MKTG118 Toyota Prius

MKTG/118

IBS Center for Management Research

Toyota Prius: A Case in New Product Development

This case was written by Mikkilineni Pushpanjali, under the direction of Sanjib Dutta, IBS Center for Management Research.

It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate

either effective or ineffective handling of a management situation.

2006, IBS Center for Management Research. All rights reserved.

To order copies, call +91-08417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: [email protected]

www.icmrindia.org

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MKTG/118


“The Prius is solid evidence that the ponderous development process that produces new automobiles is finally on the brink of a genuine technological breakthrough.”1

- Popular Science Magazine, July 1997.

“We believe that clearing environmental hurdles and offering an attractive driving experience are critical for cars to thrive in the 21st century.”2

- Hiroyuki Watanabe, Senior Managing Director, Toyota in 2003.

INTRODUCTION

In December 1997, Toyota Motor Corporation (Toyota) of Japan launched its hybrid vehicle Prius in the Japanese market. This was one of the first mass-produced hybrid vehicles in the world. It used the Toyota Hybrid System (THS), which combined an internal combustion engine fueled by gasoline with an electric motor. Prius achieved a balance between high mileage and low emissions and was the upshot of the company‟s initiative to produce environment-friendly automobiles and its goal of manufacturing the „Ultimate Eco Car‟ (Refer Exhibit I for the Ultimate Eco Car goal of Toyota).

The Prius generated a lot of enthusiasm in the industry as it was both efficient and stylish. It was also a safe car. The car conformed to Japanese regulations and standards pertaining to environmental pollution. Having sold more than 100,000 units worldwide by 2002, it was the best selling hybrid car model in the world. The company introduced further refined models in 2000 and 2003. Toyota introduced Prius in the US market in 2000. Before entering, Toyota conducted a research study of the US market and consumer preferences there. It developed various strategies specifically for this market based on its research findings. The price of the new improved Prius was unchanged from that of the original Prius. These initiatives helped Prius to break successfully into the tough US market even though it was based on a new concept of a hybrid car.

In 2001, the Automotive Engineering International3 recognized Prius as the „world‟s best engineered passenger car.‟ By 2002, it was being sold in North America, Japan, Europe, Hong Kong, Australia and Singapore. Analysts opined that the demand for hybrid cars would rise because of the unstable oil prices and the growing need for environment friendly products. Commenting on the future of green technologies and on Prius in particular, Chris Giller of Grist.org4 said, “In the marketplace, green technologies and industries are among the fastest growing and most innovative developments. The Toyota Prius has defied every prediction to become the must-have car. The organic food business doubles every time you blink. Green architecture is taking off. Renewable energy, emissions trading, environmentally-conscious investing: many of the most exciting advances in environmental thinking are happening in the private sector.”5

1 Annual Report, 1998, www.toyota.co.jp 2 Yuri Kageyama, “Toyota Unveils Beefed-Up Hybrid,” www.cbsnews.com, April 17, 2003. 3 Automotive Engineering International is a magazine published by the Society of Automotive Engineers.

The magazine contains latest information about the technology, and the products manufactured. 4 Grist.org (Grist Magazine) was an online magazine providing environmental news. Grist was a non-

profit organization established in 1999 and headquartered in Seattle, Washington. 5 Chip Giller, “The Environment‟s New Bling,” www.boston.com, April 21, 2005.


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BACKGROUND NOTE

TOYOTA

Toyota‟s history goes back to 1897, when Sakichi Toyoda (Sakichi) diversified into the textile

machinery business from his traditional family business of carpentry. He invented a power loom in

1902 and founded the parent organization of Toyota, the Toyoda Group, in the same year. In 1926,

Sakichi invented an automatic loom that stopped operating when a thread broke. This prevented

the manufacture of imperfect cloth. (Calling attention to problems and rectifying them at the

earliest later became an important part of the Toyota Production System (TPS)). The same year,

Sakichi formed the Toyoda Automatic Loom Works (TALW) to manufacture automatic looms.

Sakichi‟s son Kiichiro, an engineer from Tokyo University, was more interested in automobiles

and engines than the family‟s textile business. In 1929, he traveled to the US and Europe to study

the manufacturing processes in car factories there. After returning to Japan, he spent his time

studying car engines and experimenting with better ways to manufacture them. In the early 1930s,

Kiichiro convinced his father to launch an automobile business and in 1933, Sakichi established an

automobile department within TALW. The first passenger car prototype was developed in 1935.

In 1936, Sakichi sold the patent rights of his automatic loom to a company in England to raise

money to set up a new automobile business. Kiichiro was made managing director of the new

venture. The new company was named Toyota, which was written with eight brush stokes (eight

being considered an auspicious number in Japan). Kiichiro traveled to the US again in the late

1930s, to study the manufacturing processes at Ford. He saw that an average US worker‟s

productivity was nine times that of a Japanese worker. He realized that the productivity of the

Japanese automobile industry had to be increased if it was to compete globally. Armed with a

strong knowledge of the Ford production system, Kiichiro returned to Japan determined to adapt

the system to smaller production quantities, more suitable to Japan. In addition to adapting Ford‟s

model, he also developed a system where each process produced only the exact number of parts

required for the next process in the production line, and at the right time. This system was called

Just-in-time (JIT), within Toyota.

Although the automobile venture was set up in the late 1930s, passenger car production began only

in 1947. (During the Second World War (1939-1945), the company was involved in building

military vehicles.) Toyota faced tough competition from Ford and GM, which were the top car

manufacturers in Japan at that time. In 1950, after a major strike by labor unions, Kiichiro was

forced to step down and his cousin Eiji Toyoda (Eiji), who was also an engineer from Tokyo

University and a valued aide of Kiichiro, was made managing director.

Eiji followed in Kiichiro‟s footsteps and traveled to the US to study Ford‟s River Rouge

manufacturing facility6. Though he was impressed by the scale of production, he also realized that

the system was ridden with several manufacturing inefficiencies. He decided to set up a system at

Toyota that would be free of such inefficiencies. Taiichi Ohno (Ohno) helped him in this venture

and their efforts became the foundation of the Kanban system. Ohno also traveled to the US in

1956 and came back with several ideas on which he based the TPS. In 1957, Eiji renamed Toyota

„The Toyota Company‟.

Toyota‟s first export to the US was the Toyota Crown. But this model did not prove successful as

it was too slow for US highways. However, the Corolla, which was exported in 1968, was a huge

success due to its reliability and relatively low price. Toyota‟s cars soon became popular in the US,

thanks to their high quality and good resale value.

6 Ford‟s car manufacturing facility along the Rouge River in Detroit. It was the most highly integrated car

manufacturing plant in the world in the early to mid 1900s.


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Toyota received a major boost in the late 1970s, when the oil crisis made many people shift to

Toyota‟s cars from fuel thirsty American and European models. The crisis also sent Japan into

recession and most of the auto makers suffered losses. However, the efficiency and flexibility of

the TPS helped Toyota bounce back. This naturally heightened interest in the TPS in Japan. (The

system formally came to be known as the TPS in 1977. Until then, it was a chain of techniques that

were adopted within Toyota.) In 1978, a group of engineers from Toyota, under the guidance of

Ohno, gave a presentation at Tokyo on the TPS. Many managers expressed an interest in learning

more about the system. Toyota brought TPS to the US in the 1980s, when it set up a joint venture

with GM called New United Motor Manufacturing, Inc. (NUMMI).

In 1983, the company‟s name was changed to Toyota Motor Corporation. In 1988, Toyota opened

its own plant in Georgetown, Kentucky. Two years after the Georgetown plant opened, three

Massachusetts Institute of Technology researchers, James Womack, Daniel Jones and Daniel

Roos, published a book about the effectiveness of TPS called The Machine that Changed the

World.7 The writers coined a new term “lean manufacturing” - for the approach used in Toyota‟s

factory.

In the early 1990s, as Toyota expanded its overseas operations, excessive capital spending affected

its profit margins. Tatsuro Toyoda (Tatsuro), who took over as the company‟s President in 1992,

began to control costs by eliminating all unnecessary expenditure. In 1995, after Tatsuro resigned

due to health reasons, Hiroshi Okuda (Okuda) became Toyota president. In 1996, Toyota

consolidated its production in North American production units into the Cincinnati-based Toyota

Motor Manufacturing (North America).

In 1999, Okuda replaced Chairman Shoichiro Toyoda and Fujio Cho (Cho) became the president

of the company. In the same year, Toyota listed its shares on both the New York and London stock

exchanges. By the early 2000s, Toyota had become one of the top manufacturers of cars in the

world, and was poised to become the biggest automobile company.

As of 2005, the company had production bases in 26 overseas countries and regions and vehicle

sales network in 170 countries and regions. It employed 260,000 employees worldwide. On June

2005, Katsuaki Watanabe (Watanabe) became the company‟s President. Under the leadership of

Chairman Okuda and President Watanabe, the company‟s net revenue reached ¥18.55 trillion

while its net income reached ¥1.17 trillion in 2005 (Refer Exhibit II for Financial Highlights).

HYBRID CARS

Ferdinand Porsche8 manufactured the first hybrid-electric car in 1898. In the 1960s a few attempts

were made to manufacture hybrid cars by applying turbine engines to the production of the

vehicles. A turbine-powered race car was introduced in 1967 with the turbine engines powering

the wheels through a mechanical transmission.

The need for cleaner and more efficient vehicles led to the development of hybrid vehicles in the

1970s. In 1970, a program called the Federal Clean Car Incentive (FCCI) was started by the US

government. This program led to the development of a hybrid prototype in 1972. The program was

scrapped in 1976 by the Environmental Protection Agency (EPA) of the US. In 1993, another

program called the Partnership for a New Generation of Vehicles (PNGV) was launched in the US.

The partners in the program: Chrysler, Ford, GM, and a few governmental agencies, developed

hybrid prototypes but never commercialized them. In 2001, the program was replaced by

FreedomCAR initiative by the new administration under George W. Bush, which focused more on

hydrogen-based vehicles.

7 Published in 1990 by Rawson Associates. 8 Ferdinand Porsche was born in 1875. He was an Austrian automotive engineer who developed the

Volkswagen. His son Ferry Porsche founded a German sports car company, Porsche AG.


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Toyota has had a long history of more than three decades in manufacturing hybrid vehicles. Toyota displayed its first ever hybrid vehicle, Sport 800 with a gas turbine9 and an electric engine, in the 1977 Tokyo Motor Show. The vehicle was based on the Series hybrid system (Refer Exhibit III for a brief on different hybrid systems).

Toyota announced the “Earth Charter” in 1992. The document contained the details about the company‟s target to manufacture and sell cleaner and safer automobiles with the lowest and least harmful emissions. The aim was to introduce innovative vehicles using new technologies and alternative sources of power. This initiative began gaining momentum with the formation of the G21 committee (“Globe - 21st Century”) by the company‟s Executive Vice President (R&D) Yoshiro Kimbara in the 1990s. The committee‟s brief was to research cars suitable for the 21st Century. This paved the way for the development of Prius, Highlander Hybrid, and other hybrid models.

Prius was the refined version of a model vehicle, based on the Energy Management System (EMS)10 in 1994. The Toyota corporate officials approved the model vehicle on June 30, 1995, and it was introduced as „Prius‟ on October 27, 1995 at the Tokyo Motor Show. The name Prius was derived from the Latin word „ahead‟ or „to go before‟. It was described as a „full hybrid power train‟, which could run on engine, or batteries or a combination of both (Refer Exhibit IV for a Hybrid Power Train).11 The company also developed the Coaster Hybrid vehicle in 1997 which had an engine similar to that of the Sport 800. In 2001, Toyota launched the Crown Hybrid and Estima Hybrid in Japan. In 2002, it launched the Toyota FCHV (Fuel Cell Hybrid Vehicle) in the Japanese market.

KNOWLEDGE MANAGEMENT AT TOYOTA

According to analysts, Toyota‟s success in both the local and global markets was based on its gaining a competitive advantage through implementation of innovative and path-breaking ideas on its production floors. Toyota had focused on learning from the very beginning. At Toyota, knowledge sharing was intertwined with its people-based enterprise culture, referred to as the Toyota Way. The five key principles that summed up the Toyota Way were: Challenge12, Kaizen (improvement), Genchi Genbutsu (go and see), Respect and Teamwork. The Toyota Way recognized employees as the company‟s strength and attached great importance to developing human abilities through training, coaching and mentoring. The principles of “Respect for People” and “Continuous Improvement” were at the core of the Toyota Way.

Most experts agree that the TPS system at Toyota worked by combining its explicit13, implicit14 and tacit15 knowledge. Toyota trained new employees by bringing them to an existing facility where they worked alongside the highly trained managers. Once the training was over, this group

9 Gas turbines are similar to the turbofan engines that power jet aircraft. A gas turbine burns fuel in a

combustion chamber that causes a blade-covered shaft to turn at high speed. Toyota has been working on the turbine hybrids since 1965. (Source: www.toyota.com)

10 The EMS is a propulsion system or design which consists of an electric-motor connected to a regular gasoline engine using a Cone & Belt type Continuously Variable Transmission (CVT). The storage device for electricity is an ultra-capacitor, rather than a battery-pack. ( Source: http://john1701a.com)

11 A full hybrid vehicle has a gasoline engine with an electric motor. It also has batteries to enhance fuel economy. The gasoline engine powers the car and charges the batteries for the electric motor which provides power to the wheels of the vehicle. When the car stops at a traffic jam, automatically the engine also turns off. Thus the system achieves higher efficiency in energy recovery and higher driving performance through the use of gasoline or electricity or a combination of both.

12 The Challenge principle gives the employees a long-term, realistic and stretching vision for the company that will add real value to the business. It prevents the company from becoming complacent even in the best of times. It continuously challenges itself to keep the spirit of Kaizen.

13 Explicit knowledge is that which has been articulated in some form like text or tables. 14 Implicit knowledge is that which can be articulated. Its existence is implied by or inferred from

observable performance/ behavior. 15 Tacit knowledge cannot be articulated. The concept is captured through the statement: “We know more

than we can tell.”


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of workers was joined by an extremely skilled old worker group and as operations began at the new factory, it was ensured that all technical knowledge was passed on to workers at the new plant. Toyota‟s total knowledge base incorporated the knowledge flow in its processes and routines, as well as in the interactions between its workers, suppliers, and managers. Experts identified Toyota‟s knowledge-driven work culture as a major contributor to Toyota‟s success.

The use of quality circles at Toyota also illustrated a combined implicit and explicit approach. Toyota workers spent one or two hours at the end of each week, analyzing the performance of their part of the production system, to identify actual or potential problems in quality or productivity. During these quality circle meetings, employees proposed measures to solve identified problems and discuss the results of the measures taken during the week to address earlier problems. This practice led to processes being refined on a continuous basis, leading to fewer errors at a later point. The suggestions received from the quality circles were scrutinized by Toyota production engineers and included in task description documents.16 Toyota even had designated „green areas‟17 next to its production lines where employees could discuss work and any problems they anticipated during production on any day.

According to experts, Toyota‟s ability to form alliances with its partners enabled it to add tremendous value to its knowledge generation efforts. Toyota followed the JIT system to make its supply chain effective and adaptive. Toyota successfully used its supplier network for creative knowledge generation and sharing which helped it to respond to changes quickly. Toyota‟s supplier networks collaborated actively on joint training and building long-term relationships.

Toyota‟s KM practices were considered unique because KM was embedded in its culture, unlike at most other enterprises where it was implemented as a separate and independent effort. KM practitioners recognized that Japanese culture had always considered learning as an important endeavor. The Japanese were also known for their love of detail and perfection which further drove learning. The characteristics of a typical Japanese organization like lifelong employment, teamwork and trust also contributed to a favorable learning environment. Many Toyota practices like Hansei18, Kaizen and Nemawashi19 were in fact not specific to Toyota but were seen across most Japanese firms. Although practices like Kaizen encouraged learning on one hand, on the other they made it difficult for Toyota to implement explicit KM processes. The Kaizen concept ensured that processes underwent continuous change and the recording of these continuous changes became difficult. However, with increasing globalization and greater technological support, Toyota had increased its efforts toward explicit knowledge management.

Toyota‟s guiding principles emphasized the need to innovate, and ensured that the philosophy had support from the top management. The policy deployment process at Toyota called “Hoshin Kanri” ensured that the organization was adequately directed and motivated to learn. The goal setting process was objective and included inputs from across the organization. Toyota‟s performance measurement metrics were also more process oriented than result oriented. This again supported the culture of learning and the focus on improving processes was not lost.

The development of Prius demonstrated the benefits of knowledge creation. With the Prius project, Toyota beat its own record of having the fastest development process in the world. Though the Prius project used a completely novel design and technology, Toyota was able to reach the production stage within 15 months. This was especially impressive as hybrid technology was in a very crude stage at that time and Toyota had to carry out both research and development activities for the Prius simultaneously.

16 These documents provide a detailed description of the procedure to perform each task, the time allotted

for it, the sequences to be followed and a check list that enables workers check their own work. 17 The green in „green areas‟ refer to the plants kept in the area. 18 Refer page eleven for details on Hansei. 19 Nemawashi referred to the concept of making decisions by consensus, after a thorough consideration of

all options and followed by rapid implementation.


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The Prius project enabled the company to create a new process for product development. Since Toyota was under strict deadline pressure to commercialize a new technology that was not fully developed, it could have created just a few engine designs and then tested them to arrive at the final prototype. However, the company preferred to try out as many as 80 hybrid engine designs and test them to arrive at the final choice. This process was referred to as “set based” concurrent engineering. The company developed many new practices which further enhanced its knowledge creation process. For example, it changed the process of design finalization. Earlier, the chief engineer used to create the design concept and then discuss it with design and planning groups. Under the new approach adopted for Prius, the chief engineer discussed the concept with not only the design and planning teams but also the production engineers. CAD systems were put in place to facilitate better management of information. The development of the Prius became an important learning exercise for the younger Toyota engineers.

Other models that were a testimony to Toyota‟s knowledge creation capability were the RAV4 which used hydrogen fuel technology, and the Highlander, the world‟s first mass market seven passenger hybrid Sports Utility Vehicle (SUV). The Scientific American magazine20 awarded Toyota the “Business Leader of the Year” award in 2003 for commercializing this affordable hybrid vehicle. Apart from its legendry use of JIT and the Kanban, other process and system innovations introduced by Toyota were the concept of “Autonomation”21; the use of Poka-Yoke22 mechanical fail-safe devices to prevent mistakes; and the Single Minute Exchange of Die (SMED) system which reduced machine setup time to permit smaller lot sizes. Toyota also developed a new flexible assembly line termed the Global Body Line23 which contributed further to its cost advantage. This assembly line‟s installation costs were half those of the system it replaced, and it could be modified to suit a new model for 70% less than Toyota‟s previous production system.

THE ORIGINAL PRIUS

The original Prius was powered by the THS. The THS was an advanced version of the EMS. THS is a power train that combined an internal combustion engine and an electric motor. It was based on the series/parallel hybrid system. It contained a power split mechanism that divided and sent power through two passages. Through one passage, the power from the gasoline engine was transmitted directly to the wheels of the vehicle while through another passage, the power from the engine was converted into electricity with the help of a generator that charged the battery and drove the electric car.

The Original Prius (Prius NHW10) was launched in Japan on December 10, 1997. The original Prius was stylish and safe with a four-door and five-passenger sedan. It had several advantages over conventional cars. It provided quiet and comfortable driving similar to that of an electric motor car. Its fuel efficiency was double that of conventional cars. It ran 52 miles per gallon in the city and 45 miles per gallon on highways.24 The most important aspect was that it reduced the emissions. According to Mary Nickerson, Technical Marketing Manager for Toyota Prius, “I‟d have to say that the single most important feature is that the Prius achieves about an 80% reduction in smog-forming emissions.”25

20 Scientific American is a science magazine, published in the US since 1845. It provides insights into

developments in science and technology. 21 Also called as Jidoka in Japanese, it referred to the use of machines and workers that stop a line or

process automatically when abnormalities occur. 22 Pronounced POH-kah YOH-kay. 23 It was aimed at creating a production line that would ensure flexibility, so that Toyota production

facilities around the world could easily add/switch new models or improve production of existing models

within a short period while ensuring top quality. 24 1 gallon = 3.7854 liters 25 John Laumer, “Tree Hugger Interviews Mary Nickerson,” www.treehugger.com, October 03, 2005.


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One of the strengths of the Prius was its safety system which was given key importance during its

development. To comply with Japanese crash-safety standards, the company integrated its Passive

Safety Body Technology26 which provides safety to the driver and the passengers in a crash. It had

the standard airbag Supplement Restraint Systems (SRS), a safety provision for passengers in the

front and rear seats.27 The car offered several storage conveniences and basic controls without

compromising on the handling parts. The audio system was installed below the instrument cluster.

It also had a 5.8 inch LCD monitor which displayed a multitude of information including the

energy flow system of the engine and the navigation system.

The original Prius was well received by Japanese customers and in the first year of its launch, sales

approximated 18,000 units. Because of the increase in demand, Toyota had to step up production

levels on three separate occasions from the existing level during the first year itself. Prius was the

first commercially mass-produced and marketed hybrid automobile. It won Japan‟s car-of-the-year

award for 1997-98.

THE FIRST GENERATION PRIUS

In 2000, Toyota introduced its first generation model of the Prius in the US, Europe and other

markets. This model was also called Prius NHW11 or Prius Classic. A few modifications were

made to the vehicle to meet vehicle standards for California, USA. Modifications were made to the

engine by increasing the horsepower from 58 to 72. The battery pack was changed from the

standard D to a flat-rectangular one. The LCD monitor was converted into a touch-sensitive one,

eliminating the need for external buttons. The first generation Prius was lighter, smaller and more

powerful than the original Prius. The vehicle complied with the Super Ultra Low Emission Vehicle

(SULEV) standard.28

Marketing the First Generation Prius in the US

For Toyota, marketing the first generation Prius in the US was a challenge. Commenting on the

launch of Prius in the US market, Senior Vice President and General Manager of Toyota Motor

Sales, Don Edmond (Edmond) said, “Frankly, it was one of the biggest crapshoots I've ever been

involved in. Not because we lacked confidence in the quality of the product. Or the logic of the

concept. Or the significance of this breakthrough technology. The key was to convince consumers

in the U.S. that hybrid technology was more than a science project. More to the point, the key

would be convincing them that Prius was a real car.”29

Before introducing Prius in the US, Toyota conducted a market research study on consumers and

their preferences in the US. Toyota studied the consumer behavior of Americans to identify their

target customers in the market through focus groups. The company conducted family demos in the

major US cities such as Chicago, New York, Los Angeles, San Francisco, and Washington DC. It

26 Passive safety is the concept of protecting the passengers during a collision. The Passive Safety Body

Technology includes seatbelts, airbags, and other equipment that provide protection to the passengers. 27 During a collision, the airbags inflate automatically, cushioning the driver and the passengers and

preventing them from being pushed or thrown forward. 28 The SULEV standards were set by the California Air Resources Board (ARB), which is a department of

the California EPA. The standard is given to a Zero Emission Vehicle (ZEV) which does not give out any

emissions while operating. A ZEV that gets a partial credit is called as a Partial Zero-Emission Vehicle

(PZEV) which meets the SULEV standard by giving out air pollution at a 10% reduced level to that of an

ordinary vehicle. It should also have zero evaporative emissions from its fuel system along with an

extended (ten-year/150,000-mile) warranty on its emission-control components. Advanced Technology-

Partial Zero Emission Vehicle (AT-PZEV) standard is given to a vehicle which is an advanced version of

the PZEV. 29 Gary S. Vasilash, “The Toyota Prius: The Most Important ‟04 Model? Yes – On Cars,” Automotive

Design & Production, www.findarticles.com, October 2003.


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also publicized and provided information about Prius through the internet. The company‟s focus

group showed that the car was well received by early adopters and innovators who were more tech

savvy. Toyota classified its potential customers into the categories of early adopters, innovators

and the early majority.30

Through its research, Toyota found that most people in the US preferred trucks and SUVs. The

research also indicated that the demand for luxury vehicles was picking up. The company realized

that a specific advantage that the company could hope to benefit from was the increasing demand

for vehicles that consumed low gas since gas prices were on the up. US consumers also tended to

subscribe to the concept that „bigger is better‟. Toyota‟s research identified the internet as the

major source of information for consumers in the US market; thus advertising and publicity

through the internet was considered vital. Another important point picked up was that the price of

the car was a major concern for a large part of the market in the US.

Toyota used these pointers to fix its goals for selling the first generation Prius in the US. The

company‟s strategy was to win over the buyer by emphasizing the „clean environment‟ and „high

technology‟ features that the Prius embodied. Cleaner and more fuel-efficient vehicles formed the core

of its Unique Selling Proposition (USP).31 It also worked to gain dealer participation and support for the

marketing and sales of the hybrid car. For this, Toyota decided to stick to traditional selling methods.

Prius had all the attributes of a conventional car - it was a convenient, high quality, comfortable and

safe car. Additionally, it embodied high technology (similar to the original Prius, not launched in the

US) and was priced the same as the original Prius. After putting its selling strategies in place, Toyota

launched the Prius in the US in August 2000. The car was available with more than 900 dealers. But

even before the model arrived at showrooms, the company had sold about 1,800 Prius cars through the

internet by the end of July. To allow its US customers to make a thorough evaluation of the car, Toyota

allowed them to test drive the Prius for a whole day.

One of the most important reasons for the success of the first generation Prius was buzz marketing.

The car was publicized more by word of mouth through early owners especially on the internet.

Many websites giving lots of information about the car came up. Some of these were:

www.priusonline.com, www.priuschat.com, http://john1701a.com/, etc. The websites talked about

the Prius in its different versions, its features, the technology, and the availability of the car, and

also displayed photographs, besides covering all the advantages it enjoyed over conventional and

other hybrid cars.

The first generation Prius was a great success in the US market. It got rave reviews from the

media. Leonardo DiCaprio, Cameron Diaz, Will Ferrell, Bill Maher and Alexandra Paul were

among the celebrities who had bought a Prius. Commenting on the Prius, Leonardo DiCaprio said,

“I own a Toyota Prius; it‟s a step in the right direction. It‟s a gasoline-electric midsize car that gets

about 50 miles per gallon. We have the technology to make every car produced in America today

just as clean, cheap and efficient.”32

30 The purchasing behavior of consumers, particularly for innovative products is studied by market

researchers through an understanding of the adoption process. The adoption process categorizes

consumers as innovators, early adopters, the early majority, the late majority and the laggards. The

innovators are the set of people who adopt a product when it is very new in the market, because of its

newness. The early adopters buy new products and give word-of-mouth publicity about it to others. The

early majority waits for the innovators and early adoptors to purchase the product and purchases only

when the product is successful. The late majority purchases the product after the early majority by which

time the product is being purchased by most consumers in the market. The last set is of the laggards who

take decisions very late and do not necessarily purchase the product at all. 31 Unique Selling Proposition (USP) is a marketing concept, which differentiates a product from those

offered by the competitors. The proposition should be strong and unique and should convince the

customers to change brands. 32 “Celebrity Hybrid Cars,” www.hybridcars.com


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The first generation Prius was priced at $ 19,995 similar to that of the original Prius. Analysts

believed that the company was selling the Prius at a loss. However, the company declared that the

product was highly profitable. Prius chief engineer Masao Inoue (Inoue) said, “Toyota has largely

recovered its initial long-term investment in the first-generation Prius.”33

Within one year, the

company sold 15,556 cars in the US and the number rose to 20,119 in 2002 while worldwide sales

reached 100,000 units by March 2002.

THE SECOND GENERATION PRIUS

Toyota began evaluating the popularity of its first generation Prius in the market soon after it was

launched. The evaluation was based on the price, performance and social aspects of the product as seen

by buyers and potential customers. Through its research, the company realized that Prius was sought

after by some consumers because of its basic characteristic of being “green”. The company also found

that the product needed some improvements in terms of its looks, quality and performance in order to

win itself a larger market share. The company then took steps in this direction.

The next concept Toyota developed for their hybrid vehicle line was called the Hybrid Synergy

Drive (HSD). The second generation Prius was powered by the Toyota Hybrid System II (THS II)

which was based on this concept (Refer Exhibit V for the comparison between THS and THS II).

The THS II tried to achieve low emissions and high power performance simultaneously so as to

deliver high fuel efficiency together with an exciting driving experience. The system was powered

by two sources, a gasoline engine and an electric motor. The engine was highly efficient and

operated on the basis of the Atkinson Cycle34.

The second generation Prius or the new Prius (also called the 2004 Prius and the Prius NHW20)

was launched in the US market on April 17, 2003 (Refer Exhibit VI for comparison between the

original, the first generation and the second generation Prius). By September 01, 2003, it was made

available for sale at the Toyota outlets worldwide. The new Prius with THS II provided a smoother

driving experience. While the size of its internal combustion engine was the same as its

predecessors, it produced 76 hp at 5,000 rpm compared to that of the first generation Prius which

produced 70 hp at 4,500 rpm. It also had a magnetic electric motor which produced 67 hp.

The new Prius featured Toyota‟s highly developed electronic control systems. Through its state-of-

the-art hybrid control technology, Toyota fitted the vehicle with the Steering Assisted Vehicle

Stability Control System (S-VSC) and the Intelligent Parking Assist System, both firsts in

motoring history.35 The S-VSC system integrated the Vehicle Skid Control (VSC)36 with the

Antilock Braking System (ABS)37, the Electrically Controlled Brake system (ECB)38, the Traction

Control System (TRC)39 and the Electric Power Steering system (EPS)40. This allowed controlled

movement and stability in driving during starting, acceleration, and braking.

33 Gary S. Vasilash, “The Toyota Prius: The Most Important ‟04 Model? Yes – On Cars,” Automotive

Design & Production, www.findarticles.com, October 2003. 34 The Atkinson cycle is a heat cycle engine proposed by James Atkinson (U.K.) in which compression

stroke and expansion stroke duration can be set independently. (Source: www.toyota.co.jp) 35 Toyota Survey as of August 2003. (www.toyota.co.jp) 36 Sometimes, the vehicle loses control due to skids that are caused from loss of traction in the front or rear

wheels. In such cases, the Vehicle Skid Control System in motor vehicles helps in controlling the vehicle skid. 37 The Antilock Braking System in motor vehicles helps in preventing the wheels from locking while

braking. It helps the driver to maintain braking control during sudden braking. 38 The Electrically Controlled Brake system is electrically operated. It consists of a brake controller that

supplies electricity to the brake system. Higher braking is applied at a greater voltage. 39 The Traction Control system helps the car to avoid skidding while speeding up or accelerating by

maintaining contact between the surface of the road and the wheels of the car.


10

The Intelligent Parking Assist System guided the steering while parking the car along a sidewalk or a pavement, and while reversing into parking spaces. The vehicle was fitted with an Electroshiftmatic system41 which had a gearshift and an ignition switch (push-type) which could be automatically controlled by the engine. All the systems (mentioned in the previous paragraph) contributed to the achievement of the world‟s lowest emissions of any car and the highest fuel efficiency level of 60 miles per gallon for city driving and 51 miles per gallon for highway driving.

The new Prius was fitted with 5 doors and it provided wide and comfortable cabin space for both the passengers and the cargo. Its additional features included Electromultivision - a large 7 inch monitor with a touch sensitive screen. It had superior visual lucidity and was easy to operate. The screen displayed information pertaining to the energy flow, the air conditioning and the audio system of the vehicle. The Supplement Restraint System (SRS) or airbags were the safety features. The new Prius was a fuel-efficient and an ultra-low emissions vehicle. The vehicle complied with the Advanced Technology-Partial Zero Emission Vehicle (AT-PZEV) Standards. Due to the high efficiency of the engine, the carbon dioxide emissions were reduced by 50% and there was a 90% reduction in the emissions of carbon monoxide, hydrocarbon and nitrogen oxide.

The Testing

The most important feature of the new Prius was its enhanced safety. The company had worked toward child safety and reducing the impact of collisions to a remarkable degree. The new Prius and a Toyota Land Cruiser were made to collide for test-crashes, with both vehicles moving at 50 km/h. The company further strengthened the body of the car and the seat structure, as this would reduce the impact of any collision on the rear of the car. The electric circuits and the fuel tank were also given special protection from the impact of any collision.

The new Prius was put through 125 crash tests. Through elaborate computerized simulations using different design options and materials, the company finally worked out a body that was light-weight as well as extremely strong and crash-resistant. To achieve a low body weight with high strength, about 45% of the body was made from high-strength steel. At vital places on the body, Toyota used ultra high-strength steel which was 2.5 times stronger than high-strength steel.

Prius had the usual safety equipment which included eight airbags, and a knee protection panel. The car also had the standard Child Restraint System (CRS). It had a 2 stage seatbelt warning system and an intelligent child seat design complying with the International Standard Organization FIX (ISOFIX) system42, both specially developed by Toyota. The car was also fitted with Whiplash Injury Lessening (WIL)43, Electronically Controlled Braking (ECB2), Electric Traction Control (E-TRC) and Vehicle Stability Control Plus (VSC+).

The new Prius was the first hybrid car which was tested by the EuroNCAP44. The car passed rigorous crash tests and was among only eight cars that achieved the top rating of five stars as per the Occupant Protection Rating given by EuroNCAP. EuroNCAP awarded Prius with 4 stars in Child Protection, and 2 stars in Pedestrian Protection. The car featured as the top performer in safety in the D-segment or luxury cars segment (Refer Table I for the EuroNCAP ratings).

40 The Electric Power Steering System is used for reducing the steering effort by using the power supplied

by an electric motor for power steering. 41 The Electroshiftmatic system is an electronically controlled shift stick and a parking position switch. It

helps in shifting gears easily using the fingertips. 42 ISOFIX is an international standard developed by ISO. It is an attachment system for designing child car seats

without a seatbelt. It ensures that the child seat is not too loose. This protects the children during an accident. 43 Whiplash Injury Lessening (WIL) is a seat design that reduces the damage to the passenger‟s head and

neck during rear collisions. 44 EuroNCAP is the European New Car Assessment Programme. It is a safety assessment programme for

automobiles supported by the European governments, manufacturers and motoring organizations

worldwide. It publishes safety reports on new cars and awards „star ratings‟ based on the performance of

the vehicles with respect to crash tests, including front, side and rear impacts.


11

Table I

The EuroNCAP Ratings

Name of the Car Occupant

Protection

Child Protection Pedestrian

Protection

Family Cars

Peugeot 407 ***** **** **

Saab 9-3 Convertible ***** *** *

Toyota Prius ***** **** **

Volvo S40 ***** **** **

Small Family Cars

Opel/Vauxhall Astra ***** **** *

Renault Mégane CC ***** *** **

VW Golf ***** **** ***

Super-Mini

Honda Jazz **** *** ***

Small MPVs

Toyota Corolla Verso ***** **** **

Fiat Doblo *** *** *

Roadsters

BMW Z4 **** NA **

Opel/Vauxhall Tigra **** NA **

Source: “Lean, Green and Safe: Toyota Prius achieves Euro NCAP top rating for occupant and child

safety,” www.euroncap.com, June 24, 2004.

Toyota introduced the new Prius (second generation) with much pomp and show in the US. The

company focused on the new HSD concept, the design of the car and how it was a big

improvement over the preceding model. Toyota advertised the new Prius through the internet,

print, TV, and radio. The use of celebrities, government agencies and strategic partnerships, all

formed part of its marketing mix (Refer Table II on the various strategies adopted by Toyota in the

US to market the new Prius).

Table II

Marketing Strategies of Toyota Prius in the US

Media Sources

Internet April 17, 2003, Interactive; Live: toyota.com/newprius,

www.prius.com

Tax Sites

Portal Homepages – Yahoo, MSN (MSN Technology Showcase)

Toyota.com


12

Media Sources

Print Advertisements May 2003 and June 2003, Weeklies and Monthlies – Business

2.0, The New Yorker, Fast Company, Popular Science, Time

October 2003 to September 2004 – Forbes, Entertainment, True

Confessions, Newsweek, Cooking Light, Vanity Fair, Yoga

Newspapers – The Wall Street Journal, Automotive News, Detroit

Free Press, The New York Times, Associated Press, Brandweek,

Advertising Age

Television (National

TV) Network TV – Meet the Press, Evening News, Today Show, Alias

Cable TV – PBS-Toyota World of Wild & National Geographic

Spot TV – Markets included Atlanta, Boston, Chicago, Denver,

LA, NY, Sacramento, Seattle/Tasoma, St. Louis, Washington DC

Radio :10 National Radio – NPR: All Things Considered, Morning

Edition, Talk of the Nation, Fresh Air

:60 Spot – Markets: Boston, Denver, San Diego, Seattle, Chicago,

New York, LA, Sacramento, San Francisco, Washington DC

Celebrity

Endorsements Oscars: Annually provide Prius vehicles to celebrities to drive to

the Oscars ceremony

Celebrity owners – Cameron Diaz, Leonardo DiCaprio, Robin

Williams, Tim Robbins: While the stars can show their

commitment to the environment, Toyota is provided with

unsolicited testimonials from the Hollywood community.

Government

Agencies, and Non-

Government

Organizations

Governmental Organizations–U.S. Department of Energy -

Clean Cities network: Accelerating the introduction and expanding

the use of advanced technology and alternative fuel vehicles across

the U.S.

Non-Governmental Organizations–Global Green: Fosters a

global value shift toward a sustainable and secure world through

education, advocacy, partnerships, and programs

Trade Associations–Electric Drive Transportation Association:

Represents organizations that develop and produce battery, hybrid

and fuel cell technologies, and serves as a central source of

information on technical, market and policy issues

Other Strategies

(Sponsored by

Toyota)

Environmental Media Association Awards: Awards for TV and

Motion Picture productions which best communicate the

environmental message

Prius Start Now Tour

Ride & Drive caravan along east coast & southern states

November –December

Partnership with Whole Foods

Participants learn about Prius and Hybrid Synergy Drive in

an interactive format

Handraiser/participant info provided to local dealers via

Lead Delivery Tool


13

Media Sources

Michelin Bibendum

Electric Vehicle Symposium 20th

Race to Stop Global Warming

Drive to Survive

American Lung Association Walks

International Yoga Expo

Engines-of-Change Tour

During October and November

Ride & Drive tour in 15 cities

Targeted at opinion leaders (local personalities, celebrities,

government officials)

Provide hands-on learning of Toyota‟s commitment, Prius and

hybrid technologies

Source: Mary Nickerson „Driving Hybrids into the Mainstream‟, www.eere.energy.gov.

OUTLOOK

Toyota expected higher demand for the new Prius than the earlier versions. Edmond said, “We are

targeting a sales volume of 36,000 for the first full year. That‟s three times our sales target for

Prius (original) when it launched in the U.S.”45

The new Prius is very efficient and includes many

new features over the first generation Prius but is priced at the same level of $ 19,995 (Refer

Exhibit VII on Specifications of First Generation and New Prius).

By October 02, 2003, more than 17,500 Prius had been ordered in Japan. By September 2004,

more than 100,000 Prius cars were sold in the US alone, while about 244,000 of them were sold

worldwide (Refer Exhibit VIII for Prius sales in the US and Hybrid registrations in the US during

2000-2004). By September 2005, about 367,000 Prius cars were sold worldwide, of which 44% of

them were sold in Japan and most of the remaining were sold in North America.

The company has been developing newer versions of the car every year. Toyota introduced the

2005 Prius at a cost of $ 21,275. The 2005 Prius with the HSD had all the performance related

features of the earlier versions. It also had state-of-the-art technology like the Bluetooth

technology.46 The technology was built into the navigation system in the car and it allowed users to

use their phones comfortably without using their hands.

Toyota had about 300 patents for the original Prius and 370 for the new Prius. Few competitors

have licensed the technology from Toyota and have brought out hybrid versions of their cars

(Refer Exhibit IX for hybrid cars from competitors). Toyota has also agreed to share its hybrid

technology with Nissan Motor Co., Ltd.47 Prius had captured many awards in the industry. It won

45 Gary S. Vasilash, “The Toyota Prius: The Most Important ‟04 Model? Yes – On Cars,” Automotive

Design & Production, www.findarticles.com, October 2003. 46 Bluetooth technology is used in mobile phones. The technology was developed by Ericsson, IBM, Intel,

Nokia and Toshiba which formed the Bluetooth Special Interest Group. It is used for short range

transmission of digital voice and data that support point-to-point and multipoint applications. 47 Nissan Motor Co., Ltd (Nissan) was a Japanese automobile manufacturing company founded in 1932 as

Datsun. It was renamed as Nissan in 1983. It manufactured cars and trucks and began exporting to other

countries from 1950s. The company also sold small cars by entering into joint venture with other

companies.


14

the “Excellence in Environmental Engineering Award” given by the Sierra Club in 2000. The new

Prius won the Motor Trend „Car of the year‟ award and the North American „Car of the Year‟

award in 2004. It also won the 2005 European Car of the Year award (Refer Exhibit X for awards

won by Prius).

Toyota aims to sell a million hybrid cars worldwide by 2010. Toyota also plans to release new

hybrid cars including the hybrid version of its Camry48 in 2006.

48 Toyota Camry was introduced by Toyota in 1980. It is a midsize car. The manufacturing facilities for it

are located in the US, Australia and Japan. In 1983, Toyota introduced Camry to the US market. The US

is the biggest market for the car and it has also sold well in Australia and other Asian countries. However,

Camry has not been successful in the Japanese and the European markets (as its design did not match the

tastes of the European and Japanese consumers). Toyota introduced later versions of the car in 1987,

1992, 1997 and 2002.


15

Exhibit I

The Ultimate Eco Car Goal of Toyota

Source: www.toyota.co.jp.


16

Exhibit II

Toyota – Financial Highlights

(Yen Millions except per share data and share information)

2005 2004 2003

Net Revenues

Sales of products 17,790,862 16,578,033 14,793,973

Financing operations 760,664 716,727 707,580

Total 18,551,526 17,294,760 15,501,553

Costs and Expenses

Cost of products sold 14,500,282 13,506,337 11,914,245

Cost of financing operations 369,844 364,177 423,885

Selling, general and administrative 2,009,213 1,757,356 1,891,777

Total 16,879,339 15,627,870 14,229,907

Operating income 1,672,187 1,666,890 1,271,646

% of Net Revenues 9.0% 9.6% 8.2%

Income before Income Taxes, Minority Interest

and Equity in Earnings of Affiliated Companies

1,754,637 1,765,793 1,226,652

Provision for Income Taxes 657,910 681,304 517,014

Net Income 1,171,260 1,162,098 750,942

ROE 13.6% 15.2% 10.4%

Per Share Data (¥)

Net Income (Basic) 355.35 342.90 211.32

Cash Dividends 65 45 36.00

Shareholders‟ Equity 2,767.67 2,456.08 2,063.43

Source: Toyota Annual Report 2005, www.toyota.co.jp.


17

Exhibit III

A Brief on Hybrid Systems

A hybrid system refers to the combination of different sources of power. There are three major

types of hybrid systems used in the hybrid vehicles.

Series hybrid system:

In the series hybrid system, the engine drives a generator and the electric motor uses the

electricity generated from the generator to drive the wheels. Since the power of the engine and

the motor are in a series, the power also flows to the wheels in a series, therefore it is called as a

series hybrid system. The engine generates the electricity and the electric motor drives the

wheels.

Parallel hybrid system:

In a parallel hybrid system, both the engine and the electric motor drive the wheels, and the

power from these two sources can be utilized according to the prevailing conditions. Since the

power flows to the wheels in parallel, it is called a parallel hybrid system. In this system, the

battery is charged by switching the electric motor to act as a generator, and the electricity from

the battery is used to drive the wheels. Here, the wheels are mainly driven by the engine and the

motor assists in acceleration.

Contd…


18

Contd…

Series/parallel hybrid system:

The series/parallel hybrid system combines the series hybrid system with the parallel hybrid

system in order to maximize the benefits of both the systems. It has a gasoline engine and an

electric motor. Depending on the driving conditions, the system uses only the electric motor or

the gasoline engine or both to achieve the highest efficiency level. This is done with the help of

a power split device.

Adapted from www.toyota.co.jp.

Exhibit IV

Hybrid Power Train

Source: Automotive Glossary, http://auto.consumerguide.com.


19

Exhibit V

Comparison between THS and THS II (HSD)

THS and THS II (HSD)

The Way the THS II (HSD) Works

Source: www.toyota.co.jp.


20

Exhibit VI

Comparison between the Original, First Generation, and

Second Generation Prius

Second

Generation Prius

(NHW20)

First Generation

Prius

(NHW11)

Original Prius

(NHW10)

Engine HP 76 70 58

Engine kW 57 52 43

Engine RPM Redline 5000 4500 4000

Motor HP 67 44 40

Motor kW 50 33 30

Motor Torque 295 258 225

0-60 MPH (seconds) 10.1 12.5 14.1

Tire Width 185 175 165

Tire Diameter 15 14 15

Battery-Pack Energy (W/kg) 1250 900 600

Battery-Pack Voltage 201.6 273.6 288

Battery-Pack Weight (lbs) 99 110 125

Battery-Pack Section Type Module Module D-Cell

Battery-Pack Section Count 28 38 40

Hybrid-System Voltage 500 273.6 288

Multi-Display Size increased,

Electric A/C

introduced

Touch Sensitive External buttons

Adapted from http://john1701a.com/.

1997 Original Prius

Source: www.answers.com.

Contd…

http://us1.webpublications.com.au/static/images/articles/i26/2664_2mg.jpg

http://us1.webpublications.com.au/static/images/articles/i26/2664_2mg.jpg


21

Contd…

2000 First Generation Prius

Source: Julian Edgar, “The Story of Turbo‟ing a HybridPrius”, (Part 5, Final Result),

http://autospeed.drive.com.au/cms/A_2664/article.html, October 04, 2005.

2003 Second Generation Prius

Source:http://auto.consumerguide.com/Auto/Used/reviews/full/index.cfm/id/2512/act/usedcarre

viewphoto/.


22

Exhibit VII

Specifications Comparison

Specifications Second Generation Prius NHW20 First Generation Prius NHW11

Class Midsize Economy car

Body styles 5-door hatchback 4-door sedan

Seating 5 5

Engine HSD THS

Length 175.0 in 169.6 in

Height 58.1 in 57.6 in

Width 67.9 in 66.7 in

Wheelbase 106.3 in 100.4 in

Curb weight 2890 lb 2765 lb

0-60 mph 10.1 sec 12.5 sec

Passenger

volume

96.2 cu ft 88.6 cu ft

Luggage

capacity

16.1 cu ft 11.8 cu ft

Colors Black, Super white, Millennium

silver metallic, Driftwood pearl,

Salsa red pearl, Tideland pearl,

Seaside pearl

Black, Aqua Ice Opalescent, Blue

Moon Pearl, Brilliant Blue Pearl,

Electric Green Mica, Golden Pearl,

Silver Strata Metallic, Super White

Multi-Display Liquid-Crystal, Touch-Sensitive, 7.0

inch width Energy Monitor,

Consumption Data, A/C (Heater &

A/C) Interface, Audio & Cell-Phone

& Navigation Interfaces

Liquid-Crystal, Touch-Sensitive,

5.8 inch width, Energy Monitor,

Consumption Data, Audio

Controls

Other

Features

By-Wire: Throttle & Braking &

Gear-Selection, Electric A/C,

Electric Steering, Traction-Control

Cruise-Control, 4 Cupholders,

Double Glovebox, Power Windows,

Power Door-Locks, Power & Heated

Mirrors, Rear Defroster, Keyless-

Entry Remotes, AM/FM/CD + 6

Speakers, Tilt-Steering with Audio

& Climate Controls, 60/40 Split-

Folding Rear Seat, LED Brake

Lights, Intermittent Rear Wiper

AM/FM/Cassette with 4 speakers,

Rear Windows go all the way

down, A/C & Heat can be set to a

specific temperature, Keyless

Entry remotes, 2 come standard

Launched in 2003 2000

Contd…


23

Contd…

Performance Comparison

Second Generation

Prius

First Generation Prius

Fuel Economy

City 60 mpg 52 mpg

Highway 51 mpg 45 mpg

Combined 55 mpg 48 mpg

Engine Performance

Engine displacement 1497 cc 1497 cc

Max power 76 hp @ 5000 rpm 70 hp @ 4500 rpm

Max torque 82 lb-ft @ 4200 rpm 82 l-ft @ 4200 rpm

Emission Ratings

Advanced Technology

Partial Zero Emission

Vehicle (AT-PZEV)2

(Rating 2)

Super Ultra Low

Emission Vehicle

(SULEV)

Motor Performance

Power Output 67 hp @ 1200-1540 rpm 44 hp @ 1040-5600 rpm

Torque 295 lb-ft @ 0-1200 rpm 258 lb-ft @ 0-400 rpm

Maximum Voltage 500 V 300 KW

Battery Pack Performance

Total Weight 99 pounds 110 pounds

Total Voltage 210.6 V 273.6 V

Type Nickel-Metal Hydride

(NiMH)

Nickel Metal Hydride

(NiMH)

Adapted from http://john1701a.com.


24

Exhibit VIII

Prius Sales in the US

Year (December) Cumulative Sales (Units)

2000a 6,401

2001 21,957

2002 42,076

2003 66,703

2004 120,694

2005b 219,964

a From launch till December 2000

b Till November 2005

Source: http://autos.groups.yahoo.com/group/toyota-prius/message/89989.

New Hybrid Vehicle Registrations in the US during 2000-2004

Year Number of New Registrations in the US

2000 7,781

2001 19,963

2002 35,934

2003 45,943

2004 83,153

Source: R.L. Polk & Company, Press Release, April 25, 2005, http://www.eere.energy.gov/

vehiclesandfuels/facts/2005/fcvt_fotw381.shtml.


25

Exhibit IX

Hybrid Cars from Toyota’s Competitors

Car Year of

Release

Price

(2006) Mileage Warranty

Honda Insight

(Honda)

1999 $ 18,880*

City – 61

mpg

Highway

– 70 mpg

3-year/36,000 mile limited

warranty

Battery pack -8 year/80,000-

mile warranty and all emissions-

related equipment comes with a

more extensive warranty

Honda Accord

Hybrid (Honda)

2004 $ 30,140 City - 29

Highway

- 37


warranty

Battery pack -8 year/80,000-




Honda Civic

Hybrid (Honda)

2003 $ 21,850 City - 46

Highway

- 51


warranty

Battery pack - 8 year/80,000-




Ford Escape

Hybrid (Ford)

2004 $28,525 City - 33

Highway

- 29

3 years/36,000 miles limited

warranty

Hybrid Components - 8

years/100,000 miles warranty

Mercury Mariner

Hybrid (Ford)

2006 $29,225 City - 33

Highway

- 29

3 years/36,000 miles limited

warranty

Hybrid Components - 8

years/100,000 miles warranty

* Price of the car in 1999

Compiled from various sources.


26

Exhibit X

Awards and Recognition

Year Organization Awards & Recognition

2005 Caroftheyear.org European Car of the Year

Intellichoice.com Best Overall Value of the Year

2004

The Wall Street Journal Transportation Technology and

Innovation Winner 2004

Automobile Magazine Design of the Year

North American Car and Truck of the

Year Awards

North American Car of the Year

Car and Driver (Magazine) 10 Best List

Automotive Engineering International Best Engineered Vehicle of 2004

International Engine of the Year

Awards

International Engine of the Year

Business Week Industrial Design Excellence Awards –

Gold

Edmunds.com Consumers‟ Choice for Most Significant

Vehicle of 2004

Ward‟s Auto World 10 Best Engines

Michelin Challenge Bibendum Technical Integration Award for

Production Cars

The Economist Innovation Award in Energy: Takeshi

Uchiyamada, Senior Managing Director,

Toyota, for developing the Prius hybrid

Car

Rave Awards Business Leader: Shiqeyuki Hori,

Executive Chief Engineer for Prius,

Toyota

Wired Rise of the Green Machine

American Lung Association President‟s Circle Award

2003

Business Week Magazine Best New Products of 2003

Fortune Magazine 25 Best Products of 2003

Popular Science Best of What‟s New – Grand Award

2002 Belgian Federation of Automotive

Journalists, Belgium

Belgium “FuturAuto” prize winner


27

Year Organization Awards & Recognition

2001

National Wildlife Federation, USA National Conservation Achievement

Awards

USA Corporate Achievement

American Council for an Energy

Efficient Economy, USA

„Greenest gasoline-powered passenger

sedan in the United States‟

Ward‟s Auto World Magazine, USA One of the „10 Best Engines for 2001‟

Society of Automotive Engineers,

USA

Best Engineered Car of 2001

Top Gear, UK 2001 Specialist Award‟

2000 International Engine of the Year,

Europe

„Best Eco Engine‟

1999-00 Japan‟s COTY committee, Japan „Car of the double decade‟

1999

Fleet World Honours, UK „Technical innovation award‟

Fleet News, UK „Special car award‟

International Engine of the Year,

Europe

„Best engine 1.4L-1.8L category‟

International Engine of the Year,

Europe

„Best Eco Engine‟

United Nations, World „Global 500 Award for Environmental

Commitment‟

Royal Society, UK „Esso Energy Award‟

Freie Fahrt (Austria), Austria Environmental Award‟

ARBOE (Austrian touring club),

Austria

1st rank „Environment Award‟

1998

IBCAM-British Carriage and

Automobile Manufacturers, UK

„Auto Design Award‟

AA Awards, UK „Environmental Commitment‟

1997-98

Japan „New technology of the year‟

Japan „Car of the Year‟

Japan „Car design award‟

Source: www.toyota.com and “Hybrid vs Diesel”, http://townhall-talk.edmunds.com, Feb 15, 2005.


28

Additional Readings & References:

1. Michelle Vadeboncoeur, Prius unit sales history (USA), http://autos.groups.yahoo.com,

December 02, 2005.

2. Survey finds 15 of 31 ‘most reliable’ cars are Toyotas, www.boston.com, October 27, 2005.

3. Associated Press, Driving home need to go green, www.boston.com, October 20, 2005.

4. Toyota recalling Prius, www.cnn.com, October 14, 2005.

5. Most fuel-efficient cars for 2006, www.cnn.com, October 13, 2005.

6. Julian Edgar, The Story of Turbo'ing a Hybrid Prius, (Part 5, Final Result)

http://autospeed.drive.com.au, October 04, 2005.

7. John Laumer, Tree Hugger Interviews Mary Nickerson, www.treehugger.com,

October 03, 2005.

8. Toyota May Build Prius in California, www.edmunds.com, August 15, 2005.

9. Jeff Bartlett, Road Test: 2000 Toyota Prius, Are gasoline/electric hybrids ready to

transcend cult status? www.motortrend.com, August, 2005.

10. Most Hybrid Vehicles Not as Cost-Effective as They Seem, www.edmunds.com, June 01, 2005.

11. Chip Giller, The environment’s new bling, www.boston.com, April 21, 2005.

12. Hybrid vs Diesel, http://townhall-talk.edmunds.com, Feb 15, 2005.

13. Bruce Piasecki, Social Response Capitalism: Product Development Strategies for 21st-

Century Innovators and Investors, www.ahcgroup.com, January 2005.

14. Prius continues to win awards and media attention, www.toyota.com, 2005.

15. Toyota Prius Crash Test, www.newstreet.it, July 04, 2004.

16. Press Release, Lean, Green and Safe: Toyota Prius achieves Euro NCAP top rating for

occupant and child safety, www.euroncap.com, June 24, 2004.

17. The Clean Air Rules of 2004: The Next Chapter in America’s Commitment to Clean

Air, http://yosemite.epa.gov, April 14, 2004 (Major speeches delivered by US EPA

Administrators, 2001-2004).

18. Joshua Skov, Trend Watching, www.greenbiz.com, January 2004.

19. Gary S. Vasilash, The Toyota Prius: The Most Important ’04 Model? Yes – On Cars,

Automotive Design & Production, www.findarticles.com, October 2003.

20. Is Toyota Prius the Most Important 2004 Model? www.motortrend.com, November 11, 2003.

21. Press Release, Toyota Launches All-new Prius, www.toyota.co.jp, September 01, 2003.

22. Toyota Launches All-new Prius, www.toyota.co.jp, September 01, 2003.

23. Bruce Piasecki, Automaking and the New Century: Social Response Product

Development as Corporate Strategy, www.ahcgroup.com, June 2003.

24. Irene M. Kunii, Toyota Is Way Ahead of the Hybrid Pack, Can its new Prius crack the

mass market? www.businessweek.com, May 05, 2003.

25. Toyota Unveils New Prius at New York Auto Show, www.toyota.co.jp, April 17, 2003.

26. Yuri Kageyama, Toyota Unveils Beefed-Up Hybrid, www.cbsnews.com, April 17, 2003.


29

27. David Friedman, The Technology and Potential of Hybrid Vehicles, www.ucsusa.org,

January 03, 2003.

28. Michael Frank, Toyota’s Next Green Car, www.forbes.com, 2003.

29. Toyota launches Prius in the U.S., www.findarticles.com, August, 2000.

30. Jeremy Barnes, Toyota’s revolutionary hybrid gasoline/electric Prius: A real car in

every way…only smarter, www.electrifyingtimes.com, 2000.

31. Striding into the 21st Century, www.toyota.co.jp, 1998 Annual Report.

32. Prius - the world’s first petrol/electric hybrid passenger vehicle, www.caddet.org, 1998.

33. Hybrid Car History: Past, Present and Future, www.allabouthybridcars.com

34. Celebrity Hybrid Drivers, www.hybridcars.com

35. The Adoption Process, www.marketingteacher.com

36. Mary Nickerson, Driving Hybrids into the Mainstream, www.eere.energy.gov

37. www.toyota.com

38. www.toyota.co.jp

39. http://john1701a.com

40. www.priusonline.com

41. www.priuschat.com

42. http://auto.consumerguide.com

43. www.autotrader.com

44. www.cars-directory.net

45. www.google.com

46. www.en.wikipedia.org

47. www.answers.com

MKTG118 Toyota Prius

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