Toyota’s agony behind the smooth sailing of Prius sales

As you know, Toyota’s Prius is selling fast. The cars are selling so well that, even if you place an order today, you cannot get it before the end of March, 2010 and before the time when the government’s eco car tax cut runs out. However, because of this, Toyota is experiencing a sudden drop in the sales of their other brands such as the bread-and-butter car “Corolla” and “Mark Ⅱ”. They are facing a tough time now.

The numbers of new car sales of the Corolla in June was 6,468, 50% less than the corresponding period of the previous year. The Corolla is running in low gear coming 12th in the ranking of sales including mini-vehicles and 8th in the registered cars excluding mini-vehicles. In the accumulated total of sales for this year’s first half (from January to June), the Corolla was struggling and came 11th including mini-vehicles and 5th in the registered car base.

Not only within Toyota but worldwide, the Corolla has been the car that the world takes as the symbol of Japan’s domestic mass-produced vehicles. The Corolla had always had a fixed position as either number 1 or 2 in the registered car base but now, look at this. The Corolla’s sluggish sales also means that Toyota is in agony.

Although the new model Prius has the engine displacement of 1.8L, with an electric motor, they have similar power as 2.4L cars. They upgraded the interior from its old model. Its recommended retail price was originally set at 2.5 million yen but the new president Mr Toyoda decided to sell them for 2.05 million yen. With the government’s eco car tax cut, without automobile acquisition tax and weight levy, you can get one for the similar price as a 1.8 to 2 million yen Corolla.

“It is not how many we sell and how much we make. We have to make cars thinking what types of car people want and how much they are happy to pay for one”, said Mr Toyoda and promised rejuvenation of his company’s product line-up at his inauguration press interview. He said that the rejuvenation would start with “the Prius”.

This means that Toyota is applying a low margin, high volume policy as their business model. It also means that the Prius is going to eat up other Toyota cars, which might lead to their leading products such as the Corolla “forfeit its top spot”.

After the Japan Automobile Dealers Association expressed their concern that “Even if the economy recovers after 2010, with the reaction to the government’s cut-off of the subsidy, this might cause a drop in new car sales”, the voice asking the government to extend the temporary legislation of the eco car tax cut is getting industry-wide.

It looks like Toyota is coming back to life, thanks to the popularity of the Prius but they are worried how long it is going to last after the government stop the subsidy and thinking that no other cars apart from the Prius are selling well, they are scared of the war of attrition from the discount price war between the car manufacturers, following the cut.

So what are they going to do under the pressure? Toyota is facing a crucial test.

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