Toyota USA CEO: Hybrid cars are popular for us

Jim Lentz on success of Prius, climbing gas prices

This is a rush transcript from "Your World," April 5, 2012. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST OF "YOUR WORLD": One big exception to that fuel efficiency report, the Toyota Prius, may be a reason why sales of that particular hybrid just hit an all-time high.

With me now, Toyota Motor Sales president and CEO Jim Lentz.

Jim, good to have you back.

JAMES LENTZ, PRESIDENT AND CHIEF OPERATING OFFICER, TOYOTA MOTOR SALES USA: Thank you.

CAVUTO: With all of these vehicles, though, it is pricey up front.

And I guess the argument then becomes you save in the long run. Now, depending on the vehicle, it might be a very, very long run. But is the market there if gas prices stay where they are? In other words, do these have the -- Prius sales have not robbed Camry sales?

LENTZ: No.

CAVUTO: Volt sales certainly have not robbed cheaper vehicle sales at GM.

So is all this just a mountain of dust?

LENTZ: No.

I think, in the case of Prius, people are buying for a number of different reasons. Some people are buying for environmental reasons, some for economical reasons, some because they love the technology in the car. But as you mentioned, last month, almost 29,000 sales in the Prius family, it was the biggest month we have ever had. And on top of that, there...

(CROSSTALK)

CAVUTO: And last month, that was when the gas prices rocketed. Any connection there?

LENTZ: Well, there is a connection.

Hybrids were almost 19 percent of our sales. But if you go back a year ago, hybrids in our case were still almost 15 percent of our sales. So there has been a bump as a result of fuel price, but hybrids in our case are still a very popular product.

CAVUTO: Here is where I draw a line between hybrids and some of these more elaborate vehicles, though, that if they get too wild, too funky, you plug them in, you do all this other stuff, that is where they get to be a diminishing return.

It's not as if Americans are anti-hybrid. I think they are just anti- confusing. The jury could is still out. We don’t know. The jury could be out longer term on even the Prius. I guess what I am asking you though is the appetite really there in total volume for all of the vehicles if we just keep gas where it is now?

LENTZ: Well, it could be if you keep gas where it is now.

But I think the long-term bet is that fuel prices will go up over time, as opposed to down over time. Obviously, when we look at regulation coming forward to average 50 miles-plus per gallon, that is all assuming we will see higher fuel prices over time. I think the average person probably realizes that.

CAVUTO: But what is the cutoff for them to say, all right, I want to save some money on gas, but I don’t want to spend a lot on a car? What would be that cutoff?

LENTZ: Well, I think the interesting thing is it is not necessarily the price of gas.

It's the rate of change in the price of gas. If you look at 2008, when we had a rapid run-up in the price, we saw people shift from anything that was V8 or V6 into four-cylinder cars. Today, even at high prices, we’re not seeing that take place.

An example of that, the biggest growth in sales so far this year are mid-sized passenger cars. It is not compact cars. So people are making...

CAVUTO: But the mid-sized passenger cars, of all makers, yours premier among them, are getting great fuel mileage.

LENTZ: They are. They are.

And I think we're seeing some of that. People are actually coming in today and trading out of some compact cars that they bought three and four years ago during high fuel prices. And they’re moving back to larger vehicles that get great mileage.

The industry has done a great job even in just the ICE engines, the internal combustion engines, getting much better mileage. And people are buying into it.

CAVUTO: What do people tell you who buy the Prius or buy any of these other cars? What is the compelling sell point for them? What gets them in into vehicles? I know price and all that, but what is it?

LENTZ: It varies by person.

In most cases, they see that they are more economical over time to operate and they are paying less for gasoline. Some are doing it for environmental reasons to reduce CO2. Some are doing it less dependence on foreign oil.

CAVUTO: But all the people buying these vehicles, from the Prius all the way up to the Volt, a lot of them are upper-income people anyway, right?

LENTZ: Yes. There’s no question.

CAVUTO: So these are toys of the well-to-do.

LENTZ: Not necessarily.

I think -- I cannot tell you about Volt’s situation, because I don't know their particular demographics

But in the case of Prius, we have sold over a million Priuses here in the U.S. They are not all just to people with wealth. There are a lot of middle-income people buying the car. And quite frankly they are coming back into the market now.

(CROSSTALK)

CAVUTO: What does a loaded Prius cost, loaded to...

(CROSSTALK)

LENTZ: Loaded Prius, in a plug-in, it's about $38,000. For natural gas, it is probably about $32,000. The average transaction is about $26,000. And if you look at the average...

CAVUTO: And the average Camry?

LENTZ: Average Camry is probably about $24,000, so it's within a couple of thousand dollars.

CAVUTO: So to make up that couple of thousand if I went from the Camry to the Prius, I would have to own it for a couple more years.

LENTZ: A couple year, couple years. But the average car on the road today is 11 years old and the average person keeps their cars five or six years.

But I don't think most people sit down with a pencil and calculate the payback on cars. They take a look what their budget is, how much they can afford on a monthly basis. And part the monthly basis is the cost of operating a car. That all factors into their decision.

CAVUTO: All I know is your big moneymakers across the board, yours, GM's, Ford's, are not these vehicles.

LENTZ: We make money across the board on most of our products.

CAVUTO: I know you do, but it is not as if the Camry is going away?

LENTZ: No. The Camry is not going away. We sold 42,000 last month and will continue to be our top seller.

CAVUTO: Jim, always good seeing you. Thank you very, very much.

LENTZ: It's a pleasure.

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