Prius Production Heading To American Shores

by Bertel Schmitt

January 16th, 2013 11:29 AM

prius production heading to american shores

Toyota sold 236,659 Prii (all kinds) in the U.S. alone in 2012, all of them imported from high-yen Japan. This is a major drag on the car’s profitability. Long import routes are a hindrance, offshore production also tends to impact the granularity of options and trims. U.S. production of the Prius was expected for last year, it did not happen. Yesterday, Shigeki Terashi, head of Toyota Motor North America Inc. came as close to announcing as possible that Toyota plans to produce the Prius in North America. He didn’t really say it, and you needed to be Japanese to hear it.

After the Nikkei [sub] asked Terashi whether he would move Prius production to N.A., he answered that Toyota intends to “make cars where they are popular.” The Nikkei takes it that the “comment suggests the firm is looking to gain a cost edge over rivals.” This could be just for local assembly, with the powertrain coming from Japan, however, “the North American unit will also consider locally manufacturing key components for hybrids, such as batteries and motors,” Terashi told The Nikkei.

#BertelSchmitt #Japan #Prius

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KixStart on Jan 16, 2013

Bertel, Can you estimate the impact, in $$ per Prius, of the unfavorable currency exchange? I understand transoceanic freight is on the order of $700.

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- Tresmonos on Jan 16, 2013
  
  That would be insanely difficult to do without knowledge of the overhead costs of each perspective plant, along with any piece cost savings one would achieve with re-sourcing suppliers (whether they look to locally sourced components for trim, etc). Bertels comments about trim content pertain to this - depending on the markets that their Japanese production exports to, along with the capacity of their Japanese plant determines what level of complexity meets your business case.
  
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- L'avventura on Jan 16, 2013
  
  This is actually easy to calculate in terms of revenue. Before the US Housing Market crashed, the Japanese yen traded at around 120 yen to dollar near the end of 2007. Since the, due primarily to the US QE moves(printing money), the dollar has weakened and the yen has strengthened. At its peak it hit around 76 yen to the dollar. The average transaction price of a Prius is around $26K in the US. Meaning before the yen sky-rocketed Toyota brought in around ~3.2 million yen in sales. At the yen's strongest, at 76 yen/dollar, we are talking about just 2 million yen from an average US Prius sale. So ~1 million yen in revenue for Toyota in Japan due to the strong yen at its peak. So around a third, from its peak to its weakest point. The yen has weakened considerably since Abe took power this last December as his government is pressuring the BOJ to hit a 2% inflation target (meaning more QE). Its now trading around 89 yen/dollar. Since Toyota has been moving production from Japan to overseas in the last couple years, at this point an overly weak yen is also not in Toyota's best interest as well. Renault-Nissan's Carlos Ghosen said he considered 100 yen/dollar 'neutral'.
  
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- KixStart on Jan 16, 2013
  
  @L'avventura OK. I didn't realize it was that simple. And I hadn't noticed the recent fall in the yen. Thanks.
  
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- L'avventura on Jan 16, 2013
  
  @Kixstart Its simple in terms of straight revenue. I don't want to give the oversimplified impression. Supply chain is very global in modern manufacturing, and lots of the different currency risks come into that. There are obviously other factors, and companies keep foreign reserves and only convert that back to their domestic currency at strategically ideal times. But you can get the general idea of how much fall in revenue by looking at relative FX rates. Let's look at something more recent, a more concrete example. That is the recent *slight* weakening of the yen to mid-high 80s (yen/dollar), and *slight* strengthening of Korean Won. "Japan's Toyota Motor can now in principle offer a discount of more than 10 percent to its U.S. customers without losing profit, whereas South Korea's Hyundai Motor has to raise its dollar price by over 5 percent to keep up with the won." Reuters: http://www.reuters.com/article/2013/01/14/us-korea-currency-idUSBRE90D14L20130114
  
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Mandalorian on Jan 16, 2013

The Prius is one of the most reliable cars on the market. Watch that drop, now that it is made in the US.

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- Bob on Jan 16, 2013
  
  Yes because we are all so stupid, fat, and lazy here in the states.
  
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- Ponchoman49 on Jan 17, 2013
  
  Only if you believe CR. Out in the actual real world they are not the most reliable after the first year or two in ownership. A trip to the local Toyota dealer's service bays double confirm this. There frequent "as is" trips through the auction block on older examples also gives me pause.
  
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- Herm on Jan 18, 2013
  
  @ponchoman49 in taxi service they are considered the most reliable car in NA.. but I doubt taxis make it to 6 years before falling apart.
  
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Mor2bz on Jan 16, 2013

I do like to see a J on the door before the serial number myself.

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- Volvo on Apr 10, 2013
  
  Exactly. It is hard to determine the current truth of it but I still remember the autos built in the US during 1970 to 1990. In the 70s a friend once asked me what US automakers could do to slow down the adoption of Japanese and German brands by the then "trendsetters" who were all buying foreign cars. My facetious answer was that perhaps the only hope was for the UAW to ask the ILU to damage the cars as they rolled off the ships. That being said I had an 89 5.0 mustang that cost less per mile over 19 years of ownership than any other car I owned and a Windstar van that was also pretty inexpensive if you don't count the Engine, transmission and A/C system that Ford replaced under warrantee.
  
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Silverkris on Jan 18, 2013

It's totally appropriate to have the post picture of a Prius overlooking downtown San Francisco. Prius vehicles are very, very ubiquitous in the SF Bay Area, and especially in Silicon Valley.

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