Toyota Prius Sales in Trouble

Despite an uptick in sales in May, sales of the most popular hybrid sold in America, Toyota Motor Corp.’s (NYSE: TM) Prius, have continued a sharp decline. So far this year, through five months, they are off 10.8% to 88,452. As more and more car brands add hybrid models, the assault on the success of the Prius continues to rise.

The Prius sales represent a particularly difficult challenge for Toyota, since it is the Japanese company’s best-selling car in the United States.

The Prius hold 93% of the American “hybrid/alternative energy” car sector, according to Kelley Blue Book. That makes it an attractive target for competitors, many of which have entered the market with hybrid models of their most popular cars.

Honda Motor Co. Ltd. (NYSE: HMC) has a hybrid version of its CR-Z. General Motors Co. (NYSE: GM) has its electric Volt, although its sales have been poor. The Ford Motor Co. (NYSE: F) Focus has an electric version.

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The Prius does have two important advantages. It has had years to build its reputation as the hybrid of choice for hundreds of thousands of Americans. Toyota has superb ratings for most of its cars in important research studies from the likes of J.D. Power and Consumer Reports. And Toyota has been smart in offering several versions of the Prius.

The base model of the Prius has a base price of $24,200, which makes it competitive with many mid-sized sedans. It has the strong advantage of getting 51 MPG on the highway, according to Toyota. The Prius C is promoted as a small car ideal of city driving. Prius has a plug-in model that sells for $29,000. Toyota claims this version gets 90 MPG in highway driving. And the Prius V is a larger car, promoted for family driving.

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One important sign of Toyota’s effort to reverse the drop in Prius sales is a set of aggressive incentives, which serve to hurt the profit margins of the nameplate. Toyota currently offers 0% financing for 60 months on the base Prius, and the same for the Prius Plug-In and V models.

Toyota may control the hybrid market for now, but there are plenty of signs that its dominance is slipping.

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