19th Jan - Toyota Expands Prius Line

For much of the past decade, Toyota Motor Corp.  has been seen as the auto industry's technology leader, thanks to the Prius, its high-mileage hybrid compact.

Now, rivals seem to be jumping ahead by launching electric cars powered by batteries. But the Japanese auto maker is doubling its bet on its decade-old hybrid technology, which combines a traditional gasoline engine with an electric motor to boost fuel economy.

At the Detroit auto show that opened Monday, Toyota unveiled the first of a family of new models that will carry the Prius name, part of a move to establish the Prius as a brand in its own right. It's the first time the Prius badge will be used on more than one car.

Toyota's new variant, called the Prius v, will offer 50% more cargo space than the current Prius. It has a slightly higher roof line, with a shape similar to the company's Matrix wagon.

Two other hybrid vehicles that likewise will carry the Prius name are waiting in the wings: a smaller car, about the size of Toyota's Yaris subcompact, is expected next year, according to dealers who were briefed by the company in October. A plug-in Prius, whose battery can be recharged from a power outlet but which also will have a gasoline engine, is coming in 2012, the dealers said, giving Toyota a four-vehicle Prius suite.

Toyota is betting the strategy will spur sales in the U.S., where it sells more cars than anywhere else in the world. James Lentz, president of Toyota Motor Sales, said he believes the Prius nameplate will be the best-selling in the company's U.S. portfolio, surpassing the Camry, by 2020.

"Frankly, it will happen before 2020 - as we see fuel prices rise," Mr. Lentz said in an interview Monday at the auto show. "That's why our belief was that a Prius family of vehicles was the right thing to do."

Mr. Lentz said gasoline prices in the U.S. could reach $4 by this summer, driving interest in hybrids like the Prius, and that over the next decade they will push only higher.

Some analysts aren't as sold on Toyota's Prius expansion. "It's a good idea, but it would have been a great idea five years ago" when the brand had more cachet, said Alexander Edwards, an automotive consultant with research firm Strategic Vision, who gathers consumer data from a 300,000-person survey.

Even Toyota's own top executives in Japan hesitated to green-light the idea at first. Mr. Lentz said he has been pushing to expand the Prius lineup for the past four years before approval was given.

Nearly a decade ago the Prius was used to ferry Hollywood celebrities to the Oscars ceremony. In contrast, General Motors Co. and Nissan Motor Co. now are generating buzz with their electric vehicles, the Chevrolet Volt and Nissan Leaf.

The launch of the Prius family comes at a sensitive time for Toyota. A year ago, it had to briefly halt sales and production of some of its top-selling models in the U.S. because of defects that could cause the cars to accelerate suddenly. Eventually, it recalled more than eight million vehicles and was fined by U.S. safety regulators.

Toyota is still feeling the fallout. In 2010, its U.S. sales declined slightly while industrywide sales rose 11%. Toyota's market share fell to 15.2% from 17%, one of only three times that has happened in the last 30 years.

Creating sub-brands can be tricky, too. Toyota's own Scion line of small cars resonated with young buyers after it was introduced in the early 2000s, but has struggled for the last few years.

And it's unclear how many buyers Toyota can reel in with additional Prius vehicles. The original Prius is by far the largest selling hybrid, while others on the market have barely made a dent. Sales of Toyota's own Camry hybrid totaled only 14,587 cars in the U.S. last year - it sold 10 times as many Priuses.

All hybrids, both those made by Toyota and those from other manufacturers, made up just 2.5% of the U.S. market in 2010.

Still, the company's U.S. dealers are excited. "Presuming that fuel prices continue to rise, and I think everybody thinks they will, it will be a tremendous asset to Toyota" to have the Prius family, said Larry Kull, the president of Vineland Toyota in New Jersey. "At $4 a gallon, we'll be selling every single one that we build."