Toyota May Lower Prius Price as Brand Image Changes, Nomura Research Says

Toyota Motor Corp. may lower the price of its Prius gasoline-electric hybrid car in Japan as the brand image of the nation’s best-selling model changes, Nomura Research Institute Ltd. said.

Because of its high sales volume, car buyers are now more likely to think of the Prius as a “friendly” brand than a “leading edge” one, according to a survey conducted by Fumikazu Kitagawa of Nomura’s global automotive practice. As a result, it’s competing with customers who may be drawn to cheaper cars with a strong “friendly” image, such as Honda Motor Co.’s Fit compact, he said.

“As the Prius becomes more of a mass-market car, it may be time to think about lowering the price,” said Kitagawa, who polled 1,972 car owners in November.

Helped by government incentives that encouraged purchases of fuel-efficient models, Prius sales in Japan surged 50 percent to 315,669 vehicles in 2010, outselling Suzuki Motor Corp.’s second-ranked Wagon R minicar by more than 100,000 units. Earlier this month, Toyota unveiled a wagon-type and a smaller derivative of the world’s best-selling hybrid car at the Detroit auto show. It will introduce a plug-in Prius by 2012.

The third generation of the hybrid car was introduced in May 2009 and was Japan’s top-selling model for the past two years. The car is priced from 2.05 million yen ($24,800).

Expanded Lineup

Toyota fell 1.5 percent to 3,390 yen at the 3 p.m. close in Tokyo trading. The stock has gained 5.3 percent in 2011.

With the expanded lineup of models bearing the Prius name, Toyota has said it aims to broaden the appeal of its hybrids to buyers of all ages. Men in their 50s currently make up the core group of Prius buyers in Japan, said Shiori Hashimoto, a company spokeswoman in Tokyo. In the U.S., about 45 percent of buyers are men and women over 60, she said.

“Losing the ‘leading edge’ image is not surprising given the number of Priuses sold last year,” she said. “We are always working toward reducing the cost of the hybrid system to lower the price and stay competitive.”

Honda’s Fit has a starting price of 1.23 million yen in Japan and is the best-selling gasoline model excluding minicars. The Tokyo-based carmaker added a 1.59 million yen hybrid version of the hatchback in October.

Toyota cut the production cost of the third-generation Prius by 30 percent from the earlier version. When the company started taking orders for the updated model, it slashed the price of the entry-level version by 12 percent to compete with Honda’s redesigned Insight hybrid.

For the fourth-generation Prius, Toyota aims to cut the cost of the car’s hybrid system by half, Executive Vice President Atsushi Niimi said Dec. 24.

To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

To contact the editor responsible for this story: Kae Inoue in Tokyo at kinoue@bloomberg.net

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