A Case Of Prius Envy

Peter Kessner, a devout environmentalist, bought a Honda Civic hybrid four years ago to show everyone that he wants to save the planet. The only problem: no one noticed, since, other than the hybrid badge on the trunk, it looked like a regular Civic. So he traded it in for a Toyota Prius. Suddenly, strangers began stopping him on the street to ask about his hybrid, with its space-age styling and miserly mileage. "That's a big part of why I bought the Prius," says the Floral Park, N.Y., retiree. "It opens up conversations, and I push my theory that we've got to do our best to conserve." The Honda, on the other hand, didn't deliver what Kessner craved: green street cred. "If I'm driving a hybrid," he says, "I want people to know it."

Customers like Kessner have left Honda with a bad case of Prius envy. In the low-octane race for the environmental high ground, Honda is running a distant second to Toyota—despite the fact that Honda was first to sell a hybrid in America and remains a darling of the green movement. But to the average car buyer, Honda's hybrids are all but invisible. With 110,565 sold so far this year, the Toyota Prius is outselling Honda's entire lineup of gas-electric Civics and Accords by five to one. Honda is also pulling the plug on its hybrid Accord because it failed to attract buyers with its confusing formula of high horsepower, high price and so-so mileage. Honda execs now admit they weren't prepared for the power of the Prius. "The Prius has become synonymous with hybrid; it's the Kleenex of hybrids," says Honda senior VP John Mendel. "We feel Honda should be synonymous with the most fuel-efficient company in America."

That's why Honda is trying electroshock therapy on its hybrids. It's working on a new high-profile hybrid—a Prius fighter that analysts expect will have the highest mileage on the road when it arrives in 2009. Code-named the "Global Small Hybrid," Honda's new gas-electric model won't be a version of anything else in its lineup. Instead, Honda execs say it will be a five-passenger, small family car priced under $22,000. This time Honda won't make the mistake of wrapping its hybrid in the sheet metal of its everyday cars: instead, analysts expect the new Honda will have the larva styling the Prius pioneered—which now embodies the green- car look. Honda will also outdo the $23,000, 60mpg Prius on price and mileage in hopes of attracting 100,000 buyers a year—three times what the hybrid Civic sells.

Toyota isn't standing still. Toyota's U.S. president, Jim Press, tells NEWSWEEK that his company is looking to create an entire Prius car line, with different models all carrying the Prius badge. "We have a chance to expand the Prius model line and create a sort of sub-brand of Toyota," says Press. Industry sources say Toyota is developing three Prius models—a small car, a family car and a crossover utility vehicle that will begin rolling out in 2009. All will be sold inside the Toyota showroom, but in a separate area, like its youth brand, Scion. "Ten years ago people tried the Prius because it was a Toyota," says Press. "Today, people are buying Toyotas because we have the Prius."

With sales of hybrids expected to rise 35 percent this year, the race for the green is heated. By 2011, car buyers will be able to choose from 75 hybrids, up from 14 today, according to J.D. Power and Associates. U.S. hybrid sales will jump sevenfold to 1.7 million vehicles in 2015, from a quarter million last year, predicts auto researcher Edmunds.com. General Motors, which dismissed the Prius as a curiosity a few years ago, is now rolling out four hybrids and generating buzz for its Chevy Volt plug-in hybrid electric car, which it says will hit the road in 2010. (Toyota responded with its own test of a plug-in Prius in Japan in July.)

The big save-the-planet smackdown is between Toyota and Honda, which together control 90 percent of the U.S. hybrid market. Initially, Honda was out front with its 70mpg Insight, which looked like a two-seat transporter to the future when it arrived in December 1999. By contrast, the first Prius, which landed in America eight months later, seemed like a geeky science experiment. Neither car generated much notice, with gas prices then about a buck a gallon and the SUV craze at full throttle. (Honda pulled the Insight from the market last year.) But in 2003, Toyota changed everything when it redesigned the Prius. Hollywood embraced the Prius as the enviro It car, and it was off to the races. Four years later, the Prius is still going strong. "When we look back," says Press, "the Prius will be seen as the Model T of modern automobiles."

Meanwhile, Honda, with its practical engineering culture, was dutifully developing a "suite of hybrids" aimed at three distinct buyers—the Insight for the hard-core tree-hugger, the low-key Civic for the introverted environmentalist and the racy Accord for the horsepower jockey who wanted a guilt-free power trip (and only modest mileage improvement). By dropping hybrid systems into its popular family cars, Honda figured it had a formula for taking the technology mainstream. Then war broke out, gas prices soared and Al Gore let us all in on the inconvenient truth. As Honda's sales sputtered, it learned its own inconvenient truth: hybrids are as much about posturing as propulsion systems. "Owning a hybrid is all about saying 'Look at what I'm doing for the world'," says auto analyst John Wolkonowicz of Global Insight. "If you can't say that, the whole purchase is a waste of time."

Now you can find Honda's hybrid engineers tooling around the streets of L.A. at night under cover of darkness, test-driving what they hope will be their comeback car. "We see the Toyota guys driving the same course," says Honda's Mendel, laughing. They may share the same road, but Honda and Toyota still have different ideas when it comes to hybrids. To Toyota's Press, "everything will be a hybrid someday." But Honda is hedging. It will put hybrid systems only into its smallest cars; the rest of its lineup, starting in 2010, will be outfitted with high-mileage "clean diesel" engines.

Will tire kickers ever swoon over Honda's hybrid? Only if it sends a clear message that it's the greenest car on the planet. "Most people don't even know Honda has hybrids," says Virginia management consultant Mike Freidberg, whose family has outgrown the two-seat Honda Insight he bought in 2003 as a way to strike a blow against terrorism by helping our oil independence. He's considering a Ford Escape hybrid, but he'd prefer a "swoopy" Honda hybrid that gets noticed. "I'd be interested in Honda's new hybrid if it lets me preach about not funding terrorism." Now there's a model that might finally be the answer to the Prius: the Honda Preacher.