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Are Hybrids "loss leaders" for Manufacturers?

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Comments

  • larsblarsb Posts: 8,204
    OK Gary, let's assume they ARE just "trying to look green."

    Let's assume they are doing that to impress the environmental movement.

    So let's say that ALL the members of GreenPeace, etc. etc. ALL are impressed with the Prius and EVERY ONE OF THEM goes and buys one.

    OK, now Toyota has impressed "greenies" to the point that the greenies are buying cars which are LOSING TOYOTA MONEY on every sale.

    You see the fault in the logic? Why try to impress anyone by selling a car to them which will LOSE you money? Makes no sense.

    The Prius "looks green" because it IS GREEN. Not the greenest car on the planet, but it makes anyone and everyone's Top 5...........:)
  • gagricegagrice San DiegoPosts: 28,850
    No company pours 2 billion dollars into something to LOOK GREEN !!

    I'll bet they spent 10 times that in advertising last year. Car companies spend many billions of dollars on advertising. The Prius was an advertising gimmick and now they are not sure what to do with it....
  • gagricegagrice San DiegoPosts: 28,850
    Why try to impress anyone by selling a car to them which will LOSE you money? Makes no sense.

    Honda says the Insight costs them $30k to manufacture. They sell for $20k, How does that relate?
  • larsblarsb Posts: 8,204
    Quoting Gary-"The Prius was an advertising gimmick and now they are not sure what to do with it...."

    ( nothing I could say could ever improve my arguments better than everyone just reading that again. 'nuff said. )
  • Larsh, it sure gets frustrating dosn't it to try to cover all the endorsments that so many car mags keep preaching as to the accolades that TOYOTA's PRIUS has deservedly achieved. The nay-sayers just don't get it. The satisfaction of this new generation hybrid has been, in a simple word, FANTASTIC. Anyone who owns one will tell you that the Prius has been a "10" on Bo Derek like list of better cars. It's not perfect but Dang! It's close. Why anyone would assert that Toyota is gimmic driven is missing the talents of this hybrid. Gas is presently going up and Toyota is supplying more hybrids with great warrantees. I guess it'll take 20 yrs to convince the nay-sayers.
    Culliganman(REMEMBER..PRIUS STANDS FOR GOING B/4)
  • gagricegagrice San DiegoPosts: 28,850
    I guess it'll take 20 yrs to convince the nay-sayers.

    Not even close. When Toyota builds enough so that they are not a novelty and are priced competitively with other midsize cars. I will believe it is not a charade on the part of Toyota to look good. For a company that builds 6 million plus cars a year, to have a model that is popular since, what did you say 1998 in Japan, and only build 120k units world wide. Something ain't right. I don't see a shortage of Tacoma PUs, yet they are building a plant in San Antonio to build an additional 120k per year. So far they have not even announced where they are going to build a plant for the Prius and it is in short supply. They are upping the production to 15k units per month world wide. I realize most of them will be sold here where we have very few choices. I'll bet they don't sell many in the UK where gas is very expensive.
  • rfruthrfruth Posts: 630
    20 yrs, na, the'll never be convinced - heck there are people that would prefer a carburetor and a cassette player to what we have now. So the future of hybrids is bright just not for the retro crowd.
  • gagricegagrice San DiegoPosts: 28,850
    I guess you are addressing 99% of the car buying public. According to my calculations the hybrids did not make a one percent sales dent this year. Even if all the wait lists were filled it would not reach 1%. That makes most of the US retro. It is even a higher percentage in the EU where hybrids are not even considered a viable option. Funny with the high price of gas. Maybe they are smarter than us.
  • kernickkernick Posts: 4,072
    Go google "prius" +profits +toyota and read some of the stories.

    me: OK. Here was one of the first that wasn't run by a Prius or Toyota group.

    http://www.thecarconnection.com/index.asp?article=7269

    "But the giant skeleton in every HEV's closet is COST. Anyone who has any idea what these dual powertrain components really cost will know that Toyota is stretching credibility to claim that even the simpler Echo-based Gen I Prius was profitable at its $20k price. By contrast, the '04 is a unique, high-content car on a dedicated platform, and its nickel-metal hydride (NiMH) battery pack probably costs a quarter of its (still) $20k base price."

    you: What reasonable business would WASTE/LOSE/THROW AWAY money for the sake of "demonstrating technology?

    me: plenty, if it's only a small part of their business. In the auto industry there are ways to make money even when you lose on a certain model. For years GM has lost money with $6K rebates (or whatever was necessary to move them) on $15K Cavaliers. Why? Because of CAFE. It allowed them to sell lower mpg Cadillacs, Vettes and other such profitable cars. If you want other non-auto examples consider any retail store that has lose-leader ads on their front-page. The "$300 computers, (limit 10 in small print)" and such.

    you: No company can stay in business losing money....Toyota

    me: You're taking 1 comment and reaching the wrong conclusion. No one said Toyota was losing money; there's a difference to the statement of Toyota is losing money on the Prius. Toyota does a wonderful job of selling vehicles without discounts.
    You yourself just mentioned how much money Toyota has. The Prius can lose money for Toyota simply because they get the free-advertising effect, and it brings people into the showroom or their website, and many of those people when they find out they can't afford or will have to wait for a hybrid, buy an Echo, Corolla, or Camry.
    Similarly, but on the opposite end of the auto world, it does not really matter to Chevy or Dodge whether the Vette and Viper which sell in relatively small numbers ever covers the hundreds of millions of $ spent in R&D or tooling for those cars. They are built for prestige purpose of the brand.
  • kernickkernick Posts: 4,072
    For a company that builds 6 million plus cars a year, to have a model that is popular since, what did you say 1998 in Japan, and only build 120k units world wide.

    me: I totally agree. From experience I've never seen a company react so slowly, and that lends credence to the reports such as I just listed from the Car Connection.
    If you have a car that you can sell at MSRP, you would make an amazing amount of money. If a typical $22K Camry is discounted to $18K and Mfg. costs of $17K, Toyota's made $1,000. If the Prius had the same MSRP/cost $22K/$17K, but sold at MSRP, the profit is 500% higher!
    If that were true, I guarantee you the executives at Toyota would be converting Camry plants to Prius production; within 1 year! Or buying any vacated autoplants and restarting them for Prius production.

    The Prius sure looks like a loss-leader to me too.
  • gagricegagrice San DiegoPosts: 28,850
    me: plenty, if it's only a small part of their business.

    I always welcome the voice of logic and reality. So much of this hybrid hype has no basis. People believe what they want to believe. The truth is that hybrids will never become mainstream until they are economically viable. For those driving an Insight or HCH that was purchased close to invoice will probably make out. With the Prius you are stuck. If you sell it close to the end of the warranty you are going to take a real Beating. No one wants to pay Blue Book for an unknown entity. If you keep it past the warranty it is anyone's guess how long all that stuff will keep going. Don't forget the poster with the 2002 Prius paying for a $600 sensor and $2100 catalytic convertor. Toyota got to her and they will get to any one they can.
  • kernickkernick Posts: 4,072
    http://quote.bloomberg.com/apps/news?pid=10000080&sid=a1lUjbLfYL4- - s

    Carlos Ghosn said gasoline-electric hybrid vehicles are ``not a good business story yet'' because they still cost too much to produce.

    Also in the report: "Toyota has said the Prius has been profitable since late 2001. Toyota, unlike Ford, excludes research-and-development expenses when calculating hybrid-vehicle profitability, saying the cost is for a range of vehicles, not a single model."

    What's nearly a billion $ spread over a 100K cars?
  • rfruthrfruth Posts: 630
    I have no idea what the amortization schedule for the Prius looks like but they are probably making some off of each unit, enough that if someone looks at the books they will find a profit and more importantly they are investing in the future unlike the big 2.5 who crank out gas guzzling V8s and have to offer cash back or 0 % financing to keep um moving - ever see the movie "Demolition Man" a futureistic movie that had a classic Oldsmobile 442 (and Sandra Bullock) in it (gosh I like that movie) lost my train of thought but Sandra if you read this e-mail me its just you and me for ever Sandra, oh can I have 30 grand to buy a Prius ? It's state of the art, you can drive it anytime I'll even spring for the Bluetooth phones ...
  • gagricegagrice San DiegoPosts: 28,850
    can I have 30 grand to buy a Prius ? It's state of the art, you can drive it anytime I'll even spring for the Bluetooth phones

    TOYOTA SAYS: You gotta make a $100k a year or you will taint the Hollywood, Yuppie Prius image. Sorry rules are rules.... You can still watch Sandra Bullock movies all you like, they are for the rest of us to enjoy...
  • SylviaSylvia Posts: 1,636
    Let's knock off the personal attacks.

    This discussion really seems to be more about "Are manufacturers able to profit from Hybrids?" v. the "future" of Hybrids (as in - will they take over the universe, will we ever see a hybrid minivan, etc.)

    I'm happy to open a new discussion to cover this topic as everyone here seems quite passionate about discussing it.
  • kernickkernick Posts: 4,072
    I assumed that by discussing "the future" we were talking about the economics, and if and when hybrids would become a major component of the U.S. or world 's vehicle choice.

    I thought it pretty obvious that a hybrid system could be used in a car, truck, SUV, PU, or MV.

    I think the closest thing I could associate this topic to is the Segway. Great idea, pretty nifty, but it can't be made inexpensive enough, and have enough advantages that people will go buy them in any quantity. I've never seen one except on TV. I do at least see a few hybrids. But then again Secway isn't selling them for less then cost. It's just not worth the money; I believe that's defined as Value.
  • gagricegagrice San DiegoPosts: 28,850
    "Are manufacturers able to profit from Hybrids?" v. the "future"

    I think the future of hybrids is tied to the automakers being able to make money on them. I am sure it is a board room secret as to the profitability. Hybrids have been around for a hundred years and this is the first time they were mass produced. Will they continue is the question?
  • yerth10yerth10 Posts: 428
    Kernick wrote
    "its nickel-metal hydride (NiMH) battery pack probably costs a quarter of its (still) $20k base price."

    Its told again and again that
    second-generation model battery is 15% smaller, 25% lighter, and has 35% more specific power than the first.
    That is how they reduced the cost.

    http://www.toyota.com/about/environment/technology/2004/hybrid.ht- ml

    When Toyota was making 40,000 units of Prius, the critics were saying that it makes loss, now at 180,000 units, still its the same cry.

    Expect the number to go up.
  • gagricegagrice San DiegoPosts: 28,850
    When Toyota was making 40,000 units of Prius, the critics were saying that it makes loss, now at 180,000 units, still its the same cry.

    That is because the question has not been answered. Can the automakers make money on the hybrids or is it PR and advertising write-offs. At 180,000 sold that is about $12k each in R&D. The dealer that I talked to in 2000 told me that it cost Toyota over $30k to build the Prius Classic. They were selling them in the USA for $20k to get people interested. They knew they would never get their cost out of them. I would imagine the Prius II is being sold very near what it is costing them to manufacture. So the R&D is not absorbed into the cost as is normally the case. The bottom line is, can they EVER be built and sold competitively? Maybe the management shake-up at the top of Toyota is over the "loss leader" Prius?
  • larsblarsb Posts: 8,204
    Oh, now the Prius is the reason for the management shakeup......Seems like a pretty powerful effect from a "gimmick" car..... ;)

    Actually, Toyota is riding a profitability wave and a popularity wave - see my posts from yesterday. And this:

    "Toyota has said it will aim to at least match last year’s record operating profit of $16 billion in its current business year ending on March 31"

    http://msnbc.msn.com/id/7012385/
This discussion has been closed.