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Toyota Already Planning Production Increase of New Prius V Hybrid

Dealer orders outstrip Toyota projections - but will consumer demand keep pace?

by on Jun.08, 2011

Toyota CEO Akio Toyoda with the Prius V.

Strong, early demand is leading Toyota to sharply increase production of its all-new Prius V hybrid, the second model in an all-new brand-within-a-brand of gas-electric vehicles.

The maker – still struggling with production cuts due to the March 11 Japanese earthquake and tsunami – hopes to start rolling out 5,000 of the Prius V hybrid wagons by August or September, up from initial plans to build 3,000 a month.

Toyota is hoping that the Prius V will help sales of its hybrid models rebound from an unexpected slowdown in the key U.S. market once it goes on sale in the fall.

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Known in the U.S. as the Prius V, but sold elsewhere as the Prius Alpha, the new hybrid will be the second model to bear the familiar Prius badge.  Toyota plans to create an entire line-up of gas-electric models sharing the Prius name, including a small hybrid, tentatively dubbed Prius C, due to reach market about a year from now.  A plug-in version of the original Prius will also be introduced in 2012, and the maker hints other hybrid models could follow.

At the introduction of the new Prius sub-brand, at the Detroit Auto Show last January, Toyota officials said they hoped to leverage the familiar nameplate to help jumpstart the sale of future hybrids.

Initial signs suggest that is happening, the Japanese paper Nikkei reporting that orders have been coming in faster than expected for the second model in the Prius line.

The Prius V, or Alpha, uses the same basic Hybrid Synergy Drive as the original Prius 4-door, but it features a larger, roomier body that can be ordered in either 2-row/5-passenger configuration or as a 3-row/7-passenger model.

At an annualized rate of 60,000 units, sales would still lag well behind those of the current Prius sedan, the world’s best-selling hybrid vehicle.

Industry analysts also question whether the new Prius V will be able to draw in new customers for the sub-brand or simply wind up cannibalizing existing demand for the older model.

Toyota has been struggling to restore its global production base, which was devastated by the March 11 disaster.  Its home market plants were shut down for roughly a month and are still operating below half their capacity.  Overseas operations have been restoring production at a faster pace – Toyota’s North American plants are expected to reach two-thirds of their capacity in the coming weeks after a complete shutdown for a week following the Memorial Day holiday.

Toyota has shifted parts supplies between various models, hoping to maintain high-demand offerings, such as the Prius.  But the launch of the V/Alpha model is getting off to a late start due to the shortages.  The U.S. introduction will be about two months behind the original schedule, Toyota’s U.S. management has confirmed.

The parts and production shortages have had a devastating impact on the American hybrid market, overall, and the Toyota Prius, in particular, its volume down 51% in May.  (Click Here for more on the hybrid sales slump.)

But shortages alone were only part of the problem.  A report by data service Edmunds suggests Toyota’s gas-electric halo car has also been hurt by rising prices, the maker trimming incentives while American dealers have been tacking on premiums to take advantage of the short supply.  Various reports indicate motorists are currently paying about $2,500 to $3,000 more for a Prius than they did before the March 11 disaster.  That’s a significantly bigger jump than would otherwise be indicated by the official 2% price hike that went into effect on May 1.

The initial Prius V/Alpha numbers reflect strong dealer orders.  The big question will be whether that is matched by actual consumer demand once the new model finally rolls into showrooms.  If past trends are any indication there could be reason to worry.  Hybrid sales soared during the run-up to when fuel prices hit a record $4.09 a gallon in July 2008.  But even before hitting that peak small car and hybrid sales began to tumble again.  It remains to be seen if current prices mark a peak — and if so, where hybrid sales will trend going forward.

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