Surprise Hits: How the Toyota Prius proved its mettle

In Henry Ford's day, inventors began to wonder if gasoline was really the best fuel to power an automobile engine. Almost a century later, we're still fueling up with gas. But there are signs that we won't be forever.

The Toyota (TM) Prius is now synonymous with environmentally friendly cars, but it didn't start out that way. In 1997, people criticized the first generation of the Prius for being undersized, underpowered, and overpriced. The Japanese auto giant also had to address the public's huge learning curve, answering basic questions: "Are the battery packs fire hazards?" (No.) "Can a Prius run on electricity when it runs out of gas?" (No.)

The Prius came out just after the Honda (HMC) Insight, when low gasoline prices made alternative-fuel vehicles seem like a must-have only for diehard environmentalists -- and a pipe dream for an elite group of engineers. "Neither one of them were huge sellers," says Karl Brauer, editor-in-chief of online auto retailer Edmunds.com. But Toyota didn't want to cede the U.S. green-car market to Honda.

Toyota went back to the drawing board in 2003, building a 2004 model that was "more fully functional" with an improved hybrid system, Brauer says. Consumers noticed the improved design as gas prices were rising, caused in such factors as the ongoing war in Iraq and the damage of Hurricane Katrina in 2005. Would-be Prius buyers found themselves waiting as long as nine months for a car, a favorite of Hollywood celebrities like Larry David. Showtime hit series Weeds featured the vehicles as the car of choice for a gang of vicious drug dealers hoping to keep a low profile.

Toyota says it has sold 62,509 Priuses worldwide from January through April, forecasting a plunge from its worldwide sales of 285,675 Priuses last year. Like other models, Prius has been hit hard by economic concerns and, since last July, comparatively low gasoline prices. Prius sales dropped more than 30 percent in May; year-to-date, sales are down more than 45 percent.

The public clearly is less willing to pay the premium prices for hybrids because, economically, the high-priced vehicles aren't worth the savings in gas money. But oil prices are rising again, just as Toyota has begun selling the third version of the Prius. Should oil prices stay high, hybrids will probably become popular again.

Be sure to check out all 20 recent products that became Surprise Hits.


Increase your money and finance knowledge from home

Forex for Beginners

Learn about trading currencies and foreign exchange transactions

View Course »

Introduction to Economic Indicators

Measure the performance of the economy.

View Course »

Add a Comment

*0 / 3000 Character Maximum