Toyota eyes Honda for Prius pricing, small hybrid

Wed Mar 25, 2009 11:01am EDT

Related Topics

* Reports: new Prius to cost $3,000 less than present version

* Toyota mum on reported plans to keep old Prius in line-up

* Honda Insight outsells Prius in Japan in Feb

By Chang-Ran Kim, Asia autos correspondent

TOKYO, March 26 (Reuters) - Toyota Motor Corp (7203.T) is eyeing rival Honda Motor Co's (7267.T) hit Insight model as it decides on pricing for the next Prius and develops a smaller hybrid car that could reach showrooms as early as 2011.

How much Toyota will charge for its third-generation Prius has become a hot topic after Japanese newspapers reported that the world's biggest carmaker was looking to make its flagship hybrid as affe starting price for the next Prius, due out in May in Japan, at 2.05 million yen ($20,940), or roughly $3,000 less than its smaller, less powerful and less fuel-efficient predecessor.

Some reports have also said Toyota would take the unusual step of keeping the current version in the line-up for 1.89 million yen -- the same price as the Insight and sharply lower than its current price of some 2.33 million yen -- even after its replacement is rolled out.

Toyota has declined to confirm or deny the reports, in keeping with its practice of revealing pricing only shortly before rollout in any given market. Executives in the United States and Europe have said they would not sell the current, second-generation Prius alongside its successor model.

But Akihiko Otsuka, chief engineer of the next Prius, conceded that Honda's Insight would likely figure in Toyota's pricing decision.

"We are naturally interested (in what Honda does)," he told reporters at a recent test-drive event for the newest Prius's final prototype at Fuji Speedway, west of Tokyo.

"To be honest, my first impression was that it was quite cheap," he said of the Insight's sticker price.

Otsuka said Toyota was aiming to attract a younger crowd in their 40s with the next Prius. Customers for the current version in Japan are mainly in their 50s and 60s, with many downgrading from high-end, profitable sedans such as the Crown.

INSIGHT FIGHTER

If the reports are accurate, the pricing strategy would mark an about-face for Toyota.

Before Honda's Insight debuted in Japan in early February, executives had said Toyota planned to raise the price on the new Prius, which gets about 10 percent better mileage.

Norio Ano, an official at Honda's uka factory in central Japan, where the Insight is built.

He added, however, that he personally had doubts that it was feasible from a business standpoint.

Toyota cut the cost of the main hybrid components by 20-35 percent and plans to share other parts with more than a million other cars next time. But much of the savings went back into the car for features such as LED lights, a bigger, 1.8-litre engine and a more efficient air-conditioning system. [ID:nN12332136]

Reversing the initial pricing strategy would be difficult, especially outside Japan due to the stronger yen.

But a more attractive price could be crucial if Toyota is to reach its target of selling 400,000 Priuses globally in 2010 in a more difficult environment for fuel-efficient cars. Gasoline prices have fallen by more than half from their peak in mid-2008.

And beating the Insight is set to be tough with orders for that car in Japan topping 21,000 units as of March 23 -- or more than double the pace for its monthly sales target. In February, the Insight was Japan's 10th best-selling car, two places above the Prius, which ranked fifth the month before.

Toyota took pains at the Geneva auto show this month to distance its "full" hybrid technology from Honda's simpler, cheaper but less fuel-efficient "mild" hybrid system. [ID:nT67105]

In a presentation for reporters in Japan the following week, Toyota said its hybrid technology was ideally suited for future "plug-in" cars, which unlike Honda's system can be charged to power a second motor to run on electricity alone. The slogan in the presentation material called Toyota's "parallel" system "the only hybrid for the earth".

The race between hybrid pioneer Toyota and runner-up Honda is set to ake its flagship hybrid as affordable as Honda's month-old Insight.

Toyota is also developing a hybrid that will be smaller than the Prius, for launch in the early 2010s along with nine other new gasoline-electric cars, it said this month.

Media reports put the starting price for the next Prius, due out in May in Japan, at 2.05 million yen ($20,940), or roughly $3,000 less than its smaller, less powerful and less fuel-efficient predecessor.

Some reports have also said Toyota would take the unusual step of keeping the current version in the line-up for 1.89 million yen -- the same price as the Insight and sharply lower than its current price of some 2.33 million yen -- even after its replacement is rolled out.

Toyota has declined to confirm or deny the reports, in keeping with its practice of revealing pricing only shortly before rollout in any given market. Executives in the United States and Europe have said they would not sell the current, second-generation Prius alongside its successor model.

But Akihiko Otsuka, chief engineer of the next Prius, conceded that Honda's Insight would likely figure in Toyota's pricing decision.

"We are naturally interested (in what Honda does)," he told reporters at a recent test-drive event for the newest Prius's final prototype at Fuji Speedway, west of Tokyo.

"To be honest, my first impression was that it was quite cheap," he said of the Insight's sticker price.

Otsuka said Toyota was aiming to attract a younger crowd in their 40s with the next Prius. Customers for the current version in Japan are mainly in their 50s and 60s, with many downgrading from high-end, profitable sedans such as the Crown.

INSIGHT FIGHTER

If the reports are accurate, the priystem "the only hybrid for the earth".

The race between hybrid pioneer Toyota and runner-up Honda is set to heat up in the coming years.

Honda is preparing to roll out a family of affordable hybrids over the next few years, including a gasoline-electric version of the popular Fit subcompact. Otsuka said Toyota has also been developing a hybrid car in that segment over the past few years, with plans to roll it out in the next two to three years. ($1=97.91 Yen) (Editing by Michael Watson)

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