In the aftermath of last year's earthquake and tsunami that cut parts and auto production for Japanese carmakers, the government in December began encouraging purchases of fuel-efficient autos to reverse sagging domestic deliveries.
Rebates of as much as 100,000 yen (NZ$1656) are available from a 300 billion yen fund for qualified cars, including the Prius hatchback, wagon, plug-in and Aqua subcompact, sold in the US and elsewhere as the Prius C. Tax savings further reduce the purchase price by another 100,000 yen or more.
Aqua - available in New Zealand as Prius C - has become the car of the moment in Japan, helping more than triple Prius family sales in the country to 175,080 in the first quarter, from 52,507 last year. While funds for the rebates may run out in July if the government doesn't extend them, the tax reductions continue through 2015.
"It was good that introduction of Aqua and the start of government subsidies happened almost at the same time," says Koichi Sugimoto, senior analyst at BNP Paribas in Tokyo, who recommends that investors hold Toyota shares.
He adds that there's more to the success than the government incentives.
"Toyota is introducing good vehicles and assuming it will maintain a certain volume even after the subsidies end."
The Prius line topped other high-volume car models including Hyundai's Elantra, Volkswagen's Golf, Ford's Fiesta, General Motors' (Holden) Cruze and Honda's Civic, according to the companies.
Toyota ranked as the world's largest automaker by sales from 2008 to 2010, before the natural disasters pared its global production and deliveries.
Sales of Toyota, Lexus, Scion, Hino and Daihatsu vehicles grew 18 per cent to 2.49 million in the quarter, Toyota says in a US regulatory filing last month. That put it ahead of Detroit-based GM's 2.28 million and VW's 2.16 million, according to compiled industry data.
Chief executive officer Akio Toyoda has said the company founded by his grandfather is "turning the corner" after a couple of difficult years. The company endured record recalls in 2010 in the US, its biggest single market, for floor-mat and accelerator pedal flaws that caused unintended acceleration.
"You are seeing a company that is clearly coming back" says Efraim Levy, equity analyst with Standard & Poor's Capital IQ in New York, who rates Toyota's American depository receipts a hold.
"For Prius to sell in that kind of volume, something that's been a niche product, it's an achievement."
Since the start of Prius sales in Japan in 1997, Toyota has sold 4 million hybrid-electric vehicles worldwide, including 1.5 million in the US, the company said on May 22.
In the US, typically Toyota's top market for Prius, sales jumped 42 per cent in the first quarter, and 56 per cent through April to a record 86,027.
US sales of the model since its 2000 introduction, including the new variations, total 1.18 million vehicles, according to data compiled by Bloomberg. Global sales increased 125 per cent.
Prius sets a standard of success for alternatively powered cars, including Nissan's all-electric Leaf and GM's Chevrolet Volt, which has a petrol-burning generator on board to extend the range of the electric-drive car.
The sales pace for Prius isn't likely to be matched soon by any other hybrid models, says John Wolkonowicz, an independent analyst in Boston who specialises in automotive history.
"It's the phenomenon we saw with Chrysler and minivans: it brought out the first minivan and after all these years Chrysler still is minivan sales' leader," he says. "Prius was the first hybrid on the block."
The Prius line's current global popularity provides marketing benefits, says Wolkonowicz.
"Being number one is important for advertising purposes; it provides a comfort factor that, for Prius, can be significant," he says. "It provides a 'why buy?' reason for customers who may be on the fence."
Toyota's decision to give the car a distinctive wedge shape that some car enthusiasts dislike has also been a long-term benefit, Wolkonowicz says.
"Even grandmas who don't know cars know what a Prius is."
The appeal of Prius has as much to do with how it's now a de facto brand within Toyota, positioned as the top "green" choice, as the car's actual fuel economy, Noble says.
"Prius is a Prius first and a Toyota second," he said. "The fact it's doing well this year is a reflection of the strength of the model line and the Prius brand."
While the current rate suggests US drivers may want to buy 250,000 or more Prius models in 2012, the region may not get more than its planned 220,000 units.
"I've ordered additional production," Bob Carter, Toyota's group vice president of US sales, said last month. "I'm confident we'll get additional production but, globally, we're seeing high demand, particularly in Japan."
