Prius on Top in Japan, but at What Cost?

Posted by: Ian Rowley on January 8, 2010

Here in Japan there is no denying that the third generation Toyota Prius is a smash hit. Earlier today, official figures showed that the Prius, underpinned by hefty government incentives and market leading fuel economy, was the best-selling car in Japan in 2009, with Toyota selling almost three times the 2008 number. Even more impressive, Toyota beat the perennial top selling Suzuki WagonR, a 660cc minicar, into second place - despite the new model only going on sale in April. Honda’s Insight hybrid ranked eighth.

Still, as a Bloomberg News story by my colleagues Kiyori Ueno and Tetsuya Komatsu today shows, the mainstream success of the Prius in Japan may do little to bolster Toyota’s profitability.

One problem is that Toyota kept the price of the new Prius down to compete with the smaller, less luxurious Honda Insight hybrid that was introduced two months earlier. Another is that the fashionable Prius is gnawing into sales of more expensive and profitable Toyota models, such as the Toyota Crown and MarkX sedans. For instance, while Prius sales increased 186% to 208,876 in 2009, sales of the Crown, a more expensive luxury model, fell 46% to 40,216, according to the Japan Automobile Dealers Association.

That could have quite a big impact as Toyota battles to avoid a second consecutive annual loss for the first time in its history. Koji Endo, managing director of advanced Research Japan in Tokyo, reckons that Toyota earns about $2,100 in operating profit on the sale of one Prius compared to $10,700 on a Crown and $21,400 on a Lexus LS sedan sold in Japan. (Toyota doesn’t comment on the profitability of models.)

Reader Comments

Rich Evans

January 8, 2010 1:58 PM

Indeed! A cleaner environment, less imported fuel, continued leadership in the strongest growth segment of the market. Your this-quarter-is-all-that-matters myopia is showing. How about some holistic, or at least longer term strategic analysis, huh?

Strategery

January 9, 2010 4:52 PM

The Japanese buy their own cars... Why can't Americans?

Micheal

January 9, 2010 10:42 PM

As the price of petroleum increasing, the Hybrid Electric Vehicle, like Prius, will be popular.

jr

January 10, 2010 11:42 AM

Well, $2000 time 208,000=4.16 billion-what's wrong with that! Government Motors and Chrysler would be happy with that type of profit margin.

C. H. Ng

January 11, 2010 9:41 PM

At this time of economic downturn, if your product is still selling that's a good sign. If it can generate a good profit, that will be fantastic. If it only makes a tiny profit, it's still a PROFIT and that is a BONUS by itself..!

Edward Eng

January 12, 2010 2:16 AM

Stategery and Others,

Americans don't buy their own cars because many of them have lost faith. It is quite the sad scene every time I take a trip back home from Asia. I hope that Americans regain faith in their own country and boost the economy sooner than later. Even though China is a growing force, America is still a powerhouse. We actually need ties between both continents to grow stronger in order for the global economy to rise.

===================
Edward Eng
getchee Staff Writer
http://blog.getchee.com
http://www.getchee.com
===================

akoo

January 12, 2010 9:51 PM

Ian rowley,
Its people like you who ran big three into the ground with your most important thing is to sell the most profitable thing and forget about everything else attitude.
Yes, remember when ford, GM and Chrysler were concentrating on SUV's so much?
you'd think your kind would have learned something from your embarrassing debacle, but guess not.

ps

January 13, 2010 10:17 AM

Strategery- We do buy our own cars- Honda Accords and Toyota Camrys are 2 American Examples- More domestic (US, not Canadian or Mexican) content than a Ford F150. Also, unlike the Chevy Equinox, the engines are made in the USA, not China. Or the fabulous Fusion assembled in Mexico. Maybe AMERICAN car companies should start making more AMERICAN cars instead of hoodwinking gullible armchair patriots like yourself.

Who Can Say

January 16, 2010 6:58 AM

Drunk on yesterday's success, entitled to tomorrow's profits. America needs to acknowledge it's no longer the high school football captain.

Post a comment

 

About

Bloomberg 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.

BW Mall - Sponsored Links

Buy a link now!