Toyota Prius: Premium, Popular, Pricey

The world's most fuel-efficient car is in wild demand. It's good for the environment, but does the Prius make sense for your pocketbook?

by Thane Peterson

Editor's Rating:

The Good: No. 1 in fuel efficiency, distinctive looks

The Bad: Premium price vs. conventional compacts, no federal tax credit, tight supplies

The Bottom Line: Its economics are problematic, but just try to get your hands on one!

Reader Reviews

• View Slide Show

Up Front

With Americans suddenly reacting strongly to soaring gasoline prices, four Japanese cars outsold Ford's (F) fuel-thirsty F-Series pickup truck for the first time ever in May: the Toyota Camry and new 2009 Corolla, and Honda's (HMC) Civic and recently redesigned Accord. Yet, oddly, the most fuel-efficient model on the market, the hybrid-powered Toyota Prius, saw its sales plunge 39.8% in May, to just 15,011 units. Prius sales are up a mere 2.2%, to 79,675, so far this year.

What's going on? There certainly is no lack of demand for the Prius. A Toyota Motor (TM) spokesman says dealers have waiting lists of potential buyers and that Priuses typically sell within hours of hitting the sales lot. The problem is that Toyota simply can't produce enough of them to keep up with surging demand. The Japanese parent company has allocated about 15,000 Priuses per month to the U.S. market, which adds up to about the same as last year's sales of 181,221 units (up 69% from 2006). The main bottleneck is that Panasonic (MC), the company that produces the hybrid's batteries, is scrambling to increase production.

Meanwhile, the Prius' price is rising. Although Toyota discourages dealers from charging a premium for hard-to-get models, you may have to pay more than list price to get one. On top of that, on May 2, Toyota raised the Prius' U.S. base price by $400, or 1.8%, to $22,160. Even so, my hunch is the company could easily sell 250,000 Priuses in the U.S. this year, if it could only make more of them.

At a press event, I recently test-drove the '08 Prius Touring model back-to-back with its main competitor, the Honda Civic Hybrid. The Prius still has a lot to offer, even though it has been on the market since the 2001 model year and is overdue for a major redesign (which is coming soon). The current second-generation Prius, which first came out as a 2004 model, feels roomier inside than the Civic Hybrid. And while the other hybrids look almost identical to their conventionally powered siblings, the Prius' quirky hunch-backed roofline and goofy two-tier rear window make it instantly recognizable. Buying a Prius is still one of the best ways to make a political statement that Americans must reduce their fuel consumption and carbon footprint.

Plus, the Prius is the most fuel-efficient of all the hybrids. The '08 is rated to get 48 mpg in the city and 45 on the highway, or an average of 46 mpg, versus 40 city/45 highway and an average of 42 for the No. 2 Honda Civic. Nissan's (NSANY) Altima Hybrid is rated at 35/33, General Motors' (GM) Chevrolet Malibu and Saturn Aura (which are so-called "light" hybrids) at 24/32.

The Prius remains wildly popular despite its problematic economics. From the entry price of $22,160, its list rises to $23,535 for the mid-range Base model, and $24,430 for the top-of-the-line Touring model. That makes the Prius highly competitive with the '08 Honda Civic Hybrid, which starts at $23,235, and cheaper than the larger Malibu and Aura hybrids, which both start at $24,290, and the Altima Hybrid, which starts at $26,140.