Special Coverage

Management Briefing Seminars

TRAVERSE CITY, MI – A key executive with Toyota Motor Corp. says industry sales will rebound next year and continue to grow steadily into the next decade.

“In fact, we see industry sales potentially growing by 100,000 vehicles a year, or more, eventually reaching 18 million sometime late in the next decade,” says Jim Lentz, executive vice president-Toyota Motor Sales USA Inc.

Toyota forecasts industry sales this year of 16.3 million units, or down just slightly from 2006. “In relative terms, a decent year,” Lentz says in a speech at the Management Briefing Seminars here. The event runs through Friday.

While Lentz says it’s difficult to explain the market’s present softness – the executive offers higher fuel prices, a housing downturn and payback from past incentives – he claims a booming U.S. population, along with key economic drivers such as job growth and productivity gains will boost sales in the years ahead.

According to Toyota, 4 million potential new drivers will enter the market each year for the next 10 years. And for the first time in history, perhaps around 2011, five generations – from the traditionals and Baby Boomers to generations X, Y and Z – will occupy the market simultaneously.

“Five generations,” Lentz declares. “High-school kids will ask their great-grandfathers, ‘Hey pops, can I borrow the car?’ It’s gonna happen, and it’s going to be the greatest market we’ve ever seen. And all auto makers have a chance to profit from it.”

But with that market will come unique challenges, Lentz warns, such as the relationship between politics and powertrains; pleasing finicky new youth buyers; and improving the industry’s sales reputation.

On the political front, auto makers occupy an historical turning point in their relationship with government and society, as fuel prices, energy independence, global warming and growing environmentalism bear down on the industry.

“Some might call it the perfect storm, since these are all atop the legislative industry today,” Lentz says. “And we’ve faced regulatory threats before, but never the tidal wave that’s headed our way.”

Also, the tidal wave does not care that vehicles account for just one-fifth of all greenhouse gases and the fact that auto makers have no control over fuel prices, he adds. That means auto makers not only must unite to propose a compromise on fuel economy and other issues, Lentz offers, they should also let the world know that the industry is part of the solution and not the problem.

“In short, it’s time to transform our image from an industry that drags its feet to one that runs on innovation,” he says.

Auto makers also face the challenge of pleasing a new generation of buyers. Lentz calls them extremely smart, Internet-savvy, skeptical of advertising and accustomed to products specifically designed to fit their lifestyle and their timetable. That said, young buyers aren’t the best match for an industry that’s relied on mass production, heavy advertising and big incentives.

“These new consumers are not going to adapt to us. We have to adapt to them if we want them as our customer, and trust me, we do want them as our customers,” says Lentz. He estimates Generation Y, alone, could shortly boast close to $19.3 trillion in buying power.

Successful auto makers, Lentz says, will give those buyers unlimited opportunity to create their own products. For example, Toyota launched its Scion brand with 40 accessory options and that number now has grown to more than 150.

“The initial product purchase is just the starting point for Scion owners,” he says, adding the brand will continue to serve as a listening post for the auto maker and will transfer that learning to its Toyota and Lexus brands.

Finally, auto makers must change public perception about their retail sales network. One-quarter of customers who walk into a dealership walk out without buying because they were treated poorly, Lentz says.

“No wonder we have such a hard time pleading our case in Congress,” he offers. “Because if we’re not seen as being considerate to our customers, why should we receive any consideration as an industry?”