Toyota’s Hybrid Prius in Hot Demand

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Toyota Motor Corp. is raising American prices for the Prius, its hybrid car powered by gasoline and electricity, by 2.9% as orders outstrip supply. The boost is triple an increase announced for four other Toyota vehicles.


The 2005 Prius to be sold starting September 14 will have a base price of $20,875, up $580 from the current model, the company said in a statement. Customers on dealer waiting lists as of March 10 will be reimbursed for some of the rise, Ernest Bastien, vice president of vehicle operations for Toyota’s American unit, said in an interview. The Prius price increased $300 on April 1.


“This is ‘market-driven’ pricing,” said Dennis Virag, president of Automotive Consulting Group Inc., an Ann Arbor, Mich., company that advises automakers. “There’s a lot of research on (Prius) that needs to be paid for.”


Prius sales have more than doubled through July as car buyers seek more fuel-efficient vehicles amid record high gasoline prices. The vehicle remains on dealer lots for less time than any models sold by a major automaker, according to J.D. Power & Associates. Toyota this month said it would boost production 50% to cut waiting times that have reached six months.


“They know their customer base well enough to know how much of an increase people will accept,” said James Moffett, who helps manage $927 million of funds for UMB Bank NA in Kansas City, Mo., including Toyota shares.


Reimbursing the price increase for some customers is intended to limit frustration for those who’ve waited for their vehicles, Bastien said.


“By the end of August we estimate there will be about 11,000 people who would qualify for the reimbursement,” Mr. Bastien said. An additional 12,000 customers added to dealer lists after the March 10 cutoff period won’t get the rebate, he said.


The Prius has electric and gasoline motors. At low speeds, the electricity powers the vehicle and the gasoline engine takes over as the car gains speed. The car can travel up to 50 miles on a gallon of gasoline, more than double the mileage on a car with a comparable size engine, and emits 90% less tailpipe exhaust, according to the U.S. Environmental Protection Agency.


Toyota has said it makes money on Prius, which is fitted with components such as a battery pack and electronics that add at least $3,000 in costs. The 2005 model makes the rear-window wiper standard equipment. The company expects to sell about 50,000 of the cars in America this year.


Hybrids are still “a relatively small part of Toyota’s sales at this point, so their higher costs probably haven’t had much impact” on the company’s overall profitability, UMB’s Mr. Moffett said. The Prius was 2.6% of Toyota’s sales for seven months this year.


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