The Toyota Prius: the most important '04 model? Yes.

Toyota is diligently working to change the automotive landscape. Sure, the numbers aren't big now, but consider this: in Toyota's first full year of business in the U.S., 1957, it sold 287 Toyopets. Two years of similarly anemic sales followed. Toyota withdrew from the market. The Camry was the number-one selling car in America in 1997, 1998, 1999, 2000, and 2002. Don't let initial small numbers lull you into a sense that everything will remain the same. It won't. Which is why the Prius is so important to the industry.

Don't Play Craps with These Guys.

If you want to understand the future of automotive design and production--what you do for a living, not this publication-then you have to understand the Toyota Prius. The 2004 Prius. The second-generation. While some vehicle manufacturers are researching and developing, or hemming and hawing, Toyota, which is certainly on track to achieving a technology position that's commensurate with its quality and productivity positions (which ought to scare the hell right out of vehicle manufacturers everywhere), has been deliberately working toward bringing alternative power trains to the streets of the world. This began in earnest in the early 1990s, when the G21 committee was established. That's "globe" and "21st century." The goal was to determine how the company could develop and market vehicles that would have low emissions. Late in 1994, about a year after the committee was formed, a concept vehicle was developed called the "Prius," taken from the Latin word for before, as in "ahead," not something from the past.

The concept was shown to the world on October 27, 1995 at the Tokyo Motor Show. But prior to that and not on the world's stage, on June 30, 1995, the development of a hybrid vehicle was approved by Toyota corporate officials. It was code-named "890T." The vehicle would be powered with what was (and is) called the "Toyota Hybrid System," a system that would combine an internal combustion engine with an electric motor. The undertaking went in short order from being the sort of thing that committees do to a full-out product development program. In December 1995 it was announced that the hybrid vehicle would go on sale in Japan in two years' time. And on December 10, 1997, it did.

In August 2000, Prius was launched in the U.S. with an MSRP of $19,995. Prius sales in the U.S. were 15,556 in 2001. They increased to 20,119 in 2002. Certainly this is not a whole lot of cars by any measure. But there was Toyota (joined only by Honda with its Insight and Civic Hybrid), selling a compact car that was providing an estimated 52 miles per gallon in the city and 45 on the highway, learning not only about developing hybrid vehicles but about selling them in a market where horsepower tends to be king. (The '03 Prius has a four-cylinder DOHC, 16-valve engine that provides 70 hp @ 4,500 rpm that can be supplemented by a 44-hp permanent magnet electric motor for a total of 98 hp in action.)

Speaking of the launch in the U.S., Don Edmond, senior vice president and general manager of Toyota Motor Sales, admits, "Frankly, it was one of the biggest crapshoots I've ever been involved in. Not because we lacked confidence in the quality of the product. Or the logic of the concept. Or the significance of this breakthrough technology. The key was to convince consumers in the U.S. that hybrid technology was more than a science project. More to the point, the key would be convincing them that Prius was a real car." Arguably, other efforts by other companies did smack of Dr. Science and Rodney ("Remember: He knows more than you do"), or seemed to be put off to some point in the ever-receding Future.

This Is A Business (or, It Takes Money To Make Money).

At this point, there is an oft-heard objection regarding Toyota selling the Prius at a loss and subsidizing the cost of the vehicles. Here's Masao Inoue, Prius chief engineer, Toyota Motor Corp.: "Toyota has largely recovered its initial long-term investment in the first-generation Prius." Here's Dave Hermance, executive engineer, Regulatory Affairs, Toyota Technical Center, U.S.A.: "The product is profitable." How profitable is a question that's unanswered. At least at this point in time. Presumably, in the years ahead, that will be something that should become clear.

The Benefit of Doing It Yourself.

But there's something that needs to be understood about the development of the first-generation Prius, development that has led to a superior electric-gas hybrid technology that's designated "Hybrid Synergy Drive" (which is actually the third generation gas-electric hybrid system Toyota has developed). According to Inoue, "Back in the early '90s, when Toyota was developing a business case for hybrid technology, it was decided that the engineering program would need to be done almost entirely in-house. This meant that nearly every bit of design, engineering, parts production, and assembly would be done in-house. No partnerships. No contractors. No suppliers of major components or systems." In other words, when most vehicle manufacturers were looking for the ways and means to outsource the design, engineering and manufacturing of even conventional technology components and systems, the people at Toyota decided that it would be in their long-term best interest if they did the development.

Part of the rationale of this approach is that there is a consequent thorough understanding of not only the over-all system, but of the elements of that system. Consequently, when it makes business sense to outsource, then there is internal knowledge of what is doable, which means that there can be a clearer understanding between the customer and the supplier vis-a-vis realistic expectations. (It has also permitted Toyota to be in the position to derive revenue from licensing the technology to Nissan, which is expected to be selling its gas-electric hybrids in the U.S. in 2006.)

Inoue observes, "The Prius, unlike so many other vehicles in our lineup, shares almost no common parts of significant cost. It is a singular and unique vehicle in our lineup. Yet through in-house R&D we have been able to significantly reduce the cost of major hybrid components and sophisticated support systems." One result of that is that the 2004 Prius, which is classified as a "midsize" car as compared with its "compact" predecessor, a vehicle that boasts (relatively speaking) the same-size internal combustion engine but one that produces 78 hp @ 5,000 rpm and a permanent magnet electric motor that provides 67 hp for a total of 106 hp in action, is priced at $19,995. More car for the same price. And, with the exception of Honda, Toyota remains the only company with a serious commercial alternative propulsion program that extends beyond the lab and into retail dealerships.

Don Esmond asserts, "We are targeting a sales volume of 36,000 for the first full year. That's three times our sales target for Prius when it launched in the U.S." Still, not a huge number by the typical metric of midsize sales. But take these facts into account: (1) it is unlike any other midsize car so compared to others, that 36,000 is an enormous number and (2) the Hybrid Synergy Drive is slated to be put into a variant of the Lexus RX330 sport utility vehicle next year (mated to a 3.3-liter, V6 engine, not a diminutive 1.5-liter four-cylinder), and the RX330 is the leading SUV in its class. What's more, can anyone honestly think that Toyota won't be equipping more vehicles with the technology that it has worked so diligently to develop--technology that no one else has on the market-that we won't see the Highlander, Corolla, RAV4, Camry, and who knows what else equipped with hybrid systems? When the first Prius was launched, it included more than 300 patents. The second-generation vehicle has 370. It's intellectual property transformed into physical product, which is clearly a competitive advantage in the market.

From the Sublime to the Simple.

Dave Hermance notes that there are a variety of elements that contribute to the performance of the Hybrid Synergy Drive. (A brief take on how the hybrid performs. When starting from a stop, the battery will pass energy to a high-voltage power circuit, which passes it to an inverter, then to a motor that powers the wheels. When a cruising speed is reached, the Atkinson Cycle gasoline engine is deployed; it passes power through a splitting device: one stream powers a generator, which powers the electric motor, which passes the power to the wheels; the other stream directly drives the wheels. When there's sudden acceleration, then the battery power kicks in to supplement the power from the motor. During braking or coasting, energy is recovered from the wheels: the motor operates as a generator that puts power back into the battery.) One of the changes with the new system is the high-voltage circuit between the battery and the generator, which increases the voltage to the motor above the battery voltage. The batter pack still provides 21 kW, but it is smaller (which means they've created a higher power density) and less costly to produce. One of the objectives of the Prius is to have low emissions (it is rated under the California Air Resources Board as an SULEV (Super ultra Low Emission Vehicle) and as an Advanced Technology Partial Zero Emission Vehicle (AT-PZEV)). When the Prius is stopped, the engine isn't running. One of the concerns with cold starts is that because combustion isn't as efficient as it is when the engine is hot, there are greater emissions. So the Prius has a three-liter vacuum bottle that's used to store high-temperature coolant. The hot coolant is dumped into the engine when there's a cold start. Simple but effective.

Just a Car. Loaded.

Assume that the 2004 Prius doesn't have a Hybrid Synergy Drive. Assume that there are no nickel-metal hydride batteries. No electronically controlled continuously variable transmission. No inverter or high-voltage power circuits. That it is just a conventional car. Even then, it is a remarkable car. There's space for both people and cargo: 96.2 [ft.3.sup] of passenger space (as compared with 101.7 [ft.3.sup] in the Camry) and 16 [ft.3.sup] of cargo volume. There's the smooth monoform design for the five-door hatch that provides a coefficient of drag of just 0.26. There's throttle-by-wire rather than the conventional cable-type throttle. Air conditioning (using an electric-powered air compressor), cabin filtration, cruise control, heated side mirrors, power windows and door locks, and keyless entry are standard. And about that "keyless entry." That's certainly the case option. The driver has the key fob in a pocket or purse. When the driver grabs the door handle a sensor receives a signal from a transponder in the fob, and unlocks the door. To start the car, the fob is inserted in a slot in the instrument panel and a push-button is depressed. This is the first time Toyota has used this technology on a vehicle, with regard to driving performance, the vehicle handles well, thanks in part to the use of independent MacPherson struts with stabilizer bar in the front and a torsion beam with stabilizer bar in the rear and 15-in. all-season tires. The first-generation Prius is a compromise in many ways: looks, amenities, handling, performance. This is decidedly not the case lot the second-generation car.

The Future Is ...

Which brings us back to the start. The future of the auto industry is not going to be more of the same. It is not going to be the past repackaged. Presently, the market still demands bigger vehicles and higher horsepower. Government regulations don't seem to be inclined to dissuade that state of affairs. Presently, the attention that the Prius is garnering is related mainly to movie stars and to environmental activists--both groups certainly not of the mainstream. But there's something to consider. In January 1992, Toyota Motor Corporation announced its "Earth Charter." Among other things, it led to the G21 committee, which led to the Prius. In April 2000 the "New Toyota Earth Charter" was announced, and the "Third Toyota Environmental Action Plan" is underway, a plan that encompasses the period from 2001 to 2005. Within the charter, the number one action guideline is: "Always be concerned about the environment. Challenge achieving zero emissions at all stages, i.e., production, utilization, disposal." The first subset of that guideline states: "Develop and provide products with top-level environmental performance." The action items related to that are: fuel efficiency; exhaust emissions; clean-energy vehicles; recoverability; substances of environmental concern in products; automobile noise; air conditioning systems." One way of interpreting the Toyota Production System is through the commonly used phrase: "Plan your work and work your plan." Toyota has the plans. Toyota is doing the work. Beyond the Prius there is technology that was introduced to the world at the 2003 North American International Auto Show by Toyota Motor Corp. president Fujio Cho, Toyota FINE-S, or Fuel Cell Innovative Emotion-Sport. What it lacks in grammatical harmony it makes up lot in technological potential. Cho stated during the introduction: "The FINE-S represents what fuel cell cars will be like in the future. By using simple, modular parts and electric motors on all wheels, we can create vehicles that look fantastic and are high in performance in any configuration. We believe this freedom will help us design vehicles that will strongly appeal to the emotions and tastes of almost every driver." A concept, yes. But one that's backed by a plan. Can there be any question that companies that truly do the work--he inventing, developing, designing, engineering, producing, marketing, selling--will be the ones that will be successful, while those that do the science projects and spout the platitudes will be those who are left behind?