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The Next Generation Prius Revealed: Can It Compete In A Tesla World?

The iconic hybrid is getting a facelift, but will that be enough as it’s squeezed between electric vehicles and more fuel-efficient cars?

There was a time, not so long ago, when owning a Prius was the surest way to advertise to the world that you cared. And, inversely, to care, you had to own a Prius. Today, though, things are different: Your conspicuous lack of fuel consumption can be signaled in so many different ways.

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The fourth-generation Prius, revealed to media in Las Vegas on September 9 and expected in showrooms early next year, is how Toyota hopes to get its hybrid’s reputation (and market share) back. The first new model in six years, it’s the longest Toyota has taken between redesigns. The new Prius gets about 55 miles to the gallon (a 10% increase over the outgoing model), has a lower center of gravity for better handling and is, by most accounts, better looking, with a sportier, less bulbous profile.

Toyota has at least two reasons for wanting to ensure the success of the 2016 Prius: it is the first car built on the Japanese automaker’s new modular global platform, and it carries Toyota’s hopes for remaining the icon in an increasingly-crowded market for cars that run on more than just fuel, including Tesla’s forthcoming, cheaper alternative to its popular Model S luxury sedan: the sub-$35,000, all-electric Model 3 (the current Prius sells for about $22,000).

Toyota became the face of the green car movement when it introduced the Prius stateside in 2000, eventually selling 1.9 million units in the U.S. alone. The world’s first mass-produced hybrid car found a sweet spot among tech’s early adopters such as Apple cofounder Steve Wozniak, who uses the hatchback to hold Segways for his polo team, and Hollywood celebrities from Leonardo DiCaprio to Larry David. Its third generation, introduced in 2009, is when the car gained a huge mainstream following. Each generation has made big improvements in styling, fuel economy, and cargo room.

But the new Prius will come up in a tougher environment. It’s no longer the only hybrid with tons of name recognition out there. Dozens of new alternative-fuel models, including plug-in hybrids, electric cars, and hydrogen fuel cell vehicles, have entered the market since. Meanwhile, gasoline-powered cars are becoming more fuel efficient, as they shed body weight and pack smaller engines to meet a federal mandate requiring automakers to have a fleet-wide average of 54.5 mpg by 2025. To top it off, consumers, encouraged by a six-year low in prices at the pump, are turning their attention to larger crossovers and SUVs. “With lower fuel prices, it’s having an impact on the entire segment,” said Toyota’s North American CEO Jim Lentz. Prius sales are off 17% for the first eight months of the year, leaving analysts wondering if the top hybrid is going out of style.

Analysts say the Prius’s latest iteration must emphasize other attributes than fuel economy, focusing its design and marketing on a more mainstream audience to recapture sales lost to Honda, Ford, and GM hybrids. “The Prius’s 50 mpg was an impressive figure 10 years ago, when few cars got over 30 mpg and most SUVs barely achieved 20,” said Karl Brauer, senior analyst at Kelley Blue Book. “Now we’ve got multiple economy cars approaching 50 mpg and a range of midsize and compact SUV’s achieving 30-plus mpg.” That’s why Toyota says it gave particular focus to making the new body longer, wider and more athletic, while designing the instrument panel with a more upscale look and adding passenger and cargo space. The effort comes as the Prius family (which includes the Prius V, station wagon, Prius C subcompact and a plug-in hybrid version) has lost market share among alternative-powertrain models, comprising 33.5% of the market last year, compared with 52.4% a decade ago, according to Santa Monica-based industry analyst Edmunds.

The Prius will soon face a challenge from a formidable opponent, Tesla’s Model 3, a price-competitive electric vehicle that travels at least 200 miles on a single charge. The Model 3 is the first vehicle built on the automaker’s third-generation platform and is engineered to compete with the BMW 3 Series and Audi A3, not the Prius, Tesla says. The Palo Alto-based automaker will unveil the battery-powered car and begin taking reservations in 2016. Production will begin in 2017. Deliveries for Tesla’s third vehicle, the seven-passenger, all-electric Model X luxury SUV, will begin this month.

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“Like Model S, we’re confident that there will be a wide customer demographic for Model 3 that spans performance enthusiasts to eco-conscience drivers and everyone in between,” a Tesla spokeswoman said. “With Model S, the biggest barrier to entry is cost. With Model 3, the starting price of our current lowest-cost Model S will be sliced in half.”

But the Model 3 and the Prius may not target the same customer base, Brauer said. “Though we haven’t yet seen a reasonably priced alternative to the Prius, there’s usually not a lot of crossover between hybrid people and electric vehicle people,” he said. “The Model 3 and the new Chevrolet Volt will be increased competition, but there are still Prius loyalists.”