Toyota’s Next-Gen Hybrid Tech and 2009 Prius

SNB reader and economist Giacomo Ponzetto sent a very interesting email questioning some of my thinking in An Increasing Priority: Fuel-Efficient Automobiles. One of the points he raised was whether this was the best time financially to buy a Toyota Prius. His point is that Toyota is gearing up to release the third generation of its Hybrid Synergy hybrid-electric technology. It’s also redesigning the body of the 2009 Prius.

We know very little about Toyota’s third-gen hybrid technology as yet, but what’s leaked out is that it’s supposed to offer better gas mileage and more power. The car is apparently also undergoing a redesign that may make it one-inch wider and three to four inches longer (according to various reports). Toyota may also be increasing the number of trim levels, and may eventually offer other vehicles with the Prius badge, including some sort of small minivan.

There is precious little information directly attributed to Toyota about any of details. In fact, there are a great many conflicting reports. One of the more recent stories from Edmunds Auto Observer is, however, worth a read. The story offers more detail than any other story I’ve read on this subject, and it pegs the launch date of the redesigned Prius as January 2009. A May 2008 Road & Track story also sheds some light on the topic. The rest of the links flesh out additional information, including what Honda is doing:

This Popular Mechanics image, which may be a photo illustration, is likely not based on the actual final version of the new Prius. It appears to be an artist’s rendition of the 2009 Prius based on published descriptions of the new dimensions of the vehicle and changes to the nose. The refinements shown to the rear end, while attractive, are probably not in the cards. This Road & Track slideshow shows what it purports to be camouflaged 2009 Prius. If these images show something like the real deal for 2009, it’s a very mild cosmetic upgrade that might be nothing more than a mild refresh while we wait for the big change in 2010.

The Right Time to Buy?

Toyota, Honda, Nissan, GM, and Ford are just some of the world’s auto manufacturers that are gearing up in a big way to deliver major new hybrid line-ups and also plug-in hybrid vehicles over the next couple of years. 2010 is the likely arrival timeframe for many of these efforts. So, should you wait?

In my opinion, no — not if you’re already in the market for a new vehicle. The Prius and Honda Civic Hybrid are both viable vehicles right now that will save you money and cut back on harmful emissions right away.

The only steep-demand tax that consumers are paying Toyota right now is that dealers aren’t dealing off the suggested retail price of any of their hybrid models. In many U.S. markets, they’re completely sold out of hybrids but they’re continuing to sell them sight unseen “off the boat.” Customers don’t even get a pre-purchase test drive. Plus you’ll likely have to wait a couple of months to take delivery. But bottom line, the prices haven’t gone up yet.

Even if Toyota intends to hold the price on lower-end trim levels of the Prius, I have my doubts about whether it will be able to do so. Some of the factors that go into my thinking include the weakness of the dollar against the yen and other currencies, the cost of transportation, reduction or elimination of tax incentives, building demand for hybrids, possible limits on the production levels for the less expensive models, the worsening U.S. economy, and rising costs of manufacturing, both in the U.S. and overseas. In the 1990s, Toyota dealers in my area routinely slapped dealer mark-ups on their high-demand vehicles of as much as $2,000 above retail. Even though Toyota frowns on such practices, it could happen again.

What about the new technology? Might you have buyer’s remorse with the 2008 model?

I can’t say you won’t. I may feel that way if I buy a 2008 Prius. But there’s always something better around the corner. The real question is, is there be a significant reason to wait?

It appears that Toyota will be launching a new Prius in January. But will it be truly the next-gen hybrid technology, or is it a stopgap update while Toyota attempts to ramp up lithium-ion product? The Edmunds Auto Observer story implies that it’s all coming in early 2009, except the lithium ion batteries. The Road & Track story implies something that’s more likely. Toyota may offer three different levels: Base, Luxury, and Eco. That fits the company’s current situation. So, in that scenario, here are my guesses about the equipment levels for each trim level:

The Base model may have the current mpg levels and possibly the 1.5-liter engine with the existing nickel-metal-hydride batteries. It will be stripped way down to keep the price down. Some of the uplevel options won’t be available at all.

The Luxury model may get the 1.8-liter engine with the nickel-metal-hydride batteries. Gas mileage may suffer a little, but performance will be improved. This will be the most popular Prius sold, and it will probably be priced around $28,000 to $$29,000 depending on options.

The Eco model could have lithium-ion batteries if Toyota and its battery partner Panasonic can work out the production issues (and that’s a big if, in my opinion). The Eco model may have a June or July release date. This model could offer better than current Prius gas mileage with better than current Prius performance (on demand, but with a loss of gas mileage). But you’re going to pay for it. I expect this model to sell for as much as $32,000 to $33,000.

All three models will have the redesigned body style.

Of course, all of this is just my guesswork. The reality could be something very different. We might, for example, see only the new body design and Toyota’s improved Hybrid Synergy electric motor. The main advantage of that new motor is an increase of power output. If the weight is about the same as the old motor, or if it’s miraculously less, then Toyota should be able to run the car to higher speeds and for longer durations without switching on the gas engine. That would deliver notable improvements in fuel economy around town. Would Toyota dub that level of improvement its third-generation hybrid system? It just might. I’m pretty sure that, originally, Toyota had intended to factor lithium-ion batteries into that mix. But we’ll see.

I do think that Toyota will eventually get all this right. It’s trying to please both the eco and performance crowds. It did the same thing in miniature with the 2008 Highlander Hybrid. That’s why I bought the lighter, smaller 2007 model. I didn’t need a slightly bigger, heavier design. If the 2009 Prius tries to be more things to more people without significantly improving its HEV technology, then it might not offer the vaunted gas economy improvements that Toyota has leaked to the press here and there — at least, not until 2010.

In the end, it comes down to money. How many years will it take to pay-back your hybrid technology if the 2009 Prius costs more? Gas prices are very high right now. What about the loss of savings right now? I’m not an economist or an accountant. All I know is that, for me, it’s a good time to buy this year. If the cost of oil continues to climb, demand will ramp up that much quicker. And usually, prices of goods are determined by supply and demand.

What do you think? If you’re making a move to a new vehicle with better fuel economy, should wait for the barrage of new offerings waiting in the wings, or jump on what’s available now? There’s no right answer, but I’m interested in people’s insights and opinions. Feel free to post your comments or send me an email.

2 Responses to “Toyota’s Next-Gen Hybrid Tech and 2009 Prius”

  1. theburb Says:

    I’ll have to think about this more, but I have a few items for you to ponder now:

    1) You better than most know when its time to buy a new computer. Do you wait for some new technology, or buy now. If you have a need then you buy now. There is ALWAYS something new coming around the corner. Unless there is going to be an order of magnitude improvement in the near future don’t wait. You need a car, so it is the right time.

    2) Re-sale value. If the next generation of Prius is really a LOT better than the current model that will impact resale value. When you go to trade in your 2008 Prius in 2012 or 2013, the used car market could be focused on the improved 2009 model. I don’t think you will see a huge improvement with the 2009 model just an incremental one, so it shouldn’t have a large impact on trade-in or resale value. Probably less than $1,000 of an impact.

    3) I am still on the fence about hybrids, though I am excited about GM’s plug-in hybrid, the Volt. Unfortunately, the Volt has its own issues (http://miniburb.wordpress.com/2008/05/27/gm-volt-too-expensive/). Long term environmental impacts and cost due to the batteries is my main concern. So maybe looking toward a Honda Fit or Civic or Toyota Carola with a high mileage, but tradition drive train might be better in the long run.

    Personally I look forward to hydrogen powered cars, where the energy to remove hydrogen from water comes from solar power. I think this is a very promising long term solution. I just hope I live long enough to see it.

    Scott (with two T’s)

  2. Scot Says:

    All good thoughts, Scott. I agree that the purchase decision based on price/performance and also time of use (when gas prices are high) is important. Whether you’re talking cars, computers, or plasma TVs, the considerations are really the same so long as you fully understand the technology. I probably know automotive technology better than computers, to be honest. I can explain to you in some detail how the internal combustion engine works, whereas, I’m not sure I can do quite the same at the electron level with a computer. And bottom line, I’ve been keeping up with automobiles for longer than I’ve been keeping up with computers.

    It does appear to me that the next=gen Prius will be a mild to moderate upgrade for 2009. But I don’t think that’s 100% definite. Toyota had originally planned for a major upgrade. My belief, though, is that the fact that lithium-ion batteries will apparently not be part of the equation means that the full advantage will not be delivered. But I am reading tea leaves. I could be wrong.

    I completely agree with your points about resale value. I always buy vehicles with that thought in mind. Resale value considerations are actually a bit less important with computers, since the investment is lower and they tend to depreciate even more quickly than cars do. They also don’t last as long. Technology is moving much faster for PCs than it is for cars. (This is one of the reasons I’m attracted to Macs, which have longer effective lifespans.)

    Finally, about the Volt and plug-ins. I’m a bit of naysayer right now. It’s not that I’m against experimentation with electric vehicles, or electric-primary vehicles (because some of these will be hybrids with smaller gas engines more as back-ups), but I remain a little skeptical about the timeframe. Also, since the cost of electricity is rising rapidly, and for the most part we are burning coal or oil to make electricity (or nuclear), I’m not sure of the true advantage — at least from a long-term perspective. Finally, I’m not fully convinced that the utility of such vehicles (the number of miles between charges, the performance on the highway, and so forth) will make them useful to a wide segment of the auto-buying public. I do think there will be a segment that’s fine with it, but it may require too much adaptation from the market place to be viable for auto makers. Because of all these things, I doubt we’ll see plug-ins that are successfully mass marketed before 2015. I’m not even sure that’s likely. But I’d love to hear why I’m wrong about that.

    I don’t have complete faith in hydrogen. I’m not sure it’s going to happen. On the other hand, it remains the leading technical alternative to what we have today. My main hope is that government and industry put the serious time and funding into the R&D required to unearth a truly workable alternative. The time to get real about that was a couple of decades ago. We have a lot of catch-up to do.

    — Scot

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