Prius Sales Are Falling, But Other Toyota Hybrid Models Are Witnessing Strong Sales

Anton Wahlman profile picture
Anton Wahlman
6.93K Followers

Summary

  • Toyota Prius sales have been falling for seven years globally and a decade in the U.S. In 2018, they are down another 16% in the U.S.
  • However, inside the Prius family, the plug-in hybrid version is up 47%. Why doesn't Toyota offer more plug-in hybrid versions of its other nameplates?
  • Toyota also reports U.S. hybrid sales numbers for three other non-Prius hybrid nameplates, and they are up a collective 28%.
  • The RAV4 is Toyota’s best-selling U.S. nameplate, with an annualized sales rate of 400,000. An all-new RAV4 generation arrives near the end of 2018.
  • There's so much room for Toyota to offer more (plug-in and regular) hybrids: 4Runner, Tacoma, Tundra, Sienna, Sequoia, and Corolla are just the most obvious examples.

For good reason, almost two decades ago, the Toyota (NYSE:TM) Prius became almost synonymous with "hybrid" - and largely for good reason. Toyota got the powertrain technology down right: it was smooth, reliably fuel efficient, and just plain reliable. Witness the Prius taxicabs in major cities that run over half a million miles without any significant issues.

Prius sales peaked in the U.S. in 2007 at 181,000 units and globally in 2010 at 509,000 units. It's been downhill since then. By 2017, U.S. Prius sales were down to 66,000 units and in 2016, they were around 355,000 globally: here.

However, while Toyota's Prius sales are down drastically over the last seven years in particular, that does not mean that Toyota's overall hybrid sales are down nearly as much. How come?

The reason is that Toyota now offers several other hybrids inside its portfolio, and judging by U.S. first-half 2018 sales, these numbers are skyrocketing: here.

But first, let's examine how the different versions of the Prius performed in the U.S. market in the first half of 2018.

Toyota USA

2018 1-6

2017 1-6

change

Prius "sedan"

25340

33112

-23%

Prius V

1963

5247

-63%

Prius C

4613

7049

-35%

Prius PHEV

14255

9693

47%

TOTAL

46171

55101

-16%

As you can see in the table above, there's a stark divergence inside the U.S. sales numbers for the Prius portfolio in the first half of 2018:

  • Only the PHEV model ("Prime") is up - and it's up a lot, at 47%.

  • All the other versions are down - a lot. The V is being discontinued, so that is no surprise - but the regular "sedan" (It's actually a hatchback, but Toyota calls it a "sedan") is fresh and up to date, and yet it's down 23%.

Why is the plug-in hybrid version of the Prius up so much? When accounting for the Federal tax credit, the price difference compared to the regular version is essentially zero. So, you get the plug-in capabilities basically for free. The only compromises you have to make with the Prime (PHEV) version are:

  1. The rear seat fits two people instead of three.

  2. The luggage space has a higher floor "thanks" to the larger battery intrusion.

Also, in places such as California, you get to drive in the carpool lane solo if you have the PHEV version of the Prius - whereas, for about the last decade, the regular version has been ineligible for that privilege. This difference has increasingly started to dawn on prospective buyers in this last year.

All that said, you can see the bottom line: collectively, U.S. Prius sales are down 16% so far this year. So, Toyota's overall U.S. hybrid sales must have been terrible, right?

No. Toyota reports U.S. numbers for three other hybrid nameplates:

Toyota USA

2018 1-6

2017 1-6

change

RAV4 hybrid

23213

20770

12%

Lexus NX hybrid

3903

1263

209%

Lexus RX hybrid

5799

3680

58%

TOTAL

32915

25713

28%

As you can see in the table above, sales of these non-Prius nameplates were up a collective 28% and on an absolute unit basis, just about cancelled out the Prius decline. One only wishes that Toyota USA broke out sales for other hybrid nameplates as well, such as Camry, Avalon, and Highlander, just to mention a few of the more obvious ones.

There are at least three lessons we can draw from these observations.

  • Toyota should offer more hybrids, period.

Why isn't there a hybrid version of the Sienna minivan? The all-new Corolla hatchback, which arrived in U.S. dealerships at the middle of 2018? The Corolla hatchback is similar to the Prius, you might say - in terms of size and shape. However, the Corolla looks good, and the universal consensus is that the Prius is ugly. So, draw your own conclusions from that.

Likewise, with Toyota's leadership in hybrids, why not make hybrid versions of its trucks - from SUVs such as Tacoma and Tundra to SUVs such as Sequoia and 4Runner?

  • Toyota should offer more plug-in hybrids.

Seeing as the Prius Prime (PHEV) looks just as ugly as the regular Prius but is seeing dramatic sales improvement unlike the non-plugin version, it follows that Toyota could probably benefit from offering PHEV versions of (almost) all its other nameplates as well. No need to call out all of them here - pretty much assume that almost everyone in the lineup would be a good candidate for this additional powertrain offering.

This is, in fact, what Ford (F) will be doing in 2019 and 2020. For example, take its counterparts to the Toyota RAV4 and Highlander SUVs. Those would be the Ford Escape and Explorer. Ford has said that it will make both hybrid and plug-in hybrid versions of each of those two nameplates, as they move into their generational shifts in 2019 or 2020.

You may remember how popular the Ford Escape hybrid was as a taxicab in New York City and elsewhere, especially in 2008-2011. Having left that market, Toyota took over with the RAV4 hybrid more recently, but Ford is now returning to be more competitive with Toyota yet again, starting in as little as a year or two from now.

  • The regular Prius isn't selling well because…

I mentioned it above already, but it's worth repeating: Almost nobody likes the Prius design. Why is the ancient 4Runner selling so well? It's not because it's ancient. It's because of its rugged and almost retro design. Why are the Tacoma and Tundra pickup trucks selling so well? Design is a large part of it. Toyota ought to learn something from this.

Toyota's New Production Plans For The U.S. And Mexico

Toyota is building a new plant in Alabama together with Mazda (OTCPK:MZDAY), which will be in full production by 2021: here. This plant will build the next-generation Corolla and a Mazda product that has yet to be announced - 150,000 of each, per year.

Toyota also is moving some Tacoma pickup truck production from Texas to a second Mexican plant (it already was building Tacomas in Baja, Mexico), and the story behind this move is told in great detail in this article, published July 9, 2018: here. This article is important because it shows how complicated the supply chain is, and what it takes to minimize cost while upholding Toyota's famous quality standards. Let this article be a reference guide for when people unfamiliar with the automotive industry talk about how easy it is to set up and operate a group of automotive factories.

What's next for Toyota in the U.S.?

For the first half of 2018, Toyota's best-selling vehicle in the U.S. market was the RAV4 compact crossover, whose main competitors include the Nissan (OTCPK:NSANY) Rogue and Honda (HMC) CR-V. It sold 198,392 units, up 7.4% from the first half of 2017. The RAV4 left the Camry and Corolla nameplates in the rear-view mirror some time ago.

Therefore, the RAV4 is of utmost importance to Toyota in the U.S. The current generation has been around since the beginning of 2013 and saw mid-cycle action three years later. Now, an all-new RAV4 was shown in March 2018 and should enter production by the end of 2018. There will obviously be a hybrid variant available, but Toyota has not said anything about a plug-in hybrid version. Let's hope that changes, based on the reasoning above.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

This article was written by

Anton Wahlman profile picture
6.93K Followers
I am a former sell-side analyst -- UBS 1996-2002, Needham 2002-2006 and ThinkEquity 2006-2008. These days I review automobiles and other technology products, as well as analyze the automotive and technology industries, and coming up with long/short ideas. I also continue to write (less frequently) on macroeconomics and politics.
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Disclosure: I am/we are short TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.

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