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The Honda Insight, the Toyota Prius and profits

Posted by: Ian Rowley on April 28, 2009

Ask a Toyota or Honda executive how much their respective companies make per hybrid car and you’re unlikely to get a straight answer. Indeed, it was progress of sorts a couple of years back when Toyota began saying that the Prius, which debuted in Japan over a decade ago, had begun contributing to the bottom line. Honda, meanwhile, prefers to point out that with the Insight it achieved its aim of reducing the cost of its Integrated Motor Assist hybrid system to below $2,000.

All of which makes some of the claims in an article in Monday’s Nihon Keizai newspaper interesting. Without citing sources, the paper reports that the gross profit on the new Honda Insight is 300,000 yen (a little over $3,000) per vehicle—or a gross profit margin of 15%. If that sounds high, in accounting terms, gross profit equals the difference between revenue and the cost of making a product and, therefore, ignores lots of other costs. Still, the 15% figure puts the Insight on a par with a Fit compact in terms of profitability per vehicle. Of course, that’s much less profit per car than it gets from selling an Accord or an Acura but, with Honda aiming for 200,000 Insight sales a year, it at least helps shore up finances in these difficult times. (Honda today announced a net profit of $1.4 billion for the fiscal year just ended, but notched up a $1.9 billion loss in the January-to-March quarter).

Also of note is that the new Prius may be less profitable than its smaller rival. The Nikkei adds that the gross profit margin on the latest Prius, which goes on sale in Japan in May from as little as $21,000, is likely to be in single digits this year.

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BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

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