Toyota Planning 20% Production Reduction As Hybrid Subsidies Subside

Hybrid cars are selling like hot cakes in America, Europe, and Japan, thanks in large part to generous government subsidies and tax cuts. That is why there are so many Toyota Prius’ on the road today (though the tax breaks for those cars have long since expired in America). While demand seems to have kept up here in America, in Japan Toyota is expecting a different story.

Reports indicate that Toyota may be getting ready to stunt production by as much as 20%, or  to less than 12,000 cars per day, as generous Japanese eco-car subsidies come to an end.

Subsidies in Japan ran around 250,000 Yen, or about $2,600, towards the purchase of an eco-friendly car. That is about on par with what the U.S. government was paying out towards the Prius when it first came out (since so many Prius have been sold, the car is no longer eligible for the subsidy in the U.S.).  This helped make the Prius and rival Honda Insight among the top selling cars in Japan for two years. This, during a time when overall car ownership is experiencing a drastic decline in Japan.

The subsidies also applied towards the purchase of efficient home appliances as well. Currently, Toyota cranks out about 14,000 new cars per day in its home country. But once those subsidies come to an end, Toyota will make about 12,000 cars a day or less, as they expect people will simply buy fewer cars without the subsidy. They are probably right. We saw how the Cash for Clunkers program gave the auto industry a quick boost, and once it ended sales dropped off.

Still, hybrid cars have gotten to the point where they should be able to stand on their own merits as fuel-efficient cars. Do hybrids still need subsidies? Or would the money be better used elsewhere?

Source: Reuters | Image: Toyota

Chris DeMorro is a car enthusiast, blogger, and all-around crazy man who is as passionate about hybrids as he is about Hemis. You can follow his constant misadventures at Three Months In A Mustang.

Christopher DeMorro

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.