Toyota will update the Prius for 2010.  Following the standard operating procedure for a model evolution, the next generation Prius will be larger, more powerful, and better on gas than the current one.  What isn’t S.O.P. is a price cut.  According to Bloomberg, the 2010 Prius will start at just $21,000, a grand less than the 2009 model’s base price.

There are several potential reasons for the price cut in Toyota’s iconic hybrid.  The strongest is the new competition from the hybrid Honda Insight.  The 2010 Insight will cost $19,800 and get 41 miles per gallon.  The 2010 Prius will get 50 mpg combined.

Another factor is the Prius’ waning popularity.  When gas was $4 a gallon in 2008, there were waiting lists and dealer markups.  Now that gas is under $2.50 per gallon and will probably stay there through summer, Toyota has started offering incentives to encourage Prius purchases.  With the auto industry as a whole in dire straights, and Toyota not immune to falling sales, the company needs to convince consumers that its cars are still a bargain.  A less expensive Prius will do just that.

The reasons don’t really matter though. What matters is that for just $1,200 more than an Insight, buyers can get a larger, more powerful car that gets better gas mileage.  Sounds like an easy choice.  This also means that you’re a fool if you buy a 2009 Prius with the updated model just around the corner, so expect Toyota to start offering some heavy incentives on the 2009 Prius.

While the updated Prius will be available next month, the less expensive model won’t be available until later this year, according to Bloomberg’s source.

Photo via Leftlanenews.