While Toyota Motors North America (TMNA) finished 2007 in overall better shape than its domestic competition, they failed to meet their goal of selling 200k of their new, full-sized, Texas-built Tundra pickups. Hope leaf springs eternal. Even as the market for large pickups follows the U.S. housing market into the crapper and fuel economy standards get tighter, ToMoCo's sticking with their goal of 300k annual sales by 2010. Toyota Division GM Bob Carter told Automotive News [sub], Downturn? What downturn? [paraphrasing] In fact, Carter predicts Tundra sales will hit the low 200ks in 2008. "There is no cause for alarm. We are on plan." When asked how long it'll take for Tundra to top the 300k mark, he clammed up. However he did mention they "have 44 Tundra models now, and in the future, that segment requires even a broader lineup than we have today." So let's see… they have a model that is selling below expectations in a market segment that is shrinking so their solution is to increase the complexity of the model line-up to generate sales. The Big 2.8 have been hiring TMNA executives right and left. With marketing logic like that, you have to wonder if Toyota's been reciprocating.
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I think a better title for this article would be: Toyota plans to crush Detroit profit margins with record high incentives on Tundra.
+1 for guyincognito
I’d have to agree with Carter, the full size truck market needs all those cab/chassis configurations to make the product appealing to all its buyers. Not a big deal when you have:
1. Body on frame design
2. Excellent JIT supply chain skills
3. A profitable company willing to spend the $$$ to knock Detroit off their (last) perch
When exactly is Nissan going to stop bothering with the Titan?
When they start rebadging Dodge Rams.
I wonder what the annual Tundra volume(assuming declining per unit profit because of incentives)needs to be in order to pay back the white elephant called the Toyota San Antonio truck plant?
Me thinks it is much more than 300K per year.
Me also thinks that somebody at Toyota is smoking some of the good stuff if they think they are going to reach 300K units by 2010 with a new F150 and Ram on the way and the aforementioned segment contraction.
300k by 2010…..No problem, provided there are no bumps along the way like a sagging economy or rising gas prices or the occasional massive recall along with having all of your competitors throw in the towel.
Don’t worry, the big 2.8 will help Toyota reach their goals.
GS650G : “Don’t worry, the big 2.8 will help Toyota reach their goals”
Assuming the Big 3 are in business until 2010 (big assumption on the Chrysler side)…I’m interested as to how you think Toyota increases the their Tundra business 50% with product that has not proven reliable nor has any perceived competitive advantage (facts please and not anti-domestic hyperbole). Remember—in a declining segment—most incremental sales come at the expense of competition.
Even if there would be a meltdown in one of the big 3 you got to consider the loyalty factor. They would probably throw Billybob out of the Moose lodge and the Gun club if he ever tried to bolt on his rebel flag license plate on a Tundra.
timoted: Maybe, but not across the board. You know how many truck folk have nothing but praise for the Toyota pickup/Tacoma, even in rural parts of America?
The Tundra’s gonna have to screw up a whole lot more before people forget how great their other pickup was.
And I wouldn’t bet against Toyota’s quality control department right now.
Sajeev—-you are correct—a Tacoma trade-up to Tundra seems logical.
That said, I have a hard time thinking that large numbers of current Silverado, F150, or Ram owners are going to trade for a Tundra. They will get some conversions—but not nearly enough to grow their Tundra franchise by 50% by 2010.
In fact this discussion is like the Camry to new Mailbu conversion conundrum. Like the new Malibu—the new Tundra is a competitive product running into a wall of loyal users. The early quality and product mix issues haven’t exactly helped.
I think TTAC needs to give Toyota more credit in their North American truck plans. It seems that Toyota is very insistent on selling 300k trucks, despite a weaker economy, higher gas prices, and a slowing market. Toyota obviously knows these things, so the question is why?
I think 300k is what the bean-counters at Toyota considered to be the minimum efficient scale for manufacturing trucks in America. Toyota never does anything half-assed (except car design), and even an “import bigot” like myself readily admits that domestic trucks are best-in-class, and easily the best product available. So Toyota has got to beat a very entrenched competition, with established factories, suppliers, dealers, the whole shebang. And unlike cars, these trucks are very competitive.
The only way for Toyota to compete is to come out with a product that has sufficient volume to generate its own ecosystem. Toyota needs to sell enough trucks so that each of it’s suppliers can justify building factories that create high-quality parts at low cost. It needs enough volume so that it can support a large enough workforce to begin the Toyota Production System process in the Texas plant. It needs enough volume so that the Tundra can attract enough after-market suppliers to create all the add-ons the truck market demands.
That’s why Toyota waited for decades to build a truck plant, and why it now wants 300k trucks per year. Because it’s not just about making money on a truck, it’s creating a whole supply chain that can take on Ford and Chevy. It’s about doing it once, and doing it right.
Taking profit margin from the domestics through incentives is just gravy.
Toyota would seem to have quite a bit of excess capacity between the Princeton, IN plant which makes the Tundra, Sienna and Sequoia, and the SA plant which, as far as I know, makes only the Tundra. We’ll see what the new Sequoia does for demand, but it’s a tough market for things in those classes now. It’s my understanding that Toyota has announced plans to offer 3/4 and 1-ton Tundras by 2009 or so. That should help soak up some capacity, especially if they can get an appealing diesel in there. But there’s lots of profit in the PU market, and Toyota can afford to be patient; GM and Ford can’t.
“Even if there would be a meltdown in one of the big 3 you got to consider the loyalty factor. They would probably throw Billybob out of the Moose lodge and the Gun club if he ever tried to bolt on his rebel flag license plate on a Tundra.”
Timoted: so, you think that the Tundra has only been selling in the Midwest, Farwest, and Northeast, and few Tundras have been sold South of the ol’ Mason Dixon line? I doubt it…
Toyota’s site selection of the location of their plant in Texas, where the Pick-up is king, was damn near a stroke of marketing genius…
I think there is a large segment of the pickup market which buys the truck based on it’s balls, which was the reason for Toyota’s adds during the super bowl in 2007, where they tried to show just how big, brassy and shiny the Tundra’s were, vis-a-vis towing, stopping, etc.
Not only that, but with the pile of cash Toyota is currently sitting on, they can under-cut the market by placing many large-denominated bills on the hood of each one. That way, each Tundra they well will reduce the margins on the competitors trucks, which will reduce the amount of money the big 2.8 have to devote to engineering the NEXT generation of trucks. They kill the competition like a big boa constrictor kills a yak….by taking its time, and not letting the prey breath. Toyota is playing this game for the long-haul, and playing it for keeps. Anyone who thinks Toyota will fail, well, I got some swampland maybe you want to buy….
I thought Toyotas were so good they didn’t have to bribe people into buying their products. Taking a page out of the GM playbook, are they?
If TTAC is pessimistic about the Detroit 2.8, I would go with TTAC.
If TTAC is pessimistic about Toyota, I would go with Toyota.
History has proven that Toyota knows what it is doing. If you think otherwise, put your money where your mouth is. Short sell Toyota stock and make a profit.
quasimondo said “I thought Toyotas were so good they didn’t have to bribe people into buying their products. Taking a page out of the GM playbook, are they?”
No. There is a difference. Toyota is making money and gaining market share, while GM isn’t. Thus, any incentive from Toyota can be viewed as strategic investment and any incentive from GM would be desperate bribe that will hurt resale value.
Living in the midwest I’m not seeing Chevy and Ford truck owners dump their respective pickups for a Tundra. I’m actually seeing the opposite, F-150 & 1500 series owners are trading up to F-250/350 and 2500/3500 series pickups. It would appear that there is something to be said for brand loyalty. It would be interesting to see some stats on who is trading in their domestics for a Tundra. I wonder if Toyota has any of those stats available.
wsn :
If TTAC is pessimistic about the Detroit 2.8, I would go with TTAC.
If TTAC is pessimistic about Toyota, I would go with Toyota.
Thanks for your faith, I think, but “TTAC” is an agglomeration of voices. Frank and I don’t see eye to eye on some things, and other writers’ have other opinions.
And if anyone wants to review, blog or editorialize on any subject, from any perspective, let me know: robert.farago@thetruthaboutcars.com.
Of course, you are free to opine in the comments section, as long as you observe our no-flaming rule.
History has proven that Toyota knows what it is doing.
At one point in history, 90% of all cars were Fords. Just saying.
The only thing history teaches is that history isn’t always a good predictor of the future.
Toyota has been entering markets with an increasing degree of difficulty, over time. The small car is where everyone starts out (except for Italians, they start with the supercar and work their way down). Then the family car. Then the luxury car. Then, after all that, the truck. It’s a tough market, one that is much more educated than the car-buyer, more loyal because of dealer relationships and much more demanding about performance (not in the 0-60 sense, but in the “can this haul a payload” sense…)
No. There is a difference. Toyota is making money and gaining market share, while GM isn’t. Thus, any incentive from Toyota can be viewed as strategic investment and any incentive from GM would be desperate bribe that will hurt resale value.
When there’s $6k slammed on the hood to get somebody to drive off the lot in a truck, around my neck of the woods we call that a bribe. Whether Toyota or Chevy loses money on a sale or not is irrelevant. If Toyota is confident that they’ll gain a significant share of the truck market, then they shouldn’t be worried about not selling enough to the point that they’re flashing cash to move metal.
After all, you don’t see discounts for Camrys and Corollas, do you?
Toyota’s incentive laden trucks are just as much of a desperate bribe as GM’s incentive laden trucks.
As someone who uses (and abuses) a work truck every day I can vouch for the Toyota Tundra. It is hands down the toughest work vehicle I have ever driven. While the Chevys and Fords shake and rattle when they get a few miles on them the Toyota is as quiet as the day it was new. The 4.7 litre V-8 kicks the Chevys ass and absolutely dominates the Ford. All Toyota needs to do with this truck is add a diesel option and they will own this segment of the market too. We are starting to see quite a few of the subcontractors using Tundras as their everyday work hauler now that they have supersized the cab area. Toyota will make their 300K target no problem in my opinion.
It seems to me that the size of the rebate isn’t as important as the net transaction price. It looks like the Tundra might be winning that battle (Edmunds).