A Toyota employee displays the prototype model of the hybrid-engine SUV "Prius EcoCruiser" in Tokyo, on February 15, 2002. Photo: AFP / Yoshikazu Tsuno
A Toyota employee displays the prototype model of the hybrid-engine SUV "Prius EcoCruiser" in Tokyo, on February 15, 2002. Photo: AFP / Yoshikazu Tsuno

The Toyota Prius, the world’s most successful hybrid car, just turned 20. Since its launch, Toyota has sold more than 11 million hybrids,  accounting for roughly 60% of all electrified car sales.

The Japanese car maker was the first company to mass produce hybrids and remains the only company, so far, to make money on sales of hybrids and plug-in hybrids. Toyota turned a profit with the Prius some five years after its launch.

“Nobody thought the Prius would succeed in the marketplace so soon,” said Koji Endo, director of equity research at Credit Suisse, First Boston Securities (Japan).

The Prius’ genesis came when Toyota began planning for a new “Car for the 21st Century,” in 1993. It unveiled the Prius as a concept at the 1995 Tokyo Motor Show.

While most concept cars at international automobile fairs fall by the wayside, the newly named Prius (Latin for “the future”) began appearing in show rooms a couple of years later.

Toyota couldn’t have picked a better time to introduce an environmentally-friendly automobile. The advent of the Prius coincided with the landmark 1997 Kyoto conference on climate change: 170 participating countries signed the now-famous ‘Kyoto Protocol’ on December 11, just one day after the Prius had launched.

Gasoline prices had also peaked. These two circumstances – low carbon emissions (compared with ordinary gas-powered cars) and high mileage – gave the Prius two big advantages.

Akio Toyoda, president of Toyota Motor Corporation, speaks at the North American International Auto Show in Detroit, Michigan, on January 9, 2017. Photo: Reuters / Mark Blinch

“When Toyota launched the Prius nobody knew what a hybrid was,” recalled Takeshi Uchiyamada, a Toyota executive known as the “father of the Prius” in an interview with Japan’s Mainichi newspaper. “Those who drove them were often called “eco-geeks.’”

Hybrids combine two power sources in one automobile: a gasoline engine and an electric motor running on a battery.

Greater fuel mileage was certainly an attraction, especially in the early days when Toyota had to sell at a loss. The early Prius offered twice as much fuel economy as Toyota’s mainstay, the Corolla, or about 28 kilometers to the liter. Newer models released in 2003, 2009 and 2015 boosted mileage to some 40km per liter.

Cumulative sales of all types of Prius reached 11.2 million in October last year. Honda has accumulated 2 million in sales for its hybrid brand. No other carmaker is even close. In fact, two out of three of all electrified cars (which include hybrids and electric vehicles) ever made are Priuses.

The Prius lost money in its first five years, but has been profitable since its second generation, making Toyota the only carmaker to make money from electrified cars. Most other makers of electric cars depend heavily on government subsidies – and indeed, even the Prius Prime, introduced in 2015, needs subsidies to make it affordable.

Still, Priuses hold up well: Some 95 per cent of the cars sold over the past ten years are said to still be on the road.

(That last paragraph, incidentally, raises a question: What do you call two or more Prius models? In February, 2011, Toyota conducted a contest among car owners to pick the plural of Prius. The choices were: Prien, Prii, Prium and Priuses. Prii won the contest – but most people still say Priuses.)

Many analysts attribute the Prius’ success to its battery. Toyota has stuck with its basic nickel-metal-hydride battery pack for the past 20 years. It has benefitted from the new technology from Ovonic Battery, an American start-up, which licensed its technology to Matsushita Battery, which in turn sold batteries to Toyota.

“When Toyota launched the Prius nobody knew what a hybrid was. Those who drove them were often called “eco-geeks’”

Even so, for all its success with the hybrid Prius, Toyota has been slow to adopt electric vehicles (EV), which many analysts see as the future of automobile transport. It has still to unveil its own model, although its long-range planners anticipate making electric cars in the millions.

The chief drawbacks for EVs have been the cost of lithium-ion batteries and their limited range between recharges. However, “prices for lithium batteries are dropping dramatically,” according to Christopher Richter, a senior research analyst for CLSA Investments.

Toyota says its current battery pack is one of the least frequently replaced items across all models: the packs are warranted for ten years, or 150,000 kilometers. Some cars purchased 20 years ago are still running on the original battery.

Resale and trade-in value are tied in to battery replacement. Anyone wanting to sell, say, a 10-year-old Prius might want to provide a fresh battery. That would cost about US$3,000 to install new, including labor.

So what do the next 20 years hold for Toyota? While a major innovator and market leader in electrified cars, there is no guarantee that it will remain a market leader – or even survive.

Fully aware of the volatile car market, Toyota recently unveiled its “Vision for 2050,” which, among other goals, anticipates selling five million of its own EV models by 2030, plus a large number of fuel-cell, hydrogen-powered cars.

What it does not expect to be selling by that time – in large numbers, at least – are cars propelled with internal combustion engines.

Richter says he can see several scenarios for Toyota over the next 20 years. “Toyota might be looking at an even more successful car,” the CLSA analyst said. “Or, it might become the automobile equivalent of Kodak.”

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