Introduction
Americans love their cars and this can be evidenced by the brisk sale of SUVs and trucks in the last 10 years. Power is also a major concern for Americans when buying a car. One wonders then is a small, sluggish hybrid auto would sell well in the US market.
In spite of such expectation, the introductions of the Prius, a hybrid auto manufactured by Toyota, was a runaway success for Toyota, and the company sold 2,610 units between July and October, 2000.
The company had embarked on clever marketing techniques that targeted early adopters and techies. The Prius combines an electric motor with a gas engine to boost power and fuel efficiency. The demand for the Prius was also stimulated when the automaker was given tax incentives by the government.
Moreover, starting from 2002, the IRS allowed prospective buyers of the Prius to claim up to $ 2,000 in tax deduction, further boosting sales. Due to intense competition, Toyota anticipates other automakers to also start manufacturing hybrids in a bid to lower emission and raise gas mileage (Kotler & Armstrong, 2009, p. 120).
As an early entrant, Toyota is already targeting commercial trucks and SUVs with its hybrid model. Save for techno-savvy consumers, the mass market in the U.S is still reluctant to purchase hybrid cars. On the other hand, auto dealers are reluctant to promote hybrid cars. Only time will tell if consumers will opt to buy the more comfortable, more spacious and less powerful hybrids and benefit from improved fuel efficiency, or stick to the spacious, comfortable and powerful fuel guzzling SUVs and trucks.
Executive Summary
Americans love high-tech autos that emit fewer air pollutants and gives high gas mileage. In addition, the U. S. culture worships technological and scientific advances. Americans are also opposed to increases in gasoline prices. This, coupled with their concern for the environment, saw Toyota introduce Prius, the company’s hybrid auto, into the U.S market, in 2000. The Prius has a four-cylinder, 1.5-liter gas engine.
It delivers 114 horsepower. The 33-kilowatt electric motor operates at low speeds. It uses a nickel metal-hydride battery to start the car. 1 gallon covers 66 miles while driving under normal highway conditions. The Prius has been designed in such a way that it switches to the gasoline engine automatically as speeds increases.
However, there is a downside to the Pius. For example, although the Echo and the Prius are both nearly the same car, the latter costs nearly $ 3,000 more. To offset the difference in price, one has to purchase 1,887 gallons in the case of the Prius. This adds up to 124,542 miles, at the rate of 1 gallon for every 66 miles (Kotler & Armstrong, 2009, p. 120).
Getting the estimated mileage is a pipe dream since gasoline mileage testing procedures by the EPA are normally overstated by up to 15 percent. Moreover, hybrids recharge their batteries using regenerative braking. Therefore, during the EPA driving cycle, more energy is fed to the braking system and consequently, the estimated gas mileage is boosted.
The future looks bright though for Prius because economies of scale will result in decreased cost of production. In addition, the nickel metal-hydride batteries contribute greatly to the cost of the car and through research and development, Panasonic, makers of these batteries, can greatly reduce their production cost.
This will in the end make the car affordable to more consumers. The tax incentives advanced by the government to hybrid automakers will also help stimulate demand for high-mileage and clean fuel autos. In May 2002, the owners of electric-and-gas hybrid cars were also allowed to claim up to $ 2,000 in tax deductions by the IRS, when buying a Prius.
The decision to grant a tax break to hybrid-auto buyers by the U.S government was influenced by environmental concerns, politics, and emissions regulations. There was intense lobbying by environmental interest groups and politicians, calling for enhanced air quality through reduced emissions.
A quick look at auto sales over the past 10 years appears to suggest that consumers are still not ready to for hybrids, and their buying decisions have not been affected by improved emission and gas mileage standards. SUVs and trucks have recorded the highest sales in America over the last 10 years.
However, through clever marketing, Toyota managed to sell 2,610 Priuses between July and October 2000. Toyota had started educating potential consumers about the Prius 2 years before their launch into the U.S market. A web site had been established to distribute information, and 40,000 likely buyers sent e-brochures. Based on e-mail messages alone, Toyota managed to sell 1,800 cars within 2 weeks.
Touting the Prius cost Toyota $ 15 million in 2002 alone, with television advertisements taking the bulk of the campaign. The ads stressed how the Prius was technologically advanced. The intention was to target the early adopters who also tend to be technologically-savvy (Rodriguez &Page, 2004, p. 2). In addition, they also positioned Toyota as an “environmentally concerned company”.
On Earth Day, Toyota sent prospective buyers green seed cards in the shape of the company’s logo. The company also gave away cars at Earth Day events. While customers still resist buying hybrid cars and dealers are reluctant to promote them, competition will however force automakers to manufacture hybrids to lower emissions and raise gas mileage.
Already Ford has introduced a 40 miles per gallon Escape SUV. The Durangos hybrids manufactured by Daimler Chrysler are 20 percent more fuel efficient compared with conventional Durangos. On the other hand, GM is hopes to manufacture hybrid trucks and buses.
Toyota is not threatened by competition and hopes to bank on its early entry into the hybrid market by diversifying into the production of commercial hybrid trucks, luxury sedans, and SUVs.
Conclusion
The mass market in the U.S values comfort, space, and power. For this reason, the highest sold numbers of cars in the U.S mass market for the past 10 years are SUVs and trucks. Considering that hybrids cars are less powerful, less spacious, but nonetheless, comfortable, did Toyota make the right decision to venture into the U.S. market.
We need to note that prior to the entry, Toyota had conducted research for two years, during which time a website had been set up to provide information on the hybrid car. Some 40,000 e-brochures had also been distributed to prospective buyers. Through astute marketing techniques, the company managed to sell 2,610 cars in the space of three months.
This notwithstanding, customers are yet to accept hybrid cars even after the tax deduction claim to the tune of $ 2,000. Dealers also resist the temptation to help market the Prius. One wonders if consumers in the U.S will go for the hybrid banking on its ability to accelerate on mountain inclines and high speed on open freeways, even though it has less power.
Reference List
Kotler, P., & Armstrong, G. Principles of Marketing. (13th edition). New York: Prentice Hall.
Rodriguez, A., &Page, C. (2004). A Comparison of Toyota and Honda Hybrid Vehicle Marketing Strategies. Web.