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Will the All-New 2016 Prius Jump-Start Toyota's Hybrid Sales?

By John Rosevear – Sep 12, 2015 at 1:22PM

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Cheap gas has made hybrid cars a tough sell. Sales of Toyota's Prius are down 17% this year. Will the all-new Prius be able to turn that around?

The all-new 2016 Toyota Prius was revealed at an event in Las Vegas. Source: Toyota.

Toyota's (TM 0.85%) all-new 2016 Prius was revealed at a splashy event in Las Vegas earlier this week. It's expected to arrive at U.S. dealers early next year. But with gas prices in the U.S. stalled under $3 and buyers turning away from hybrids, how will it fare?

Hybrids are a tough sell right now
Toyota is indisputably the world's hybrid-car leader. It has sold about 8 million since the first Prius was launched in 1997, far more than any other automaker. Hybrids account for roughly 14% of Toyota's global sales.

But lately, sales have been falling, and not by a little bit. U.S. sales of the Prius fell 11.5% in 2014, and they're down another 17% this year through August. 

To some extent, the Prius -- like other sedans, hybrid and otherwise -- has been hit by a shift in consumer preferences toward car-based "crossover" SUVs. That trend was well under way before gas prices fell sharply last year. But there's no question that cheaper gas is making it easier for American consumers to buy larger vehicles. 

The 2016 Prius' interior is all-new, but its general layout will feel familiar to owners of the outgoing model. Source: Toyota.

It's also making it harder for Toyota and other makers of hybrids and plug-in vehicles to argue that it's worthwhile to pay a premium (or give up features) in order to have a hybrid car. Sales of "plug-in" vehicles like General Motors' Chevrolet Volt and Nissan's all-electric Leaf have fared even worse than the Prius' over the last year, while sales of big SUVs and pickups have soared.

But Toyota -- and other automakers -- need green cars in their lineups
Yet for Toyota, and many other automakers, hybrids are a longer-term play. Oil prices may be low, but fuel-economy rules are still set to tighten around the world over the next several years. Toyota needs the Prius. And it'll still sell, albeit likely in lower numbers unless gas prices rise again.

The all-new model is making a bid to be a bit more than just a "green car." Toyota is touting the new model's fuel economy improvements, as you'd expect -- but it's also talking up the 2016 Prius' driving dynamics, luxury features, and styling. Its shape is more dramatic than the outgoing car's, bearing a strong family resemblance to Toyota's hydrogen-fuel-cell Mirai, unveiled last year. 

The basic shape of the all-new Prius is similar to its predecessor's, but its styling details are more dramatic. Source: Toyota.

The new Prius is the first model based on Toyota's brand-new New Global Architecture, a modular set of designs that Toyota hopes will reduce its costs and improve reliability as it is gradually rolled out across the company's global product portfolio.

So will the 2016 Prius sell?
The short answer is that of course it will. The Prius has a broad and loyal following, and enthusiasts should welcome the new model. But total sales, at least in the U.S., might be subdued for a while.

That's unlikely to be a major problem for Toyota's bottom line. Strong sales of Toyota's crossover SUVs have mostly offset the sales slumps the company is seeing with the Prius and some other sedan models. But unless gas prices jump, the new Prius is unlikely to be setting sales records anytime soon.

John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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