Forget Rebates:
The Hybrid-Car Markup
Dealers Tack on Thousands
To Price of Prius, as Wait Lists
Grow for Fuel-Efficient Autos
By SHOLNN FREEMAN
Staff Reporter of THE WALL STREET JOURNAL
June 10, 2004; Page D1
Rising gas prices are spurring consumer interest in the Toyota Motor Corp.'s fuel-saving Prius sedan, but car buyers who want one are in for a tough time.
In the latest sign that demand for the high-tech gas-and-electric car is growing, some dealers have begun tacking markups of $5,000 or more on top of the car's sticker price of $20,295 to $26,000.
With waiting lists for the vehicle now stretching six months or more, others have stopped taking deposits from interested customers. Spots on dealers' waiting lists are showing up on eBay where they are being auctioned for $500 or more.
The interest in the Prius is creating problems for Toyota. Its U.S. arm has a backlog of 22,000 orders that it cannot fill at the moment. It recently asked its Japanese headquarters for more Priuses, but is unsure how many it can get. Last fall, the U.S. allocation for the car was increased to 47,000 vehicles from 36,000. So now Toyota is yanking ads from cable television to avoid pulling into showrooms customers that it will only have to turn away.
The Prius and other hybrids face tight supplies.
The Prius isn't the only hybrid facing tight supplies. Honda Motor Corp., has a 10-day supply of its hybrid-powered Civic in inventory, far fewer than the 65 days' supply that car makers like to have.
The markups on the Prius are remarkable in an era of hefty rebates on conventional cars. In May, Toyota offered an average of just under $3,000 in incentives on its vehicles, according to CNW Marketing Research of Bandon, Ore.
Shopping for a Prius recently in the Dallas area, Bill J. Kelly, a 47-year-old sign-store owner, searched online and found a dealership in Plano that agreed to take a deposit. But the dealer warned Mr. Kelly by e-mail that he'd have to pay a "fair market adjustment" of $6,000 to $8,000 on top of the car's list price of about $26,000. "People are paying a premium for these vehicles," says the Plano salesman, Mazi Talebi, in a phone interview. "This is what the market is bearing for these cars."
The rising popularity of hybrids comes against a backdrop of the recent increase in gasoline prices, which now average more than $2 per gallon in the U.S. The higher prices have had an effect on vehicle sales, particularly large SUVs, which auto makers have had to prop up with bigger and bigger incentives.
Hybrids combine a gas engine with an electric motor and, in the case of the Prius for example, are capable of getting 60 miles per gallon in some situations. First introduced in 2000, the first versions of the Prius were criticized as too small and underpowered. Still, they spawned a cultlike following among some buyers. When the 2004 model arrived with increased interior room and a peppier engine, demand took off.
A Toyota spokesman says the company started to break even on hybrids two years ago and the models are profitable now, particularly as the cars sell in greater volumes. Toyota eventually plans to build hybrids of most of its products.
Later this year, Ford Motor Co. will roll out a version of its Escape SUV powered by a hybrid engine, while Toyota will offer hybrid vehicles based on its Highlander SUV and the Lexus RX330 SUV. Nissan Motor Co. confirmed this week it will offer a hybrid version of its Altima sedan in 2006.
Honda says it's taking a wait-and-see approach before increasing its supply of hybrid vehicles. "If fuel prices go down, they'll be some reduction in demand," says Robert Bienenfeld, senior manager of product planning for Honda and Acura.
Dealers around the country are scrambling to find vehicles to sell. Daytona Toyota recently bought a 2004 Prius from a wholesaler and is auctioning the car on eBay, with a buy-it-now price of $36,450. Sales manager Brian King says the dealership gets one or two new Priuses a month that they sell for list price plus $5,000.
Mr. King attended a car auction this week in Ocoee, Fla., where four used 2004 Priuses from a rental fleet were on the block. Dealers snapped them up for $28,000 -- more than the list price of a new model.
Write to Sholnn Freeman at
sholnn.freeman@wsj.com 
