Cooling Prius needs a push

After watching the Prius hybrid fly out of dealer showrooms the last six years, Toyota has started to nudge consumers with zero-percent financing and lease deals because supply has caught up with demand.

Until recently, most Toyota dealers had waiting lists of two to three months for the fuel-efficient Prius, the most popular gas/electric hybrid model. But at the end of January, dealers had a 30-day supply, or about 10,000 vehicles, based on January sales.


Toyota quietly launched its first incentives on the Prius at the end of last month and has extended the offers until Feb. 28, though it doesn't plan national advertising to promote the program.

Offers include zero-percent interest for 24 months, 2.9 percent for 36 months, 3.9 percent for 48 months and 4.9 percent for 60 months, or a $219 lease for 36 months.


Toyota also offers interest rates from 2.9 to 4.9 percent on the Highland Hybrid SUV, which has been available with incentives before, as have hybrids from Honda and Ford.

Toyota's incentives come after the automaker sold 107,000 Priuses in the U.S. last year and increased production capacity in Japan in anticipation of selling 175,000 this year.

Toyota expects total hybrid sales in the U.S. to grow to more than 250,000 this year from about 170,000 in 2006.

Mainstream goal

"We want to make sure that the hybrid system becomes mainstream. We have to start marketing the car," James E. Press, president of Toyota Motor North America, said last week at the Chicago Auto Show.

"Eventually, hybrids are going to be on everything [at Toyota]. It's going to be a permanent part of our plans."

Hybrid sales for all automakers rose last summer with gas prices, but dropped in the fall when pump prices eased.

Although Toyota is bullish on hybrids, analysts and other car companies question how much demand there is for the vehicles, which generally cost at least $2,000 more than a comparable gasoline model. Hybrids use battery-powered electric motors part of the time, reducing fuel consumption by the gasoline engine.


Nissan hybrid

Nissan recently launched its first hybrid, an Altima sedan, using technology licensed from Toyota, and has lower expectations. Nissan offers the Altima only in California and seven Northeastern states that adopted California's emissions rules. Nissan has not announced plans to offer it nationally.

"I think we're being smart in watching the market," said Larry Dominique, Nissan's vice president of product planning.

Toyota's incentives, Dominique added, "speak volumes about what the market is for hybrids. Most Americans will look at the economic equation and ask where they will be at the end of five years."

Erich Merkle, an analyst with industry forecaster IRN Inc., said hybrid sales will continue to grow mainly because more automakers will build them "as an insurance policy in case the price of gas doubles."

Hybrids face another challenge in the 2008 model year, when the Environmental Protection Agency changes the way fuel-economy estimates are calculated for new vehicles.


EPA estimates for conventional gas vehicles will drop about 10 percent, but hybrids could see their numbers fall 25 percent. The Prius now is rated at 60 miles per gallon for city driving.

Rick Popely writes for the Chicago Tribune.