Toyota Admits Tesla Model 3 Is Killing Prius Sales, But Doesn't See Growth In EV Sector

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It appears that Toyota still doesn't quite know what to make of electric vehicles (EVs). The Japanese auto giant was among the first to deliver a production hybrid vehicle to the public with the Prius. The Prius rode a wave of popularity starting with its first-generation and peaking with its third-generation.

However, as traditional internal combustion engines (ICE) vehicles have become more efficient and the availability of hybrids has expanded, Prius sales have started trending downward. And according to Toyota Motor North America CEO Jim Lentz, electric vehicles are also starting to blunt Prius sales. More specifically, Lentz calls out the Tesla Model 3.

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Fourth-generation Toyota Prius

In comments made at the 2019 Automotive News World Congress, Lentz confirmed that the Model 3 has had a "negative impact" on Prius sales. At its high point, the Prius family (which includes the Prius, Prius c, and Prius v) sold roughly 150,000 units per year in the United States. However, total Prius family sales totaled just 79,191 units (not including the Prius c) for 2018.

That data is backed up by comments made by Tesla CEO Elon Musk in early August 2018, when he revealed that the top vehicle traded in for the Model 3 is the Prius. The other four vehicles rounding out the top 5 (in descending order) included the BMW 3-Series, Honda Accord, Honda Civic, and Nissan Leaf.

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With the exception of the 3-Series, none of those vehicles are considered luxury vehicles, which most people would typically associate with the Tesla brand. However, Lentz says that Tesla has crafted its own product category. “[Elon Musk] is creating an entirely new segment of vehicles. And by that, I don’t view Tesla products as luxury products," said Lentz. "Those of us who only separate the world between luxury and non-luxury, we’re missing the point. Tesla has created this new category of a technology-driven product."

With that being said, don't expect for Toyota to jump on the electric vehicle bandwagon anytime soon. Although the company has produced limited numbers of RAV4-based EVs, the company doesn't currently have a production EV in its stable. Instead, the company has focused its energies on gasoline-electric hybrids and hydrogen fuel cell-based vehicles. According to Lentz, "There not much growth in that industry."

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Tesla Model 3

He cites range anxiety as being the primary factory, and also points to gas prices that are as little as $1.69 currently in some parts of the United States. However, it could be well argued that Tesla EVs for the most part have alleviated the fears of range anxiety for many Americans. Take the Model 3 for instance; the mid-range battery option (rear wheel drive) allows owners to drive 264 miles per charge. The long-range battery option (all-wheel drive) boosts the range to 310 miles.

It'd be hard to argue that the typical American would need to travel more than 264 miles on their daily commute to work and back home. And when the vehicle is charged overnight, you start the next day off with that same 264- or 310-mile range. Add in the vast Supercharger network and it's easy to see why Tesla sold nearly 115,000 Model 3 EVs during 2018.

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Lentz went on to add:

I worry a little bit we are over-stimulated in our belief that (battery) EVs are going to take over the world quickly. Today, if you look at just alternative(-powertrain) vehicles (hybrid, plug-in hybrid, BEV- or fuel-cell) there are 94 nameplates out there. And they sold about 600,000 (units) last year. But only seven sold more than 2,000 a month.

On the sale front, Lentz does have a point. According to Wards Auto, the EV market in the United States ballooned by over 100 percent during 2018, but that growth was almost completely attributed to Tesla. Other manufacturers are not as committed to diverting resources away from their bread and butter ICE sedans and crossovers to take Tesla head-on in the market. Even General Motors, which sells the Chevrolet Bolt EV with a range of 238 miles, isn't "winning" in this category. According to GM CEO Mary Barra, the company loses money on each Bolt that it sells -- a vehicle that starts around $38,000 before a $7,500 federal tax credit is applied.

Toyota seems reticent to sitting on the sidelines until it makes financial sense to go full-bore into the EV market. However, by that time, who knows if Tesla will have achieved an increasingly dominant position in the market or if the company will implode under a confluence of factors as its tries to support a quickly growing customer base.