Prius Sales in Japan Expected to Plunge as Government Incentive Program Ends

For more than a year now, government subsidies have help bolster sales of the Prius hybrid in Japan. As the incentive program draws to a close, however, most analysts expect sales of Toyota’s most successful hybrid model to plummet in that market.

Tokyo Toyopet Motor Sales Company’s head of new car sales Hiromi Inoue said, “A collapse in sales is unavoidable. The daily pace of orders for the Prius is already dropping. We are bracing ourselves for the coming crisis.”

He said Prius sales across Toyopet’s 66 dealerships averaged about 20 per day in June. That number has fallen to about eight per day. The Japan Automobile Dealers Association predicts that sales industry-wide will fall 23% during the six-month period beginning in October compared with the same six-month period in 2009.

Domestic sales of the third-generation Prius hybrid surged last year after the government announced its incentive plan. Under the plan, new car buyers could apply for a 250,000 yen ($2,963) subsidy if they traded in a vehicle 13-years-old or older. Buyers who opted not to trade in their older vehicles could apply for a 100,000 yen subsidy.

Domestic deliveries of Priuses during the first six months of 2010 reached 170,426 and accounted for 20% of Toyota’s total domestic sales. Inoue said the recent slump in Prius sales has resulted, in part, from a backlog in production. He said buyers who order their Priuses now won’t receive their orders in time for them to take advantage of the incentives. He said that most other Toyota models have faster delivery times and should still qualify for the incentive program.

Tokyo-based IHS analyst Yoshiaki Kawano said, “Toyota dealers will likely try to minimize the sales drop with their own incentives.”

Incentive programs in other countries resulted in sales slumps when they were terminated. Germany’s 5 billion euro incentive program boosted sales by 23% last year, but that surge was followed by a sharp decline in new car registrations once the program ended. According to the VDA auto industry association, new car deliveries plummeted 29% during the first seven months of this year.

The U.S. CARS program resulted in an estimated 700,000 new car sales last year and was a boon for Toyota, which accounted for more than 19% of those sales. Without the benefit of the incentive program, Toyota’s U.S. sales fell 3.2% last July compared with last year. Prius sales in July plunged 26% compared with the same month in 2009.

According to’s director of industry analysis, Jessica Caldwell, stable gasoline prices have led to a decline in sales of more fuel-efficient vehicles, including the Prius.

Kawano said Toyota’s December launch of the updated Vitz compact vehicle may help offset the decline in Prius sales. The Vitz was the country’s third-most popular gasoline-powered vehicle during the first half of this year.

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