Green Car Diaries Part 1: Toyota’s Hybrids In The Driver’s Seat

Green cars are the next big thing for major automobile companies. With oil prices shooting higher and concerns of exorbitant gas prices at the pump, almost all major automotive companies have started rolling out their versions of electric cars. The U.S. electric auto industry is also heating up and sales are currently on an all time high. According to a report by Bloomberg, electric-vehicles, including hybrid, plug-in and pure battery models have grown at the fastest clip in the U.S. auto market in the first quarter. Sales of these models rose 49 percent to 117,182 vehicles in the first quarter, from 78,527 a year earlier. ^[1]

It seems that in the next 15 years, any car manufacturer without a line of electric vehicles will be left behind in the fight for market share. Therefore, most car manufacturers have started taking concrete steps towards building and marketing their portfolio of green cars that employ innovative concepts developed by these companies. In this series, dubbed Green Car Diaries, we take a look at the portfolio of major global car manufacturers in this field and how they are approaching this market. We take a look at their products, their positioning in the market, the prospects of the success of their strategy and the impact on the market price. We pick up one company in each article and this time it’s Toyota, the Asian giant.

Toyota competes in the U.S. market with North American automotive majors like GM (NYSE:GM), Ford (NYSE:F), Chrysler apart from the Asian car manufacturers. We currently have a $93 price estimate for Toyota’s stock is about 5% above the current market price.

See our full analysis for Toyota’s stock here

Toyota’s offerings in the electric cars segment

Toyota has been slightly slow in taking to electric vehicles but now seems to be working at it with a vengeance. The company has been taking its expertise to hybrid cars and is applying it to new concepts of electric cars which are expected to start production in the next three years. Toyota’s hybrid car, the Prius, has perhaps been the biggest success story in the hybrid car segment. The Prius initially debuted as a compact sedan globally in 2001 and has since then sold over 2.5 million cars. It is now into its fourth generation and has been converted into a mid size hatchback. It was also the third best-selling U.S. car line last month.

Toyota plans to launch its first electric vehicle by the end of this year. It will be a four-seater with a range of 65 miles (100 km). Toyota is also planning to launch a smaller Prius version called Prius C which will have a 1,500 cc gas-engine along with Hybrid Synergy Drive components of original Prius, in a smaller, lighter, more aerodynamic vehicle at a substantially lower price. A plug in Prius has already been on the cards for quite some time now. ^[2]

Toyota’s positioning and stock impact

Toyota has been looking to offer the green factor in its cars without comprising on performance. This has resulted in the company focusing more on hybrid cars, and it has established itself solidly in this field. The company’s hybrid products are the most sought after in the market and will continue to drive market share for Toyota in the coming years. However, from a long term perspective, Toyota might miss out on the experience and expertise in electric cars by not focusing on them now. We feel that, in the short term, Toyota’s efforts in the hybrid space should continue to drive the bottom line and spell out good returns for its stock holders.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Gas near $4 boosts U.S. demand for electric drive vehicles, Bloomberg, 4 April, 2012 [↩]
2. Toyota planning electric car and smaller plug in hybrid for sale in America next year, Gizmo Magazine, 15 Nov – 2011sa [↩]