Special Coverage

NADA Convention & Exposition

SAN FRANCISCO – Competition will mitigate pricing pressures generated by increasingly strict fuel-economy standards, says Toyota Motor Sales U.S.A. Inc.’s president and chief operating officer.

Jim Lentz makes the calming statement following his upbeat address to the National Automobile Dealers Assn. convention here.

“Regulation will drive up the price of cars,” he tells journalists. “As we push to the 35.5 mpg (6.7 L/100 km) by 2016 and then whatever it’s going to be up until 2025, that’s going to drive cost up (and) it will drive price up.”

But the story does not end there.

“You’ve got to remember, we are still an extremely competitive industry,” Lentz says. “There’s still going to be tremendous competition and different availability of products for customers. Customers are still going be able to get great deals on great products.”

He also is skeptical of claims the federal government will recommend a bogey of 62 mpg (3.8 L/100 km) in the coming years, a notion put forward by government analysts in October following the release of a study by the Environmental Protection Agency and U.S. Department of Transportation.

The study says a fleet-wide average of 62-mpg is attainable. Lentz expects the next benchmark will not be set until the government consults with industry stakeholders.

“Everyone would love to have higher mileage,” he says. “If we could do it today, we’d do it today. But we’ve got to understand how feasible it is and what the cost is going to be to the consumer.”

Minutes earlier, outgoing NADA Chairman Ed Tonkin delivers a rousing speech urging dealers to be vigilant against regulation that runs counter to market trends. Failure to consider the consumer is a recipe for disaster, he says, citing Frito-Lay Inc.’s recent adoption of a biodegradable bag for its sun chips snack food.

The bag decomposed much more quickly than previous-generation plastic bags, Tonkin says. But when consumers handled the bags, the resulting noise was likened to a range between “a lawnmower and a jet engine.”

And then they stopped buying, Tonkin tells convention attendees, adding Frito-Lay now is abandoning the green bags in a concession that is costing the company millions.

“Make sure you know what the consumer wants,” Tonkin warns regulators, suggesting vehicles that can achieve 62 mpg will have little appeal in the marketplace, likely because they will need to be smaller than vehicles now preferred by the American public.

Despite volatile gasoline prices, light trucks outsold cars in the U.S. last year, the first time that has happened since 2007, according to Ward’s data.

The caution expressed by Lentz and Tonkin contrast sharply with the words of San Francisco Mayor Edwin Lee, who devotes several minutes of his welcome address espousing the virtues of electric vehicles.

Lee says San Francisco is in the process of installing EV charging stations in all of its parking garages.

At a pre-NADA event just blocks away, Jeff Schuster, executive director-global forecasting J.D. Power and Associates, tells dealers EVs, plug-in hybrids and hybrid-electric vehicles will account for 5 million units of volume in the U.S. by 2020. But that tally only will represent about 5% of the total market.

Hybrid sales fell 5.6% in 2010, compared with prior-year, according to Ward’s.

Lentz says Toyota will bring to market 11 new hybrids and two EVs between now and 2013. Among the most significant, he suggests, is the CT 200h compact hybrid-electric hatchback. The Lexus brand’s first compact model goes on sale March 1.

emayne@wardsauto.com