Struggling is a good way to put it (Source: Honda Says ‘Too Small’ Insight Hybrid May Miss Sales Target - Bloomberg.com). Honda is just struggling with the Insight. Not just because it's too small (read the article) but because it can't compete against the Prius in a lot of ways.
There are a lot of factors as to why Honda is having a tough time with their hybrid car. The biggest reasons include the smaller size (including less room in the back) despite being less fuel efficient, it looks very similar to the Prius, and an initial slate of poor reviews by American journalists. Put it all together and you end up with a very lopsided loss (sales at 7:1) against an already entrenched opponent.
There's just nothing but the price tag to differentiate the Honda Insight as being better than the Prius. But, the Insight only comes in at best $3K less than the Prius. At that price range ($20,000 +), people who are looking to buy aren't looking for bargain vehicles.
Selling 200,000 Insights worldwide in the first year “looks tough,” Executive Vice President Koichi Kondo said in an interview on Jan. 19 in Tokyo, where Honda is based. “I think we compromised too much on size in pursuing fuel efficiency” for the U.S. market, he said.
“There are plenty of people who think that the current Fit meets their needs already” with its fuel efficiency, he said. “A hybrid version might seem expensive. Our engineers are really struggling.”