Cheap Gas, More Choices, and Possibly Ford Are Hurting The Aging Prius

Toyota’s Prius has loomed above the U.S. hybrid sales landscape ever since it and Honda’s Insight ushered in the hybrid era in 2000, but of late, the Prius has been losing some of its lion’s share.

Redesigned in 2009, and launched in the U.S. in 2010, for the past few years the third-generation Prius – now called the “Liftback” – made respectable year-over-year increases over its already outsized share, but 2013 saw it decrease slightly, and it’s still declining.

Meanwhile the rest of the market is growing at about the rate at which the Liftback previously did, and Ford’s redesigned Fusion Hybrid and C-Max are among the most notable stars with triple-digit percentage gains.

The Camry Hybrid, a direct competitor for the Fusion Hybrid, and redesigned in 2011 for 2012, was also down for 2013 by 2.6 percent. The Prius v was down 14 percent and Lexus CT200h was down 14.7 percent.

Top 18 sellers out of 43 on the market. Prius was down, so were others. Redesigned Avalon Hybrid was up indicating buyers like a pretty new design.

Year-end totals tell the story. Prius was down, so were others, but it matters more when the Prius carries the weight of the next four combined. Redesigned Avalon Hybrid was up indicating buyers are still rewarding its new design.

Even though during 2013 the Prius and other Toyota and Lexus hybrids fell back from respective positions, the Japanese automaker’s cars carried just-over two-thirds of the entire U.S. hybrid market but now they’re down to 58.5 percent share.

The Prius and other Toyota and Lexus models stand to more severely swing the “take rate” – or market share of the total passenger vehicle market.

All by itself, the Prius commanded over a quarter of the total hybrid market for 2013. This it did despite a 1.6 percent decline for 2013 while the rest of the hybrid market saw 14.1 percent year over year growth.

The Prius is still number one, but by a smaller margin, and last month it was down 30.8 percent compared to February 2013.

The Prius has had its ups and downs before, but as of February, the take rate for the entire hybrid car market was down more than half a percentage point from where it had been last year to 2.57 percent.

When you are only working with 3 percent more or less, a half a percentage is a sizable amount.

The hybrid market is experiencing what could be called a gradual correction, and some might say it’s healthier to have more models contributing than one giant, and a bunch of distant followers.

Losing Its Luster?

We expect when a fourth-generation Prius Liftback is released in 2015, it will rebound, but we asked Toyota for its perspective.

Toyota documents three reasons why Prius Liftback sales have flattened out, and are now declining.

2012_Toyota_Prius_001

These have to do with 1) lower gas prices, 2) more consumer choices, and 3) the Prius is now late in its life cycle.

Despite the rapid ascension of Ford the past couple of years – which along with Lincoln has grown to holds 17.39 percent of the hybrid market – Toyota says Ford is not eroding its place.

“In regard to Ford, we do not believe they are taking our market share,” said Toyota media rep Maurice Durand. “Ford vehicles appeal to a buyer who is somewhat different than a traditional Prius buyer and therefore attracting consumers who are ready for a hybrid but do not want a Prius.

“In fact only 3 percent of C-Max Hybrid and Fusion Hybrid inflow comes from Prius customers. The largest share of C-Max and Fusion Hybrid inflow appears to come from loyal Ford buyers who are ready for their first hybrids.”

Fusion Hybrid.

Fusion Hybrid.

In response, Ford said it does not offer direct replies to competitors’ statements, but its has otherwise been on the move.

Last month its Fusion Hybrid pushed the second-place Toyota – usually a Prius “family” member or Camry Hybrid – out of the way, and now basks in second place below the Liftback which still outsells the Fusion Hybrid 3-to-1.

While the Fusion Hybrid’s sales last month were down with the market in February by 16 percent, last year it was up a massive 164 percent – though this is up because the present version was launched September 2012, and the new design is being rewarded by increased popularity.

So, when asked about its potential threat to Toyota, what does Ford say?

C-Max.

C-Max.

“Ford C-Max hybrids and Fusion hybrids continue to draw new customers to the Ford brand, with conquest rates remaining above 60 percent since launch – among the highest in the Ford showroom,” said Ford media rep Amanda Zusman. “While we don’t quantify conquest percentages, we do know that we are seeing customers trade in the Toyota Prius and Toyota Camry Hybrid for Ford’s hybrids. We also know that Toyota Prius is the #1 competitive trade-in for the C-Max hybrids and has been since launch.”

You can decide what you want about Ford. It was caught in controversy over “47 mpg” ratings that were not fully substantiated by many publications, but that its cars are competitive is not disputable.

Toyota’s Explanation

The Prius Liftback retains a loyal following, is rated at 50 mpg combined, and can do this or better with a little extra care.

Durand spoke on behalf of Toyota’s marketing team on how they see the Prius’ present status.

Reason Number One

Prius Liftback sales are down, says Durand, as gas prices have also dropped.

This phenomenon for hybrids in general has been documented before. Gas prices are essentially like a barometer of eco car sales in this very reactive society where consumers can make long-term decisions – like buying a car – based on short term events – like alarming gas prices.

2012_Toyota_Prius_022

At the same time, truck and SUV sales have been relatively robust as consumers just as quickly cool off about saving gas, and choose these and other thirstier models.

“Hybrid sales have always been highly correlated to gas prices,” said Durand.

“2012 was the highest selling point for the Prius,” he said, and in large part Toyota credits this with the launch of the aforementioned “Prius family” – namely the Prius v wagon, Prius c city car, and Prius Plug-in Hybrid Electric Vehicle.

Also, Durand said, March and April 2012 saw gas spike to a $4 average nationally, and this sent consumers running to eco choices like Apple fans lining up for the new iPhone.

Reason Number Two

“The marketplace has become more competitive,” said Durand. “There are more options for eco and mpg-conscious customers. In 2012 we were tracking 55 hybrid, plug-in, and EV models on the market. Today there are over 65.”

Toyota has very publicly stated EVs are not ready for mass-market prime time, and said it is not worth it to eek out incremental sales with these most efficient but pricier kinds of car.

Ironically, Toyota does say some of its most faithful are choosing against their top hybrid, and turning to EVs and plug-in hybrids.

“We estimate as Prius becomes more mainstream some of the leading edge-early adopters are migrating to EVs and plug-ins,” said Durand. “On the mainstream side, while we’re gaining new customers, we also see buyers compare Prius to newer high mpg internal combustion vehicles; both with Toyota with Corolla and Camry, and from competitors, for instance Jetta and Civic.

“For some customers, gasoline vehicles are more appealing even though they do not offer as good of fuel economy as Prius. So, essentially what they are saying is the improved fuel economy offered by typical internal combustion has also gotten better over the last few years.”

According to automotive analyst Alan Baum, another gas model not mentioned by Toyota is the non-hybrid Nissan Altima which has pulled ahead of the regular Camry.

“The Altima is doing well because of design, good fuel economy, and pricing,” said Baum, noting these benefits are reward enough for some buyers who can also avoid having to pay a hybrid price premium, such as Toyota charges for hybrid models over comparable non-hybrid Toyotas.​

Reason Number Three

The plain fact is the Prius is getting older, and the wow factor is wearing off. Meanwhile, there are newer choices – such as by Ford, and others.

“While we do realize that Prius is in its fifth year of a life cycle – two years after a minor change has contributed to a cooling off as well,” said Durand.

2012_Toyota_Prius_015

We asked Durand whether Toyota had sabotaged its own sales as well by last summer’s “Hybrid World Tour” in Michigan. From there news broke out the 2015 Prius would benefit from a benchmark thermally efficient gas engine, possibly a lithium-ion battery replacing the nickel-metal hydride, and get perhaps 10-percent better range.

This fourth-generatin Prius will reportedly also be more sporty in some respects.

Its progressive clean sheet design could erode resale values for present third-generation cars.

We wondered whether forward thinking, Internet-connected shoppers are becoming more savvy like those waiting for the next iPhone, or other gotta-have electronic goodies.

Toyota says it does not think so.

“We do not think customers are holding out, that they just have a lot more options now. Prius is not the only eco game in town,” said Durand. “While it makes our job more difficult, it’s also exciting to see the eco shift Prius started in the automobile industry growing into a driving force. We think the next generation Prius will excite current customers as well as attract new customers of Toyota into hybrids.”

Given Toyota has delivered more power and more mpg with each successive generation, and having personally attended the Hybrid World Tour and heard the Japanese engineer in charge of the project give hints about the next Prius, we have little reason to doubt this.

Meanwhile

At the moment, hybrids as a whole are still up. Last year just short of a half-million were sold and it appears a new high-water mark could be set this year.

The Prius Liftback, while still the mpg champ in the mid-sized segment, and a stellar car with good utility, is proving relatively less attractive for a variety of reasons.

We suspect Ford has more room to grow this year, and even if it is actually taking more of Toyota’s sales, if Toyota’s new whiz-bang Liftback comes through as planned, the shoe may be back on the other foot in 2015 unless Ford too ups the ante, which is possible.

And then you have Honda. It’s canceling its Insight, the car that started it all, and some of its new hybrid tech is beating Toyota in the home market.

Honda is sitting on superb 1-motor, 2-motor and 3-motor technology with class-leading internal combustion engines as well.

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At long last, Honda may be turning over a new leaf, and new its 50-mpg Accord Hybrid is a stunning example of what more may come.

Toyota knows this, says people will like what’s next, but the Liftback’s big fish in a small-but-growing pond status may not be as safe as it once was.

And for this you can either blame or thank the polarizing car that made the word “hybrid” synonymous with “Prius.”

The Prius has been seed stock for a new industry, and its maker intends it not only to go to seed, so we’ll wait and see what’s next – if it doesn’t turn around and surprise us this year anyway.