Toyota Motor Company: Launching Prius

9-706-458
REV: DECEMBER 7, 2006

FOREST L. REINHARDT DENNIS A. YAO MASAKO EGAWA

Toyota Motor Corporation: Launching Prius
“Should we accelerate the launch schedule for Prius?” Hiroshi Okuda, president of Toyota Motor Corporation (TMC), pondered, when the bullet train left Tokyo Station and began to gain speed. The train was headed for Nagoya. In Toyota City (about 30km away from Nagoya), ameeting to discuss the plan for Toyota’s first hybrid vehicle was scheduled for the following day. His engineers had proposed a plan to introduce the car at the end of 1998, with expected production of 1000 units per month for at least the first three annual cycles. The engineers viewed this target as aggressive since they still had significant technical problems with the hybrid powertrain andsaw mass production as an even greater challenge. The first prototype developed in November had not even moved for 40 days. Okuda, appointed to presidency a few months earlier in August 1995, believed the company had to change. He felt that this car had the potential for radically altering the image of TMC, but was concerned that another automaker might bring a hybrid vehicle to the mass marketfirst. Should he push for a more aggressive timing of launch or, given the technical problems, perhaps delay the program to ensure a smoother launch? And how might this program allow him to make progress on his more general vision for TMC?

The Automobile Industry
In 1994 global motor vehicle production was 49 million units. The United States was the largest national market with about 9 million newregistrations, followed by Japan, with over 4 million registrations. The total number of motor vehicles in use worldwide was 644 million units. 1 Thirty-five million passenger cars were produced, up 4.1% from the previous year, but down 2.6% compared to 1990. Automobile sales were cyclic, falling during economic downturns and rising during periods of strong economic performance. Prior to 1970,competition in the industry was largely regional with manufacturers developing designs suited for their region. For example, U.S. consumers who faced lower gasoline prices and drove on wider streets purchased larger, more powerful vehicles than their European and Japanese counterparts (see Exhibit 1). The 1970s were a difficult but defining period for the industry, especially in the United States.Due to gasoline price hikes following the Arab oil embargo in 1973 and the Iranian revolution in 1979, U.S. demand for smaller, more fuel-efficient cars grew, and automakers rushed to offer such models.
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Professors Forest L. Reinhardt and Dennis A. Yao, and Masako Egawa,Director—Japan Research Center, prepared this case with the assistance of Jeff Aguero and Adam Frost. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproducematerials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

706-458Toyota Motor Corporation: Launching Prius

Japanese producers expanded their shares in the United States, while the Big Three suffered from a lack of expertise in small cars. A host of new technologies was introduced in passenger cars in the 1980s. These included new engine technologies, sophisticated electronic controls, and more extensive safety features. There was also increased use of new...