annual picnic at least…) and you have Toyota figures that benefit from the horridly overpriced Lexus hybrids as well as old figures of the previous Prius that didn’t have to price match the new Insight, further they expect the new Prius to have single digit profit margins! Then you have a Dailytech article twisting it into saying that hybrids are a “cash cow.”…Color me unimpressed with the integrity of the Dailytech article. Now before this devolves into yet another 200 post bicker-fest about American automakers, I don’t think anyone here is about to disagree that US makers are sucking wind and that they are not doing well. This is not the argument I am making. I have issue with the horrid sensationalism that goes on around here each day. Just because one is doing bad, doesn’t mean that the other is “raking in the bucks.”I would be thrown out of a project approval meeting if I proposed a project that was only going to receive 15% ROI, much less 15% gross margins. Now the auto industry is in a much worse situation than the industry I am in, but the fact remains that 15% gross margin is not a cash cow in any industry.
quote: GREED GREED GREED.
quote: Toyota are obviously devoted to long term objectives. In case you haven't noticed , they ARE working!
quote: I'm not saying they aren't in a better position than the other big auto makers
quote: In my books ANY profit is a good profit.
quote: The DT article claiming 3100$ profit was actually full of balogna.