Dealers only taking '05 orders

I am doing the same. We have no idea what the MSRPs are for a car that's still 5 months away. And, we all know that with the lists we have for delivery and the average cars we get monthly, it's best to take names and numbers and just call when the name comes close to the top.

If I were most of you getting all pissed off with Toyota and their allocation of this car, I'd buy something else if you were in need of a car right away. Corolla, Camry, whatever. On a personal level, they have handled this poorly. Prius is the bane of my entire existence. Toyota's been begged, asked, advised and should be embarrassed to NOT have made the customer database more consumer-oriented with the color and package folks want so that they KNOW what YOU as the buyer wants, not just your damn name and phone # and email addresses. Right now, they should open that database to us for all of the important specs -- what YOU as a consumer, wants. Color, option package, and date of order at the ONE dealership you want to go get your car from. And, start building the cars in order of their ORDER.

They allocate units based on average sales. However, this is a car with a different sort of demand. And, it's highly impossible to earn a lot of them without a 2 year head start! Toyota -- why will you not respond to this demand? WHY are you continuing to stick your heads in the sand on this one issue? The consumers -- the BUYERS and the customers come first -- NOT your allocation system.

I will probably get in trouble for this post, but I am so tired of keeping silent and watching this cross-country frustration. :?

Dianne

 

Thanks, Dianne, for your valuable feedback from the dealers' side.

I'm glad you mentioned that Prius is not a normal car.

I think that you're absolutely right and Prius is quite special case.

My takeaway is:

(1) A lot of ubnormalities with Prius could be explained by the fact that Toyota is losing money on every Prius they sell. Not just 1 or 2 thousand USD, but, probably, We are not there yet, isn\'t it clear?


Toyota bet is BIG, so the prize - de-facto standard (and royalties) for next-generation cars.

Silver lining for Prius buyers: it seems we have a good deal...

 

Just to clarify, I've read here and in articles that this was true only of the Prius Classic. Toyota is making money off of the '04 Prius -- though they may still be subsidizing it to some degree (i.e., not passing all the cost onto the customer.)

 

Toyota play the game which NOBODY else can afford/risk or copy. Why? Because they have patience and financial muscle to do that. Because they know that Prius will pull sales of profitable Lexus lineup and (eventually) will allow them to reach critical mass of sales and breakeven point.

We are not there yet, isn\'t it clear?

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If you MAKE money, if you found a golden mine, it's pretty straitforward - to increase capex, ramp up production. Battery shortage or not...
That the stuff people get promotions and bonuses for.

On the other hand to APPROVE and REAPPROVE balooning LOSS budget, manage PROPERLY balance between losses and marketing plan points is completely different ballgame. Not a lot of people will risk their jobs eight time higher sales (and losses) or not...

 

I don't buy it, it seems to me that they are losing a lot of money on new Prius too (you can call it a *subsidy*, financially it's the same).

Do not forget, Toyota is one of the best-managed companies in the world.
I think it'll be unwise to assume that they can not handle high growth in a relatively small (Prius represents less than 2% of Toyota global sales) segment of their production.

 

My 2 cents worth: I don't believe Toyota is losing money on the Prius. They'd be in deep doo-doo with GATT if they were "dumping" cars on the U.S. However, based on my subjective evaluation of cost vs value of this car, I do think they have cut their profit margin down to the bone, in order to penetrate the market faster.

So why the backlog? Two points: 1. Clearly, they didn't realize what a winner they had on their hands. They based production on sales of the Classic, but we, the public, decided the '04 has crossed over from not-quite-there-yet to exactly-what-we-want. 2. Toyota puts quality first, and ramping up production too fast might compromise quality. A drop in quality now could scuttle the entire program.

As for the poor way they are handling the shortage / allocation, perhaps they don't understand how impatient we westerners are. Toyota knows how to make cars, and takes a long-term view of business matters, but does not fully understand the western culture.

In 1988 I went shopping for a new car. I made a list of what features I wanted. The Toyota dealer told me, "That's not how you buy a Toyota. We sell every Toyota we can get before it even reaches the lot. If you want a Toyota, you give us a deposit, and when your name gets to the top of the list, the next one is yours. We'll make an effort to get you what you want, but no promises!" In contrast, the Honda dealer went looking, found me exactly the car I wanted, and had it brought here. At one point I said I'd take a different color, because it was available, and he refused to sell it to me. He said he knew I would not be happy with a different color, and I had to wait 2 days for mine to come. And he was right.

As a result of this experience I was reluctant to switch from Honda to Toyota, but I just had to have this car.

Toyota builds great cars, but could learn a lot from Honda about distribution and customer relations.

 

Good post.
And, that said, OooOO wait till we all see how much the Highlander Hybrid will cost. I think they will be waaaay higher than expected because of the situation with Prius. My gut tells me.

 

dianne- i tend to agree with you, though i would not guess as to the exact reasoning. i have a feeling that a loaded highlander will approach the upper 30's. i thought of getting on the list for that but it's just more than i want to spend.

on the other hand, i did get to drive a prius today at a dealer who has a demo (it had regular plates on it so i suspect it belongs to one of the salespeople or something) and at least i know i am waiting for a terrific car! what a kick to drive.

 

Regarding the allocation system:

. It appears like allocation is based on each dealer's Prius sales historical record. I can't think of a better reference.

. All major dealers appear to have a list and at any point in time you can see where you stand on that list. If you keep close tabs you can watch the dealer's allocation and match that with where you stand on that list at any given time (that was my way of checking to assure nobody was cutting in line ... nobody was).

. Each time the dealer gets cars in, the dealer calls the first person on the list to see if there's a match. If the first person prefers to wait for a different package then the second person is called, and on and on.

I don't have a problem with this approach. Other ways of handling it that come to mind would either be administrative nightmares or open to favoritism (some folks being escorted to the head of the line because they know someone).

Regarding Profit and availability:

Toyota says they are selling the Prius for more than it costs to build. Well, I believe that. But manufacturers have to not only get manufacturing costs back, they have to also get R&D, engineering, warranty, and other fully absorbed overhead costs back as well (not to mention a profit for investors). I very much doubt this is happening at Toyota with the Prius. Imagine some U.S. agency attempting to prove that Toyota is violating dumping laws. Any comptroller worth his or her salt can make a division of any given large company look any way he or she wants it to look to an outside observer (and to most inside observers).

One thing for sure, Toyota is getting massive free marketing and advertising benefit from the Prius. If there were enough Prii available to meet all demand, I strongly suspect the car would quickly dissappear from the news (why would Toyota want to let that happen?).

So, if Toyota is, in reality, losing money with every Prius sold, then it's not in their best interest to crank up their assembly lines, especially if other more money making cars must be bumped out of the way in order to match the Prius needs.

As long as Toyota sees more gain from limiting the flow of Prii out the door than gain they would see by greatly increasing production of the Prius, I suspect availability will continue to be just as tight as it is now.

In the mean time, I think those of us who already have our very own 2004 Prius should rejoice at the fact that we're probably driving the best bang-for-the-buck car out there on the market today.

 

"Isn't there a 10 month waiting list for that car?" is usually the words out of someone's mouth when I pull up. Can you imagine the marketing dollars required for this type of publicity? Historically, hybrid vehicles have cost 30% more than comparable models as I'm sure the Lexus RX400h will be in the neighborhood of $50k. Toyota is probably losing money on the base models and breaking even on the premium packages. More power to them. Low marketing dollars, incredibly high demand, and gearing up for mass production to fulfill all current pent up demand and a consumer focused marketing program to create additional demand (Now that they know who is buying the cars to confirm their market analysis).

Not knowing much about the Prius before I bought one, I don't know if I would have jumped in so fast if there were 10 Prii on the lot when I went for my test drive. Now that I"ve put 1000 miles on it in two weeks, my E500 and Land Rover remain parked int he garage.....yes, yes I am one of those evil SUV owners. Hopefully, I will be SUV-NO-LONGER in a few more days!

 

The whole discussion of how much it costs to build the Prius is so complicated. I think anyone would be crazy to think that Toyota has already recouped their R&D costs on the new Prius. So in that sense Toyota has not made a profit yet.

The interesting question is what is the marginal cost to build more Priuses. In other words, is the cost to Toyota to build 1000, 10,000, or 100,000 more Priuses per year higher or lower than what they get for them from their dealers. Even there, I'm not so sure the prius is cash flow positive; building more requires large investments in tooling, dies, all kinds of customized manufacturing equipment. Those kinds of investments are typically recouped in years not months.

In that sense Toyota does have incentive not to overbuild; if they were to invest too much in manufacturing equipment and then demand dropped, they would lose bigtime because that customized manufacturing equipment wouldn't be utlized.

So the ideal production level for Toyota is probably whatever level will let them eventually catch up with demand.