By Noel Adams
Toyota’s announcement of the 2004 Prius at the New York Auto Show in April 2003 created quite a stir. The previous version of the Prius, on sale since 1997, had been somewhat of an ugly duckling. It looked too much like the Toyota Echo, which was often used when making price comparisons, even though the Prius was a much better vehicle. Still, Toyota had been steadily increasing sales of the Prius and had moved a respectable 175,000 hybrids by the time the model changed.The 2004 Prius is a different beast altogether. This model is a sleek hatchback that moved from being a compact to the mid-sized sedan category. To complement the improved looks and larger size the gasoline-electric hybrid drive has been updated to provide better fuel economy than its predecessor.
Toyota expected to top 2002 sales, which had been 20,119 units and projected 2004 sales in the US at 36,000 units. To help manage the increased volume the 2004 Prius would be built on the same assembly line in Takaoka, Japan that is used to build four other sedan models including the Camry.
Toyota began sales in the US by offering the new Prius to those early adopters, referred to as Pioneers by Toyota, who had purchased the original model over the Internet. Still, some dealers started a waiting list and orders flooded in. When Toyota finally placed the 2004 on sale in Japan in September 2003 they took 10,000 orders in the first month; twice what they had expected.
There was a tidal wave of orders in the US as well. By the time of the official launch in October, dealers were sitting on something close to 12,000 orders. The first shipment of cars were distributed to dealers as TRAC (Toyota Rental Cars) cars, to be used as demonstration cars and rental units. Pioneer orders were filled next. "We didn’t get our pioneer orders filled until mid December so we really didn’t start on our order list until after that" said Dianne Whitmire, fleet manager of Carson Toyota, one of the nations largest volume dealerships for the Prius.
It was even difficult to get a test drive in one of these cars. I went into Santa Monica Toyota, another large volume Prius dealer, one Saturday morning shortly after their TRAC car arrived. It was out on a test drive and there were three other families waiting for them to return. I went back on a weekday and the car was on a test drive at one of the movie studios and would not be back for an hour. A man sitting in one of the salesman’s cubicles let me know that he would be first to test drive the car when it got back.
After a few weeks the initial excitement died down and test drives became easier to find, but orders still continued to climb.
There was an initial flood of cars in the first month after the launch as the Pioneer orders were filled, but allocations slackened during Christmas and New Year and waiting lines grew. Although California received the majority of the vehicles being shipped to the US, wait times at most Southern California dealerships quickly reached six months.
In January, Carson Toyota announced that it was no longer taking deposits on vehicles because of the extreme wait time.
Still, some people were able to get their cars in a few days. This was a result of the archaic system of allocation that is used by Toyota. Toyota’s primary customers in the US are the seven sales regions. Cars are allocated to each region twice per month, based on the number of vehicles that they sold previously. Most sales of the Classic Prius had occurred in California, which is why they get the lion’s share.
The regions allocate vehicles to their dealers using the same principal. So a small town dealer who just happened to sell a Prius last year may get one car allocated even though they have no orders, while another dealer, who has thirty orders but didn’t sell a Prius last year won’t get any.
David Franklin, fleet manager at Hollywood Toyota, told me "Toyota of Hollywood is receiving the largest Prius allocation in the world, more than any other dealer. We are currently receiving about twenty cars each month. For Dianne Whitmire at Carson Toyota things have been a little more unpredictable. "Some months we get as few as six cars and other months we thirty", she said.
In some cases, people have walked in off the street at the small town dealership and found that they had a car in inventory. Meanwhile at other dealerships in the area, people wait and wait and still no Prius.
Even when dealerships do get allocations they are not based on their orders. I heard of a case recently where a dealer had ten vehicles on order and all of the prospective purchasers wanted a fully loaded silver Prius. Their allocation was a single vehicle, partly loaded in Tideland (a sort of grayish green color). None of the people on their list wanted this vehicle so some lucky person who just stopped by got a car. Meanwhile some, who ordered from the dealership in October, are still waiting.
You might think that the Toyota dealerships would be taking advantage of this high demand and jacking up the price. I have heard rumors about the odd dealership that will bypass their order list and sell to anyone willing to pay several thousand above MSRP, and some dealerships that install options like Lo-Jack on the vehicle and insist that the buyer pays for that also. One dealership in the San Diego area was selling at MSRP but wanted the buyer to purchase a Toyota extended warranty for $2000; about $1,000 over the lowest price for this plan. Surprising though this might seem, most Toyota dealerships have been selling at MSRP.
It is impossible to say just how many orders are outstanding for the 2004 Prius. In an attempt to get one, people are determining how far they are willing to travel, then contacting every dealership within that radius. They tell each dealer that they are ready to do a deal today, and give them a list of colors and packages acceptable to them. Usually they are able to find a car at one of these dealerships in a few weeks but don’t always tell the other dealerships they are no longer in the market for a car.
David Franklin agrees that there are a lot of people on multiple lists. "Most of our orders are authentic though", he told me, "as we require a $1,000 deposit". Diane Whitmire also has duplicate orders. "When these people find cars elsewhere they typically tell us and we drop them from our list" she said, "we still get two new orders for each one that drops off though" she added.
Since Carson Toyota stopped taking deposits they have received four allocations of vehicles but their wait list has gone from 180 to 270. Many of these will not receive a car until the 2005 model year since waiting list time for some color and package options has now reached one year.
Some people have moved on and bought another car. One Beverly Hills surgeon was in the market for a hybrid but gave up the wait for the Prius after three months. He also looked at the Honda Civic Hybrid but passed on that because a friend was unhappy with the fuel consumption he was getting. In the end he traded in an aging Honda Civic, which he had been driving since medical school, for an Acura.
Others have moved on to the Honda Civic Hybrid and sales of these vehicles have increased considerably for the 2004 model year. David Franklin agrees, "It’s mostly due to the waiting list, partly due to gas prices, and partly due to the growing understanding of the benefits of hybrids." Dianne Whitmire disagrees. "It’s mostly due to fuel costs" she said, "People are just looking for lower fuel consumption".
The US manufactures have said that they don’t consider the hybrid as a viable step towards fuel cells and continue to hawk their gas-guzzlers. Now, with sales of the Prius being way beyond Toyota’s expectations, we are going to see more and more hybrid models in dealerships. Toyota is expected to launch a hybrid SUV later this year, the Lexus 400H, and also a hybrid version of the Highlander. A hybrid version of the Camry is slated for 2006.
Honda is following on from the success of its Civic Hybrid by introducing a hybrid version of its popular Accord. This will have a V6 Power Plant which features displacement on demand, where cylinders are shut down when the vehicle does not need the full power of the V6, such as while cruising on the freeway.
Ford is expected to finally get its Escape Hybrid into dealerships later this year although it appears that this vehicle will use Toyota’s hybrid drive system. GM will also enter the hybrid market this year with mild hybrid version of the GMC Sierra and Chevy Silverado.
There is no indication yet that these new vehicles will have an impact on the long wait for the Prius. "The typical Prius buyer is not the same buyer as an SUV Lexus buyer" Says David Franklin, "Those buyers that like both will buy both". Diane Whitmire agrees, "I don’t expect to see any drop in orders for the Prius when we begin selling the highlander" she said, adding "I have over one hundred people on the my list of people interested in the Highlander HEV but I don’t expect more than a couple of those will trade in a Prius. What I will get is other SUVs like the Ford Explorer or Nissan Pathfinder".
It appears that interest in the highlander HEV is just as strong as it is for the Prius. Rick Hirose from Fremont Toyota also has a list of about seventy people interest in being one of the first to have a Highlander HEV. "I hope they start out with an Internet ordering system like they did for the Prius", says Dianne Whitmire, "It is much easier if they build and distribute cars to match orders when there is such a short supply".
Toyota is planning to increase production of the Prius to 47,000 for the US when they introduce the 2005 model later this year, an increase of 11,000 over the 2004 model year. "I expect to see these extra vehicles begin to appear in our September or October allocations" said Dianne Whitmire. " We should see supply catch up with demand by Christmas". David Franklin in more pessimistic, "Toyota is going to have to build more", he told me, "11,000 is not enough". He doesn’t expect supply to catch up with demand for another twelve to eighteen months.
Toyota is taking some action to help alleviate the problem. "Toyota has sent out a letter to everyone who has orders at multiple dealerships asking them to cancel orders at all but one dealership" said David Franklin. "This will allow them to get a true count of the number of orders that are outstanding". It is still going to take a long time for supply to catch up with demand.
There is a lot of frustration since for many people the Prius is a must have car and the wait is so long. Dianne Whitemire says, "Please don’t shoot the messenger. I get people calling every week asking where their car is. I tell them not to expect it for six months but they continue to call. I spend a lot of time looking after my Prius waiting list customers."
Personally, I think Toyota could easily sell 100,000 Prius cars per year here in the US so I don’t see wait times dropping any time soon. "It is truly the car of the Future", says David Franklin, "with $20 Billion in R&D behind it the demand is justified".
I would like to see Toyota do two things. The first is to increase the build rate on the Prius to a level that will meet demand. This is not an easy task since external suppliers may not have the capacity to meet such high volumes. The second thing that Toyota needs to do is to get control of the Prius orders and begin to supply the cars that people ordered on a first come first served basis. This is also not a trivial task but it is doable as their handling of the Pioneer orders illustrated.
blog comments powered by Disqus