The Once Hot Prius Falters As Gas Prices Fall

Feb. 12, 2007 — -- Jonathan Keyes surveyed the Santa Monica Toyota dealership the other day and was surprised by what he saw. Row upon row of unsold Priuses, Toyota's supposedly hot-selling hybrid.

"When I came into the lot, I won't lie," he told us. "I was absolutely surprised. I thought that maybe I could just test drive [a Prius].

"But the car salesman who was helping me said, 'which one do you want?'"

It is a scene that is being replayed across the country these days, as consumers, once accustomed to paying more than the sticker price and waiting half a year for a Prius, are now being told to take their pick, which could bring better deals for those looking to purchase the hybrid car.

"There's no question that demand for the Prius is not as high as it was, say, a year ago," explained Jesse Toprak of the auto Web site Edmunds.com.

There are several reasons for this, but the main one involves the price of gasoline.

All summer long, when you couldn't find a Prius to save your soul, the price of a gallon of gasoline hovered in the neighborhood of $3. But steady declines in gas prices have brought the average price per gallon down to around the $2 mark -- and that's a problem for Prius.

"The No. 1 reason people will buy this vehicle is gas mileage," said Brian Weinberg, general manager of Grossinger's Toyota in Chicago.

Toyota anticipated strong market demand and ramped up Prius production -- pushing supply past demand. Today, it takes an average of 30 days to move a Prius off the lot. Adding to the glut, Toyota responded to repeated consumer complaints that they just couldn't find the car. Unfortunately for dealers, Toyota's response came a tad late.

Sales of Prius have been flat for a year, but according to Jim Press, president of Toyota Motor North America, that's no problem.

"Now we can start to satisfy consumer demand and start to sell in the mainstream," Press contended. "Obviously, what we're trying to do is to bridge from the vehicle that was attractive to environmentally conscious customers to the mainstream."