NEW YORK/NAGOYA -- Toyota Motor is scrambling to maintain its stature as a manufacturer of environmentally friendly vehicles in the U.S. as its Prius and other hybrid vehicles are no longer being recognized as green cars.
Having established itself as the hybrid leader, the Japanese automaker faces challenges as environmental regulators increasingly favor electric vehicles over hybrids.
The Japanese automaker unveiled its new Prius Prime plug-in hybrid at the New York International Auto Show that opened Wednesday. Bill Fay, vice president of Toyota Motor Sales U.S.A., stressed the enhanced electricity-only driving range, saying "over 50% of Americans can get to work and back home without using a drop of gas." Overhauled for the first time in four years, the new version boasts an electric range of 60km or more, marking a significant improvement from the existing version's 26.4km.
Currently, less fuel-efficient models such as sport utility vehicles and other larger autos are popular in the U.S. market thanks to cheap crude oil. But Toyota's decision to unveil its new plug-in hybrid first in America rather than anywhere else in the world highlights the urgency of its green vehicle push in the country.
In the state of California, the biggest auto market in the U.S., Zero Emission Vehicle regulations require that clean vehicles account for a given percentage of autos sold. Automakers unable to comply have to either pay fines or buy credits from other automakers that meet the requirement. Toyota had long been a seller of credits, but in 2015, it became a net buyer of credits for the first time ever.
With hybrids no longer meeting certain regulations, Toyota apparently bought credits from electric vehicle maker Tesla Motors and others. California plans to remove hybrids from its definition of green cars in 2017. Toyota has to sell more electric and fuel cell vehicles, as well as plug-in hybrids, to comply with the regulation going forward.
Fuel cell car faces obstacles
Aware of this headwind against hybrids, Toyota rolled out the Mirai fuel cell vehicle in the U.S. last fall. But with a lack of hydrogen refueling stations and lower production volume hampering the momentum, the model's sales are not as strong as initially anticipated. Hence hopes for plug-in hybrids heightened as the company seeks to "catch up with regulations," a Toyota official said.
The existing Prius plug-in, rolled out in 2012, has been struggling. Toyota initially targeted annual global sales of some 60,000 units, but cumulative sales over three years have been only about 75,000. The North American market still accounts for 60% of all unit sales, but with the plug-in version's price higher than regular hybrids, the model has not widely penetrated the market. A complicated charging equipment setup is also to blame. A Toyota staffer conceded that selling plug-ins is not as smooth as selling hybrids.
Meanwhile, electric vehicles -- on which Toyota has not focused much -- are a growing presence in the U.S., as environmental regulators promote them and American manufacturers sharpen focus on them. General Motors will release an electric model with a range of about 320km per charge as early as this year. Tesla will add medium-price offerings to its line-up of high-end models. Against such a backdrop, the new Prius plug-in's longer electric range may not impress consumers.
When the Prius debuted as the world's first hybrid, California drivers -- known to be particularly sensitive about emissions and natural resource issues -- gave a major boost to raising the model's profile. But amid drastic market changes in America, one success story does not guarantee long-term prosperity. The automaker's ability to sustain growth with its green vehicle strategy is being put to the test.