Even the Prius Takes a Hit

Feeling the pain, Toyota Motor Sales U.S.A. Inc. executives expect the market to remain “suppressed” for the foreseeable future.

Some rough sales months are fueling that somber forecast. November turned out to be another awful month for Toyota as light-vehicle deliveries were down 33.9% from November 2007.

Toyota Div. car sales fell 29.6%, while light trucks slid 37.4%, compared with like-2007, according to Ward's data. The Lexus luxury division fared no better as sales tumbled 39.9% for cars and 26.8% for light trucks, compared with year-ago.

Even the Scion brand, with its fleet of moderately priced small cars and utility vehicles, saw sales volumes nearly cut in half for the three models currently available.

All 31 nameplates across the three brands suffered declines, save for one: the all-new Sequoia fullsize SUV, which boosted volumes 51.9% over like-2007. Fortunes were reversed for the Sequoia's platform mate, the Tundra pickup, with sales plunging 55.9% from year-ago.

Even Toyota's hybrid-electric vehicles, which have pioneered a new segment with fuel-efficient cars and cross/utility vehicles, could not escape the spiral: Every Toyota and Lexus HEV lost sales, including the most moderately priced model, the Prius, down 48.2%.

“November was a tough month,” a somber Bob Carter, group vice president and Toyota Div. general manager, tells journalists on a conference call.

One of the few encouraging signs in the month came in the final Thanksgiving weekend, when showroom traffic and volumes picked up.

“But I'm not suggesting that weekend creates a trend and is indicative of what we expect for the month of December,” Carter says. “We do continue to expect the overall industry to remain suppressed and in tough business conditions for the months ahead.”

Over the past five years, Toyota has witnessed an average 14% lift in sales from November to December. But Carter appears doubtful that trend can be sustained.

Carter declines to discuss 2009 in detail, saying Toyota is continuing to develop its forecast for release at the North American International Auto show in Detroit this month.

“November journeyed down the same path as we saw in the preceding months, resulting in an overall weak industry,” Carter says, noting auto sales are suffering from low consumer confidence, a tight credit market and declining demand for durable goods.

Consumer confidence bounced upward slightly after the presidential election in November and may have prevented the overall economy from plummeting further in November, Carter says. “But unfortunately that bounce didn't quite reach the auto industry,” he says, citing unemployment that hit a 14-year high and persistent market uncertainty.

“So it's no surprise that many consumers continue to wait on the sidelines,” he says, even though gasoline prices have fallen to a national average of $2 per gallon, about half the price just four months earlier.

Toyota sales dropped despite the auto maker's stepped up incentive offerings, primarily a 0% financing spiff on 12 Toyota brand models throughout the month of November. That lure remained in place for December nationwide, while different markets of the U.S. take a more regional approach with other incentives. For instance, New York will concentrate on attractive lease deals.

“We are going to continue to have aggressive incentives,” Carter says. “We are focused on doing whatever we can to offer consumers the right deals and right products to generate traffic for our dealers.”

Brian Smith, vice president-Lexus sales and dealer development, says, “We're providing dealers the tools to sell the inventories they have.”

When asked if Toyota has been significantly ramping up North American production capacity just in time for the market to tank, Carter says the characterization is unfair.

Long-term, Carter sees light ahead. “One year or 18 months doesn't make a long-term trend. We are very bullish on where the industry is going,” he says.