Toyota may slash Prius prices to meet Insight challenge

For years, Toyota with its Prius hybrid has enjoyed a sort of monopoly in the US market as far as environment-friendly vehicles were concerned. Until, Honda launched Insight (See: Honda unveils cheapest hybrid, the Insight)

Suddenly, the hybrid car race was thrown wide open, especially since Honda, in a clever marketing strategy in times of recession, introduced the Insight at price below $20,000. Suddenly, the Prius was no longer the first choice of the environment-conscious American. The Insight gets fewer miles per gallon, but it would be nine years before the premium paid for the Prius is made up for by savings on fuel at current prices. (See: Honda Insight hybrid emerges most affordable vehicle in US)

However, Toyota is not a company to sit silent. According to a newspaper report, the world's No.1 auto manufacturer is looking to slash prices of the Prius to take on its smaller rival. Toyota spokesman Yuta Kaga declined to confirm or deny a Nikkei newspaper report today that said the starting price of the Prius will be cut to 1.89 million yen ($19,250) from 2.33 million yen. The Insight retails at the lower price.

The Prius saw sales climb 25 per cent last year in Japan to more than 73,000 units, compared with 2007, the news report said. Toyota has said it will offer a redesigned version of the car in May with a selling price of between 2.05 million yen and 2.5 million yen.

Toyota hopes to spur demand before the introduction of tax breaks next month on environmentally friendly vehicles. The incentive will likely cut taxes on a 2 million yen hybrid car, weighing around 1.3 tons, to about 150,000 yen, the news report said. Last week, Toyota announced plans for the development of a new, more affordable hybrid car as early as 2011 that will sell for around 20 per cent to 30 per cent less than the current Prius.

Honda aims to sell 5,000 Insights a month domestically and has said it hopes to sell 100,000 in North America in the model's first 12 months. The Insight goes on sale in the US this month. Toyota's US target is 180,000 units of the new Prius in its first full year.