The document summarizes the launch strategy for the Toyota Prius hybrid vehicle. Some key points: - Toyota launched the Prius in late 1997 in Japan, selling 2,000 units per month, and in 2000 in the US, selling less than 6,000 units per year initially. - The Prius retailed for about $21,500 in Japan and $20,000 in the US, roughly equivalent to average car prices at the time. - Toyota's strategy was to sell the Prius at cost initially and reduce costs over time through its production system to increase profits as hybrid technology gained acceptance. - Each Prius sold helped advertise the new technology and Toyota brand, with a focus

1. MIT OpenCourseWare
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15.912 Technology Strategy
Fall 2008
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2. Launching the Toyota Prius
Professor Jason Davis
MIT Sloan School of Management

3. TheThe PriusPrius Launch StrategyLaunch (the facts)
(theStrategy facts)
Retail Price = $25,000
-Fixed costs: assume dev. costs of $2B and 12K units/yr for 8 yrs =
$20,833/unit
-Var costs: assume $3500/unit; tot cost/unit = $24,333
-Avg Vehicle Price in 1994 = (net sales/ #units) = $20,650
-Survey Customer WTP: 20% premium, ($20,650 + 20%) = $24,780
-Fuel Savings/ year : U.S.=$248 German/Japan=$360
-BEV for 20% premium w/ fuel savings: U.S.= 16yrs G/J= 11yrs
Launch Strategy
‐Must be reliable and safe to gain traction in the mkt
‐Launched too early could “spoil” customer perception of new technology = better to wait a year
than launch with uncertainty (although the 1st mover will determine customers perception)
‐Assume competition’s development timeline is equal to yours, but you can beat them with costs
and quality (TPS) in the long run
Price Strategy
‐Sell at cost initially and “create” margin through TPS cost reductions in future years/ possible
cost reduction in key parts (batteries)
‐Each car sold is a moving billboard (free advertising for new tech and Toyota)
‐Marketing to only 12,000 purchasers per year = very pinpointed market segment where key
message is “pro‐environment”

4. Launch of Prius
Japan US
• Timing: late 1997 • Timing: 2000
– Beat Honda Civic hybrid
• Quantity: 2K/month • Quantity: <6K/yr
• Price: 2.15m Yen ($21.5K) • Price: $20K
– Avg Toyota car price 1995 – Avg domestic car price $18.9K
$24.9K

5. All hybrids = 1.2% cars sold in US,
2005
Toyota has 52% of hybrid market

6. Looking forward
• Next session: Organizational Dynamics
– More on Overload, Real‐Time Decision Making,
Simple Rules, Rhythm, Pacing