Invasion of the Green Machines
High gas prices have drivers chasing after hybrids. Is it a fad or a phenom?
While other automakers were dismissing the math, Honda, Toyota, and Ford sensed an appeal beyond dollars and cents. "There's a very emotional component there," says Jon Lancaster, who owns Toyota and Lexus dealerships in Madison, Wis., and sells 20 Priuses per month. With growing concern about U.S. dependence on foreign oil, he says, "it makes you feel like you can do something about it." When Toyota's engineers first began sketching the Prius, part of their goal was to improve the fuel economy of Toyota's overall fleet. But Toyota also hoped that mass-producing one of the world's most efficient cars would buff its image as a high-tech and environmental innovator.
Celebrity fare. For that, it has been willing to pay. Most analysts believe that the company has subsidized the Prius, eating some of the cost of the hybrid system instead of passing it on to consumers. Toyota also has gotten some unexpected help. Unsolicited endorsements from celebrities like Leonardo DiCaprio and surging gas prices have transformed the Prius from an oddball experiment into an object of desire. Toyota sold 50,000 in 2004, after the redesigned second-generation Prius went on sale, and still had waiting lists. This year the company plans to sell 100,000. "They made a good play," says Larry Burns, head of research and development for General Motors. "Toyota did get ahead of the domestics."
The early lead has made Toyota the default option for many hybrid enthusiasts. When Cindy Petzold, who lives outside Madison, decided to buy a hybrid last fall, the Prius seemed like the only choice--even though she'd have to wait four months for it. "Toyota has been at it the longest," says the hospital lab technician, who calls herself a "recycling Nazi." Like many other hybrid owners, she hopes that driving a Prius signals she's doing her part.
The question now is whether the hybrid movement will gain momentum or run out of gas. So far, hybrid buyers have been wealthier and better educated than car shoppers overall. Automakers see that as an opportunity to market hybrid power trains as a premium feature, like a navigation system or leather interior, that well-wheeled consumers are likely to pay extra for. One reason Honda decided to load up the Accord hybrid and price it near the top of its lineup is that regular Accord owners were trading in their midpriced sedans for the less-expensive hybrid version of the Civic. That violated a basic rule of auto salesmanship: Get your existing customers to trade up, not down. It also told Honda that hybrids and their image of social responsibility might be a fresh way to land desirable customers. "We want to attract new, affluent buyers to the Accord," says Dan Bonawitz, Honda's marketing chief.
At some point, however, hybrids need to pay their own freight if they are to become more than a trendy way for drivers and automakers to feel better about themselves. Hybrid manufacturers hope that early adopters will help drive sales volumes high enough for the cost of the new technology to be spread across more vehicles, lowering average prices.