Toyota Says It’s Now Turning a Profit on the Hybrid Prius

Toyota Motor Corp. said it is starting to make a profit from its Prius gasoline-electric hybrid car, four years after introducing the low-pollution vehicle.

Higher production volume of the Prius, introduced in Japan in 1997 and in the U.S. last year, and technological gains are helping the costs of its advanced battery and electrical components, said Hiroyuki Watanabe, Toyota’s senior managing director for hybrid and fuel-cell systems. Toyota has sold about 75,000 Prius cars worldwide.

“I would say we have reached the profitable point,” Watanabe said at an electric vehicle conference here last week. “We are just above the break-even point, but we are not complacent about it. We have to try harder to increase our profitability.”

The Prius, the first hybrid from a major auto maker, and Honda Motor Co.’s Insight were built to meet stricter air-quality rules in Japan, the U.S. and Europe with improved fuel efficiency and low emissions. Toyota has struggled to overcome a per-car expense of as much as $8,000 for a power system combining a gasoline engine, an electric motor and regenerative brakes.

Though the cars are no longer sold at a loss, profit from sales remains insufficient for Toyota to recoup its initial investment and development costs, General Manager Shigenobu Uchikawa said.

Toyota said it will increase U.S.-bound shipments of the Prius, which sells for $20,450, by more than 40% to 17,000 units next year. Annual production of the model at the Motomachi plant in Toyota City, Japan, should reach 36,000 units in 2002, Uchikawa said.

Sales need to reach 50,000 to 100,000 units annually for the Prius to become truly profitable, said technology analyst Menahem Anderman, president of Advanced Automotive Batteries in Oregon House, Calif.

In addition to costs associated with research and development and capital investment, he said, Toyota may be incurring expenses from an eight-year, 100,000-mile warranty on the Prius’ advanced battery and 33-kilowatt electrical system because the model has been available for too brief a time for the company to know how long the components will last.

Toyota President Fujio Cho has said the company will produce annually 300,000 vehicles powered by hybrid systems or other alternative technologies, including fuel cells and engines that run on compressed natural gas, by 2005.

Honda’s second hybrid, a version of its Civic, went on sale in Japan last week and will be available in the U.S. early next year. Honda says it will cost about $20,000--or $3,000 more than a conventional gasoline-engine model.