San José, Costa Rica, since 1956

Toyota Focuses on Education, Not Hibrid Sales

Toyota Motor Corp., the world’s most profitable automaker, and other makers of gasoline-electric vehicles would be forgiven for bypassing Costa Rica when choosing new markets for their hybrid cars.

Demand for new vehicles accounts for only about 30% of the total market here, vehicle taxes are high and gas is lower grade. Surely the cost of selling and ensuring the vehicle’s compatibility in the country would be too high and burdensome to consider when sales in other markets such as the United States are surging.

Apparently not for Toyota. The Japanese automaker introduced its Prius hybrid into Costa Rica exactly one year ago, even before the government reduced one of the three taxes on vehicles, and has sold 40 of the sedans so far, according to Toyota’s distributor in Costa Rica, Purdy Motor S.A.

Toyota is not making a profit on the Prius, which sells here for $31,900, because it is promoting “eco-friendly vehicles,” says Hellmuth Solé, executive supervisor for regional training for Latin America and the Caribbean at Toyota.

Toyota and Purdy decided to sell the car here “to inform people we need this type of technology to help save the planet, and that there is a company here that wants to protect the planet and Costa Rica,” Luis Mastroeni, Purdy’s head of marketing, told The Tico Times.

Toyota’s decision to sell the Prius here is a reflection of its overall strategy, which aims to change the way people think and not just sell cars, says auto expert Graeme Maxton, a director at the Economic Intelligence Unit who has authored books on the global auto industry.

The company’s bottom line isn’t suffering from this long-term strategy. With net income at Toyota rising to $12 billion in fiscal 2005, which is more than half Costa  Rica’s $19 billion economy, Toyota can afford to bypass instant profits to promote its image as an eco-minded company.

“Toyota has such a strong position in the industry it can afford to take a long-term perspective and that means it can afford to sell and market the Prius in smaller, developing markets with a long-term view to sales,” Maxton said. “Toyota, unlike almost every other car maker, actually plans 20-30 years ahead. Toyota wants to make money, but it also wants to produce and sell integrated and innovative ways to move people that are environmentally and economically responsible.”

Purdy has joined forces with a local project featuring visits to high schools and colleges to raise awareness among students about the sharp decline in the population of Costa Rica’s leatherback turtles. After the presentation of the turtle project, the Prius is introduced as a tool to educate youngsters about the importance of reducing pollution to save the planet, Mastroeni said.

Sales of Toyota’s Prius and Honda Motor Co.’s hybrid models have been rising in the United States, partly as record oil prices prompt consumers to consider more fuelefficient vehicles. Prius sales in the United States rose 9.3% to 11,177 units in August.

Honda, the world’s second-biggest seller of hybrids after Toyota, reported a decline in sales for August for its Civic Hybrid, although sales from January through August for the car rose 14% to 21,841 units.

A hybrid system is a combination of a gasoline-fueled combustion engine and a battery-powered electric motor. The electric motor is used to power the car at slow speeds and is recharged through the use of the brakes and the gasoline engine. As the car gains faster cruising speeds, the gasoline engine starts to kick in.

While hybrids are not completely emission free as are electric vehicles, there is no need to create an infrastructure of recharging stations – a problem that has stunted widespread use of electric cars – because the car can recharge itself.

The Prius in Costa Rica is similar to the European model, Toyota’s Solé said. The model cuts fuel consumption by 40%, according to Toyota’s Web site. The Prius emits 90% lower emissions than comparable gas-powered cars, Purdy’s Mastroeni said.

Toyota’s smaller competitor Honda is considering the viability of introducing hybrid models into Costa Rica and other Caribbean and Latin American countries.

Under study is whether the vehicle can run on the lower grades of gas and how to recycle the battery, said officials from the Japanese company’s distributor in Costa Rica, Franz Amrhein & Co. S.A.

Technical issues aside, it’s the Costa Rican government that really needs to work to improve tax incentives to make introduction of hybrids viable for automakers like Honda, said Franz Amrhein, part owner and head of sales at Honda’s distributor.

In May, the government halved one of the three vehicle taxes on hybrids with engines of 2 liters and smaller, from 30% to 15% in a bid to encourage the import and sale of more environmentally friendly vehicles (TT, June 2). This reduction is not enough, according to Amrhein.

“From the distributors’ point of view, the tax reduction is not enough to give an incentive to the end user,” Amrhein told The Tico Times. The amount of savings from a lower gas bill is unlikely to cover the extra cost of purchasing the hybrid car, he said.

The Ministry of Environment and Energy didn’t reply to questions regarding the tax incentives.

Tax incentives in the United States have helped sales of Toyota’s Prius, Honda’s Civic Hybrid and other vehicles with emissionreducing technology. The United States has a federal clean fuel vehicle tax credit of $3,150, and in California, qualifying hybrids can drive in the carpool lane with just one occupant, according to the California Air Resources Board. The San Francisco Bay Area has an incentive program of $2,000 to help with the purchase of less-polluting vehicles including hybrids, and there is free metered parking for these cars in various Californian cities, the board said in an e-mail response to questions.

Purdy’s Mastroeni reckons that with further tax incentives in Costa Rica he could increase Prius sales to about eight from the current three a month.

For now, the focus of the Prius is on educating young people about the importance of technology that can contribute to a cleaner planet and country.

“Toyota is thinking about how cars and transportation will be in the future and is happy to help educate people in its vision,”

 Maxton said.


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