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The Toyota Approach

#Scion #Lexus #Toyota


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Undoubtedly, from the point of view of Toyota Motor Sales (TMS), the most important vehicle debuted is the 2007 Camry. After all, in 2005—the last full year for that fifth-generation’s production—there were 431,703 Camrys sold in the U.S., which was actually up 1.4% compared to the previous year, when the car was younger. The Camry will not be denied, however, as ’05 sales put the car back on top of the best-selling vehicle list—for the fourth time in a row and for the eighth time in nine years.

The second-most important—or maybe it would be tied for first, given the status of the car in question—would be the Lexus LS 460. The last time that Lexus made such a startling introduction of a production vehicle at the North American International Auto Show was in 1989 (the first year the show gained its international moniker), when the division essentially revealed itself and showed the world the LS 400 sedan, a car that had the heads of many senior executives shaking in disbelief. (Lexus also introduced the third-generation of the product, LS 430, in Detroit in 2000.) Lexus has done pretty well for itself, to understate the case, as it sold 302,895 vehicles in the U.S. in 2005, up 5.5% from ’04, which means that it was the best-selling luxury car brand in the U.S. for six years running.

Another important vehicle for Toyota is the Yaris, a B-segment car. The importance of small cars in the U.S. market—something often overlooked by things at least mid-sized, if not much bigger—can be assessed by looking at the numbers for the Scion brand: there were 128,452 Scions sold in ’05; each of the three models showed year-to-year sales increases: 16.3% for the xA, 15.3% for the xB, and 166% for the tC.

Also shown in Detroit was a concept vehicle, the F3R, a hybrid—not surprising because with the cars and trucks it has equipped with hybrids, Toyota leads the market (and will gain more space between itself and the others with the hybrid version of the Camry)—and a minivan, a vehicle type that seems to be to transportation what flossing is to dental hygiene: something you’ve got to do (or have). 

Much of the success that Toyota (and Lexus and Scion, too) is experiencing seems predicated on something that might not be expected: listening to the customer. Donald V. Esmond, TMS senior vp, Automotive Operations, says there are short-term and long-term issues that the company deals with. In the short-term, for example, it is one of observing what’s happening in the market and listening to what the dealers want. Then it is a matter of making sure they have the product for the end customer. That is, he says when gas prices go up, the SUV and truck sales go down and the Prius and Corolla demand grows. When the prices go down, then the trucks gain their luster and the cars continue to do OK. What makes close listening very important for Toyota: “We’re still running less than a 30-day supply of products, so it is that much more important to deliver the right product to the right dealer at the right time.”

Then there is the longer-term issue: “Coming up with the right product that maybe the customer doesn’t know he needs yet. That’s probably the bigger challenge, and one that our engineers do a pretty good job dealing with.” He cites, for example, the Prius, and admits that when the first-generation Prius went on sale in the U.S. as a model year 2000 model, “There weren’t waiting lines of people saying, ‘This is what I’ve been asking for all along.’”

Or, take the case of Scion. It first went on sale in just California in June, 2003, and had a staged rollout to the rest of the U.S. in the months following. According to Esmond, some 75% of Scion buyers are new to the Toyota brand, so while the sales numbers aren’t massive in a traditional sense (although if you look at the total sales and divide by the three models, the number is nearly 43,000 each, which is the sort of thing that people talk about when it comes to “niche” vehicles), there is hope that those who start with Scion will move through the ranks with time and life-stage changes.

In late ’06, a new Toyota manufacturing plant will open in San Antonio, TX. It will have an initial annual capacity of 200,000 units. It is for the production of the Tundra pickup truck, which will be a full-size model by anyone’s standards. One might think that given the unlikelihood of falling gas prices, the timing would be less than propitious. Esmond responds, “It’s still a huge market—the biggest market out there. Those customers aren’t going to be quick to give up some of their versatility and utility. Pickup trucks are going to be the only thing to meet their needs.” It’s worth noting that in ’05 Toyota sold a total 295,360 pickups—mid-size Tacomas and Tundras—while Chevy alone moved 769,166 full-sized pickups. There’s a lot of headroom for Toyota.


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