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Toyota Prius sales lag in China

BEIJING --When Toyota Motor Corp. announced two years ago that it would produce Prius hybrids in China, it seemed like a sure bet.

The air in China's biggest cities is thick with pollution, and the government is pushing up taxes on gas guzzlers. China appeared to be an ideal market for Toyota's gasoline-electric car. But sales of the Prius have been extremely disappointing.

"We started with a target of 3,000 a year, but we're running short of that," said Yoshimi Inaba, an executive vice president of Toyota and its top executive in China. Prius sales are currently running at around 100 a month, or less than half the rate required to meet the annual goal.

The Prius's poor showing, an anomaly in Toyota's otherwise dynamic performance in China, suggests that energy conservation is not a priority among China's newly rich consumers.

A fuel-saving car here may not confer the same status that it does in the United States, where Toyota sold more than 100,000 Prius cars last year.

The Prius's difficulties in China also may reflect the contradictions between the government's goals regarding fuel-efficiency and some of its policies.

In China, Toyota charges more than $40,000 for the Prius, or nearly double the base U.S. sticker price, in part to cover the import duties on the hybrid powertrain and other high-tech components shipped from Japan.

Yet Chinese consumers prepared to spend that kind of money for a car don't get advantages or perks, such as tax breaks, access to less-crowded lanes or easier parking.

"There's no incentive, monetary or social," Inaba said in an interview here during the Beijing auto show. "We think it's a long-term investment."

Toyota was among the latecomers to China, but the automaker is growing fast in the country, which is expected to overtake Japan this year to become the world's second-largest car and truck producer after the United States.

In an increasingly competitive arena, Toyota has climbed to sixth place among carmakers in China from 10th place last year. With its Chinese joint-venture partners, it expects to sell 300,000 vehicles this year. "We have set next year's sales growth at more than 400,000 units, recognizing this market's growth," Inaba said.

"China's future is also Toyota's future," he said Friday at the Beijing show, where the new Toyota Corolla sedan was shown for the first time outside Japan.The10th-generation Corolla will be a crucial model for Toyota in the Chinese market, where small cars account for just over 60 percent of total sales.

Luxury car sales also are growing rapidly, with Chinese consumers favoring stretch sedans and richly-equipped models that convey wealth and power.

Despite the weak demand for the Prius, Toyota plans to bring more hybrids to China as part of its overall plan to sell a million hybrids annually in the next decade. Other automakers such as General Motors Corp. also want to offer hybrids in China. GM expects to start producing a hybrid model with its Shanghai-based venture partner SAIC Motor in 2008.

"We do have a pretty strong hybrid program planned," Nick Reilly, president of GM Asia Pacific, told reporters at the car show.

With Beijing prodding automakers to introduce cleaner cars, automakers are proposing a variety of solutions. Mercedes-Benz organized an overland Paris-to-Beijing drive to showcase its new Bluetec clean diesel technology. Nissan Motor Co. executives, noting that the quality of Chinese diesel fuel is poor, say it's not clear which technologies will prevail.

Toyota is in talks with Chinese government officials about establishing incentives to encourage consumers to buy cars with fuel-saving technologies.

You can reach Christine Tierney at (313) 222-1463 or .

Toyota Prius sales lag in China
Japanese Import Car, New & Used Car, 2007