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Leading a Wave of Hybrids - Prius

Essay by   •  April 2, 2012  •  Case Study  •  1,985 Words (8 Pages)  •  2,276 Views

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Leading a wave of hybrids

Americans love their cars. In a country where SUVs sell briskly and the biggest sport is stockcar racing, you wouldn't expect a mall, hybrid, sluggish vehicle to sell well. Despite such expectations, Honda successfully introduced the Insight in 1999 as a 2000 model. Toyota closely followed Honda's lead, bringing the 2001 Prius to market one year later. Introducing a fuel sipper in a market where vehicle size and horsepower reigned led one Toyota executive to profess, "Frankly, it was one of the biggest crapshoots I've ever been involved in." Considering these issues, it is nothing short of amazing that a mere five years later, the Prius is such a run- away success that Toyota Motor Sales U.S.A. President Jim Press has dubbed it " the hottest car we're ever had."


Like other hybrids currently available or in development, the Prius (pronounced PREE-us, not PRY-us) combines a gas engine with an electric motor.Differebt ways to boots both fuel efficiency and power. The Prius runs on only the electric motor when starting up and under initial acceleration. At roughly 15 mph, the gas engine kicks in. This means that the auto gets power from only the battery at low speeds, and from both the gas engine and electric motor during heavy acceleration. Once up to speed, the gas engine sends power directly to the wheels and, through the genera-tor, to the electric motor or battery. Where braking, energy from the slowing wheels- energy that is wasted in a con- ventional car- is sent back though the electric motor to charge the battery. At a stop, the gas engine shuts off, saving fuel. When starting up and operating at low speeds, the auto does not make noise, which seems eerie to some drivers and to pedestrians who don't hear it coming!

The original Prius was a small, cramped compact with a dull design. It had a total of 114 horsepower- 70 from its four-cylinder gas engine and 44 from the electric motor. It went from 0 to 60 in a woeful 14.5 seconds. But it got 42 miles per gallon. Although the second- generation Prius, introducedas a 2004 model, benefited from a modest power increase, the car was still hardly a muscle car. But there were countless other improvements. The sleek, Asian- inspired design ws much better looking than the first- generation Prius and practical, with plenty of real legroom and gobs of storage space.

The new Prius also provided expensive touches typically found only in luxury vehicles. A singerpush button brought the car to life. A seven- inch energy monitor touch screen dis- played fuel consumption, outside temperature, and battery charge level. It also indicated when the car was running on gas, electricity, rergenerated energy, or a combination of these. Multiple screens within the monitor also provided controls for air conditioning, audio, and a satellite navigation system. But perhaps the most important improvement was an increase in fuel efficiency to a claimed 60 miles per gallon in city driving.


Apparently, consumers liked the improvements. In its inau-gural year, the Prius saw moderate sales of just over 15,000 units- not bad considering Toyota put minimal promo- tional effort into the new vehicle. But for 2005, more than 107,000 Priuses were sold in the United States alone, mak- ing it Toyota's third-best-selling passenger car following the Camry and Corolla. Perhaps more significantly, Toyota announced that as of April, 2006, the Prius had achieved a major milestone, having sold over 500,000 units worldwide.

The rapid indemand for the Prius has created a rare automotive phenomenon. During a time period when most automotive companies have offered substantial incen-tives in order to move vehicles, many Toyota dealers have had no problem getting premiums of up to $5,000 over sticker price for the Prius. By June 2004, waiting lists for the Prius stretched to six months or more. At one point, spots on dealers' waiting lists were being auctioned on eBay for $500. By 2006, the Prius had become the "hottest" car in the United States, based on industry metrics of time spent on dealer lots, sales incentives, and average sale price relative to sticker price. In fact, demand for new Priuses is currently so strong, that Kelley Blue Book puts the price of a used 2005 Prius with 20,000 miles at $25,970, more than $4,500 higher than the original sticker price.

There are many reasons for the success of the Prius. For starters, Toyota's targeting strategy has been spot-on from the beginning. It focused fist on early adopters, techies who were attracted by the car's advanced technology. Such buyers not only bought the car, but found ways to modify it by hacking into the Prius's computer system. Soon, owners were sharing their hacking secrets through chat rooms such as, boasting such modifications as using the dashboard display screen to play video games, show files from a laptop, watch TV, and look at images taken by a rear-view camera. One savvy owner found a way to plug the Prius into a wall socket and boost-fuel efficiency to as much as 100 miles per gallon.

By 2004, Toyota had skimmed off the market of techies and adopters. It knew that the second-generation Prius needed to appeal to a wider market. Toyota anticipated that environmentally conscious consumers as well as those desir-ing more fuel efficiency would be drawn to the vehicle. To launch the new Prius, Toyota spent more than $40 million spread over media in consumer-oriented magazines and TV. With the accuracy of a fortune teller, Toyota hit the nail right on the head. In the summer of 2004, gasoline prices began to rise-going to over $2 a gallon in some locations. By the sum-mer of 2005, gas prices had skyrocketed to over $3 a gallon. As a result, buyers moved toward smaller SUYs, cars, and hybrids while sales of full-sized SUYs such as the Ford Expedition, Chevy Tahoe, and Hummer H2 fell significantly.

In addition to Toyota's effective targeting tactics, various external incentives have helped to spur Prius sales. For example, some states allow single-occupant hybrids in HOV (High Occupancy



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