Hybrids soar via word-of-mouth

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In California, green-conscious superstars such as Charlize Theron, Tim Robbins, Susan Sarandon, Marcia Gay Harden, Keisha Castle Hughes and Robin Williams are seen stepping out of Prius hybrid cars at the Academy Awards as millions watch.

These stars, who can afford any vehicle under the sun, chose the earth-friendly Toyota Prius-EPA-rated at 60 mpg/city and 51 mpg/highway-to be ogled in. Toyota Motor Sales USA sold 53,991 of the gas-electric engine hybrids last year, every model it could squeeze out of production. That was more than double the 2003 sales of 24,627. Plans call to produce about 100,000 Prius sedans this year.

About 30% of current sales of the Toyota hybrid, which has a manufacturer's suggested retail price of $20,875, are in energy-focused California. Other high-profile celebrity endorsers such as Tom Hanks, Don Cheadle, Ed Begley Jr., Leonardo DiCaprio and singer Sting help the environmental cause-and Prius sales at the same time.

Toyota partners with Global Green USA, the U.S. affiliate of Mikhail Gorbachev's non-profit Green Cross International, and BIG Imagination Group, Culver City, Calif., to coordinate events such as the Oscars and Emmys. The carmaker, however, says it doesn't solicit or pay for the celebrity endorsements.

"Quite the opposite. It's the passion of people in Hollywood for the environment. They're really doing this because deep in their hearts they believe in it," says Jim Lentz, group VP-marketing at Toyota Division. Mr. Lentz is trying to evolve the Prius brand through a more emotional connection with future buyers, and he notes that "word-of-mouth advertising works extremely well" for Prius.

Automakers expect to sell more than 200,000 hybrid vehicles this year in the U.S., according to auto analyst J.D. Power & Associates. Anthony Pratt, senior analyst with J.D. Power in Detroit, predicts Toyota will take 60% of that market, led by Prius.

"The real advantage of Prius is the statement buyers make driving it," Mr. Pratt says. "It's important for them to be seen in a hybrid-the only true hybrid. We expect Prius to do very well. Toyota says they will sell 100,000 units this year. We have no reason not to believe them."

More people know Prius improves fuel economy and helps keep the air clean than when the brand launched, Mr. Lentz says, noting, "The first generation were early adopters; now we will cross the chasm into the mainstream."

Toyota sold 5,600 Priuses during the 2000 launch year, mostly to people who love new gadgets and technology. Prius came on the heels of American Honda Motor Co.'s 1999 debut of the two-seater Insight. In 2003, Honda added the Civic Hybrid, the first high-volume, mainstream hybrid, and this year a gas-electric Accord rolled out.

Production lags have put Prius advertising in a holding pattern, Toyota marketing executives say. More than 20,000 orders sit in dealer banks, leaving some customers waiting six months for delivery, Mr. Lentz says.

long waits a problem

The long waits have prompted Toyota to cut back on advertising, not wanting to rile customers.

Toyota spent $5 million to advertise Prius during the first three quarters of 2004, via Publicis Groupe's Saatchi & Saatchi Los Angeles, Torrance, Calif. That compares with $29 million both in the 2000 launch year and in 2003, according to TNS Media Intelligence.

Honda, meanwhile, spent $11 million in the nine-month 2004 period on the Civic Hybrid, and the same amount for full-year 2003, the hybrid's launch year. Rubin Postaer & Associates, Santa Monica, Calif., handles. So if there's such a backlog, why not step up production?

"The engine's fairly complex, so there's not as much flexibility to move production around," Mr. Lentz responds. "With the Corolla you can move product around far easier plant to plant." The hybrid has more complicated lead times since it uses specialized parts and requires specially trained workers, he says.

"We'll play [marketing] by ear until production volume increases," he says. "We continue to rely on word-of-mouth and Web site visitors."

Marketing is not at a standstill, however.

Some magazine advertising has run, and Toyota conducted an "Engines of Change Tour" in 15 U.S. cities last fall, introducing its second-generation Hybrid Synergy Drive to opinion leaders including government, media and environmental groups. The technology combines a 1.5-liter, four-cylinder gas engine and an electric-drive motor.

It's a good time to be green and automotive. Anxiety about uncontrolled energy costs and pollution are starting to fuel consumer appetites for hybrid cars. Government incentives also are helping. A $2,000 federal tax exemption is on the books, and many states have tax credits.

"As we go more mainstream, it may take government assistance to help people buy hybrids," Mr. Lentz says. "It's the only answer that provides solutions for both gas [prices] and pollution. That's the true magic of hybrids."

Carmakers are gearing up to accommodate. About 50 hybrid nameplates will appear in the next five years, according to the Automotive Technology Group. That's nearly 1 million units a year, from 85,000-100,000 today.

Building on Prius' success, Toyota Motor Sales USA will introduce two hybrid sport-utility vehicles this year: the Lexus RX 400h and Toyota Highlander. Toyota's top-selling Camry reportedly will be offered as a hybrid in 2006.

launch delays

The Lexus hybrid seen at auto shows nationwide is slated for an April debut, touted as the world's first luxury SUV hybrid. First announced at the 2003 North American International Auto Show in Detroit, the Lexus hybrid has faced launch delays. According to Toyota officials, a "late 2004" launch target was set early on. "But it was just that-a target. Once we got into the final development stage and then the pre-production phase [November 2004], we were better able to pinpoint the launch date," says Cindy Knight, environmental communications administrator at Toyota Motor Sales USA.

The Highlander goes hybrid in time for June sales. Both vehicles will run on V-6 engines, demonstrating the adaptability of Toyota's hybrid engines. Highlander already has 100,000 "hand-raisers," or consumers who've expressed interest in the new hybrid, say Toyota insiders.

Ford Motor Co. and General Motors Corp. also have announced hybrid initiatives. The 2005 Ford Escape Hybrid launched this year; Ford plans to sell 20,000 units in '05. GM is introducing hybrids into its truck and small car platform, which it calls a bridge to fuel cell and other alternative fuel technology.

In addition, GM and DaimlerChrysler's Chrysler Group in December announced a joint initiative to build full-size hybrid SUVs by 2007-2008. The vehicles named were the Chevrolet Tahoe and GMC Yukon in late 2007, followed by the Dodge Durango after that.

But the race is clearly between Honda and Toyota at this stage.

"Strong true hybrids are really what people want," Mr. Lentz says. "We will continue to market this as a solution."

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