Answer the following two questions.

1. What is something you learned as a result of reviewing their project?
2. What is something you want to learn more about as a result of reviewing their project?

My course project this term is a new vehicle to be offered from Toyota, taking their most popular fuel efficient model (Prius) and replacing the driveline with one from their second most powerful vehicle (RAV4 prime) to create something that could bring in a new type of customer. Rather that the 100 horsepower anemic four cylinder with tiny electric motor for the motivation the driveline is replaced with a larger four cylinder engine plus three electric motors to give an all-wheel drive system with 306 horsepower. It would retain the plug-in hybrid system of the RAV4 prime, keeping it still in the fuel efficient category. Since the Prius is lighter than the RAV4 this "hot hatch" would be even faster than the currently fastest Toyota, Supra.

Included here is my favorite section from my course project:

Pricing Strategy

The hot hatch market is a pretty competitive market in the automotive industry. While most of the common competitors price around the $40,000 mark there are a few exceptional models that are priced well above, in the $50,000 range. The Volkswagen GTI, Honda Civic Type R, and Mini Clubman S are all in the $37,000 to $42,000 range, the most sophisticated models such as the Kia Stinger GT2 is $54,000 and the Audi RS3 sportback starts at $56,000.

Looking at the break-even price (BEP) we need to consider the two models that this new special model stems from. The Toyota Rav4 Prime (the model in which the driveline comes from) starts at a price of $38,000 but typical dealer models are closer to $50,000. The Prius Prime (the model in which this new model gets its body and interior from) has a starting price of $29,000 and the typical dealer model is $34,000. Trying to find a break-even price for a car that does not exist can be tough. Looking at the invoice price versus the sticker price, Toyota shows just a $2000 difference. The assumption is that the BEP is somewhere below the invoice price as Toyota needs to make a profit, but the BEP should be somewhere in the 80-85% of the invoice price. That said, the halfway point between the two models donating their parts to the new model is $42,000, so 80% of that is $33,600.

If they want to have a short ROI they could follow a strategy of pricing it on the lower side and selling more models. To do this they would price it around the $38,000 price. This means they would likely outsell the competition and draw more new clients in. This would open their market up to a younger audience which might help in trying to get the word out of a new player in the hot hatch market.

A strategy for a longer ROI would be to price it higher, say in the $48,000 price range. They will sell many fewer models and eliminate the younger audience, but they would create an exclusivity to their product which could leave the reputation for this model as a higher end vehicle.

This performance Prius model is very elastic. The hot hatch market is flooded, with new models coming out every few years. The prices are over a wide range which means that with a higher price the interested customer base will shrink and with a lower price the customer base would grow. The overall market for hot hatches, however, is pretty inelastic. The customer base for that market is interested in a performance vehicle but can not afford a true sports car or might need a backseat, which sports cars do not provide. That said, a hot hatch customer will find a model within the range to purchase and would not buy a car from a different category without a major incentive.

The optimal pricing strategy for this model is to keep the price on the lower side of the scale. People look at the Prius as a basic utility vehicle so pricing it high might alienate most of the target customers. By pricing it low they can recover their return on investment faster and move their product into the mainstream marketplace.