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Toyota’s Ability to Satisfy Prius Demand Hindered by Quake

A Toyota Motor Corp. 2011 Prius logo is seen on a vehicle displayed for sale at Fred Anderson Toyota dealership in Raleigh, North Carolina. Photographer: Jim R. Bounds/Bloomberg
A Toyota Motor Corp. 2011 Prius logo is seen on a vehicle displayed for sale at Fred Anderson Toyota dealership in Raleigh, North Carolina. Photographer: Jim R. Bounds/Bloomberg

March 31 (Bloomberg) -- Toyota Motor Corp. posted record sales of its Prius hybrid in the first two months of this year. Japan’s strongest earthquake hindered the company’s ability to keep that pace.

Rising gasoline prices, along with low-cost leases and loans, helped Prius sales jump 47 percent in the first two months of 2011. With most of Japan’s auto production halted after the March 11 temblor and tsunami, Toyota may be unable to meet demand for the world’s top-selling hybrid.

“Toyota doesn’t have enough vehicles to sell when demand for its cars, especially the Prius, is drastically recovering because of higher gas prices,” said Koji Endo, a Tokyo-based analyst at Advanced Research Japan. “They can’t take advantage.”

The natural disaster that left more than 27,000 people dead or missing forced Japan’s automakers to close factories due to shortages of parts and electricity. The Prius, rated by the U.S. government as getting 50 miles per gallon, and two new Lexus hybrids were the first models put back into production as Toyota tries to meet demand for them.

The carmaker still may need weeks to restore Prius assembly to the pre-disaster level, said Jim Hall, an industry analyst at Birmingham, Michigan-based 2953 Analytics. Prius sales in the U.S. likely will end the year below the Toyota City, Japan-based company’s initial target, Hall said.

Toyota’s American depositary receipts, each representing two ordinary shares, fell 71 cents to $80.25 at 4:15 p.m. in New York Stock Exchange composite trading. They have dropped 8.3 percent since the day before the earthquake.

Prius a ‘Priority’

In Los Angeles, sales of the model in the first two months of 2011 exceeded that of Toyota’s Camry sedan, the best-selling U.S. passenger car, said Billy Rinker, general sales manager of Toyota of Santa Monica.

Tight Prius inventory “is definitely something we’ve seen before when gas prices jump,” said Rinker, whose dealership says it’s the top U.S. seller of the car.

Steve Curtis, a spokesman for Toyota’s U.S. unit, declined to say how soon Toyota might return to pre-earthquake production levels.

“We’re going to do everything we can to minimize the impact of this situation for customers,” Curtis said. The resumption of production of the model at Toyota’s Tsutsumi plant in Aichi, central Japan, on March 28 indicates “Prius production is a priority,” he said.

Gasoline Prices

Since its U.S. introduction in 2000, demand for the Prius has tracked gasoline prices, surging in 2007 and early 2008 when fuel prices rose rapidly, and falling in 2009 as retail fuel prices plunged amid a recession. The model’s best year in the U.S. was 2007, when drivers bought 181,221.

Toyota sold 24,174 of the Prius in the U.S. through February, compared with 16,452 a year earlier, according to Autodata Corp.

Before the March 11 disaster, Bob Carter, Toyota’s group vice president for U.S. sales, expected the Prius to match or top the 2007 record, depending on supply.

“Demand is so strong right now that it is conceivable we could reach those kinds of numbers” in 2011, Carter said in a March 3 interview.

A gallon of regular unleaded gasoline cost an average of $3.59 in the U.S. on March 28, according to AAA’s Daily Fuel Gauge website. That’s up 17 percent from $3.07 on Jan. 1.

500 Parts

Toyota also made a renewed marketing push for the car in advance of the scheduled mid-year release of the Prius v wagon as the carmaker plans to introduce a hybrid line bearing the Prius name.

Interest in the Prius among online shoppers considering a new vehicle rose more than 30 percent from the start of the year,, the Santa Monica, California-based pricing and auto data service, said March 18. That was about triple the 11 percent overall increase in consideration for hybrids and small cars, Edmunds said.

About 500 parts were in short supply in Japan after the temblor, Paul Nolasco, a Tokyo-based spokesman for the carmaker, said this week.

Toyota will build the hybrid vehicles at a rate of about 50 percent of normal capacity, Kyodo News reported March 28, without saying where it got the information.

Battery Lines

Among the Toyota factories making the Prius and key components for it, a subsidiary’s battery plant in Miyagi, northern Japan, received minor damage during the earthquake, said Shiori Hashimoto, a Tokyo-based spokeswoman for the automaker. Toyota hasn’t decided when production will resume, she said.

“One of the constraints for Toyota’s hybrids is the supply of batteries,” said Jeff Liker, an engineering professor at the University of Michigan in Ann Arbor who specializes in researching Toyota.

Two other battery lines closer to Toyota’s manufacturing hub in central Japan were unharmed by the quake, Liker said.

“When you lose capacity, unless you have the ability to produce additional batteries, you simply cannot make up lost production,” Hall said. “It’s physically impossible to make up lost ground.”

It is “possible but unlikely” that Toyota will match its 2007 sales of the Prius, Hall said.

Month’s Supply

A supply shortage would likely drive up prices for the model. The hybrid is selling at the manufacturer’s suggested retail price, or MSRP, at dealerships including Atkinson Toyota in Bryan, Texas, said Paul Atkinson, president of the dealership.

Tom Ryan, managing partner of Metroplex Toyota in Dallas, said that may change if output doesn’t recover soon.

“Production will dry up, so these cars will go for MSRP or higher,” he said. “If gas prices go up, we sell these cars at MSRP. Other dealers will put an adjustment on it of $500 or a $1,000 above MSRP or higher.”

Don Mushin, general manager of Toyota of Hollywood in Los Angeles, took additional allocations of Prius cars when supply in the U.S. surged last year. Now he says the company has about a month’s supply left.

Best-Selling Hybrid

“I wish I’d taken a whole lot more,” Mushin said. “We’re the third-largest Prius dealer in the country and have 100 or so cars on the ground, with maybe another 40 in the pipeline.”

Mushin and Vicki McCoy, a spokeswoman for El Monte, California-based Longo Toyota, the largest U.S. Toyota dealer, said they aren’t marking up Prius prices. Selling vehicles for more than MSRP goes against their dealership policies, they said.

“I hope no one pushes the prices up,” said Adam Sims, co-owner of Toyota of Sunnyvale in Sunnyvale, California. “By the nature of the disaster, it would be an ugly thing to do.”

Sims, like Atkinson, Mushin and McCoy, said he is selling the Prius at the sticker price.

The model is selling for an average of $26,100 this week, based on’s “no-haggle” pricing index. That’s about $900 more than in mid-February, according to the Santa Monica, California-based company. By comparison, midsize sedans such as Toyota’s Camry or Honda Motor Co.’s Accord averaged $23,909.

Even if Prius sales don’t reach a record in 2011, the car remains the world’s best-selling alternative powertrain vehicle almost 14 years after it was introduced in Japan, outselling General Motors Co.’s plug-in Chevrolet Volt and Nissan Motor Co.’s all-electric Leaf.

“Prius is still the iPhone of the hybrid world, the model by which competitors are measured,” said Chris Chaney, senior analyst with San Diego-based market researcher Strategic Vision Inc. The Toyota model is still in a “sweet spot,” he said.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at

To contact the editor responsible for this story: Kae Inoue at

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