Toyota Expects Slight Uptick in Sales in 2015

NEWPORT BEACH, CA – Toyota made headlines in 2014 when it announced the planned move of its U.S. sales and marketing headquarters from its longtime home of Torrance, CA, to Plano, TX, in 2017.

But the automaker, which also is relocating some other U.S. operations to Plano, didn’t let the ensuing hubbub from that decision distract it from its bread-and-butter business of selling vehicles.

Toyota had a generally good 2014, thanks to strong growth from its light trucks and continuing upward momentum at the Lexus luxury brand, which offset weak Toyota car sales and a slumping Scion.

The No.1 Japanese automaker met its goal of selling 2.3 million units in the U.S. last year, with deliveries tallying 2.37 million, up 6.2% from 2013.

Toyota Motor North America CEO Jim Lentz expects a slight improvement in 2015, when the automaker will launch new versions of some of its highest-volume models in the U.S.: the Toyota Prius hybrid car, Toyota Tacoma compact pickup and Lexus RX midsize luxury CUV. All three led their respective segments and accounted for nearly 400,000 of Toyota’s U.S. sales last year.

Lentz, who relocated to Plano last summer, sat down with WardsAuto at a Toyota Mirai fuel-cell-vehicle preview here to discuss launching eco-centric models during a time of cheap gasoline, his concerns about the automaker’s supply chain and why the Mirai, set for a fourth-quarter debut in California, is his favorite Toyota green car yet.

WardsAuto: Did you ever think you’d have to worry about falling gas prices in the U.S.? How is this impacting Toyota?

Lentz: I think it’s impacting the entire industry. We’ve seen for the last six months the demand for light trucks continuing to increase and the demand for passenger cars continuing to fall. I don’t recall when it’s been that large of a spread for as long as it has been. And as gas prices continue to fall that may continue to spread.

The good news is I don’t think it’s going to impact the launch of (fuel-cell vehicles). Because I think the people that are going to buy fuel cells are very similar to the very first Prius buyers.

They have a love of (the) environment, they have a love for technology. Think about when we launched Prius (in June 2000, when gas prices were low).

In the long run, when everyone is trying to sell (FCVs) in fairly large volume, it would be problematic to have a huge drop in (the gas) price. But I think today, from a launch standpoint, I’m not worried about the price of fuel.

WardsAuto: You have a new Prius coming in 2015. Do you think low gas prices will be more impactful to the Prius, because it does sell in bigger volumes?

Lentz: (We) have 2 million owners (and) they’re fairly loyal to those vehicles. I think we’re going to be fine. The challenge is going to be to get non-hybrid (owners) to consider hybrids if gas is less than $3 a gallon.

WardsAuto: What would be the most effective government policy to promote the sale of alternative-energy vehicles?

Lentz: If you look at California as an example, specifically what they’re doing on the hydrogen front, where they’re making grants available to private enterprise to develop (alternative-energy vehicles), I think that is the best way.

Government doesn’t have to subsidize infrastructure, whether it be charging stations or hydrogen refueling (stations). But if they can help with the dollars, I think it goes a long way.

If you look at California through (hydrogen-infrastructure startup and Toyota loan recipient) FirstElement’s efforts, we can go from about 10 stations to almost 50 stations in two years. That’s a pretty big move to get that going. So I think that would be a big, big help.

I think from the consumer side, tax incentives are obviously a big, big plus.

WardsAuto: Of all the concept or production alternative-powertrain vehicles you’ve test driven in recent years, which is your personal favorite and why?

Lentz: Well, of course the (Mirai)! And the reason why is, first off, I love what it represents, and that is the beginning of this hydrogen society, because in my mind this is going to go well beyond just vehicles. This is going to go into stationary power plants and everything else. So it’s a very reliable future source of clean energy, for this country and for the world quite frankly.

So beyond what it kind of represents, I think it’s a fun car to drive. I think it has good acceleration. I love the exterior of it, kind of the catamaran look. I love the interior.

WardsAuto: What are the major issues facing Toyota’s supply chain today?

Lentz: I think that we are at the point with some suppliers (where they need more) brick-and-mortar than they have today to be able to keep up with demand. I think we can handle today’s demand, in a 16.4-million (-unit) industry. I think there’s going to have to be more investment made in the next couple years as the industry moves upward toward 17 (million units annually). [Editor’s note: Toyota expects the U.S. light-vehicle industry to sell 16.7 million units in 2015].

WardsAuto: New-car financing terms are increasing in length beyond 70 months, subprime loans are on the rise, incentives are climbing. Which trend is the biggest threat to market health? Is the industry is danger of suffering a 2008-like downturn?

Lentz: I don’t think we’re in danger of suffering a downturn, because if you look at that downturn, it was more the Lehman (Brothers) shock, the meltdown of the availability of credit, and not necessarily the cost of credit.

There’s no question at that point in time the industry was still producing too much, and the industry had huge incentives that were not sustainable. I don’t think that’s the case today. While incentives are up, they’re still a fraction of what they were at that point in time.

I do worry about the length of financing, and I think we have seen leasing come back much, much stronger as a result of that, to try to help (improve vehicle) affordability.

So yeah, long-term, we have to make sure as an industry we don’t push the incentives too far. I think we’re not close to that, to where we were back in those days. And I think there will be enough discipline in the industry that we will not cross that again.

WardsAuto: What’s your target for 2015 sales? Do you have a projection?

Lentz: We don’t yet. We’ll release that probably in Detroit (at next week’s North American International Auto Show). But gut feel is, it’s going to be up 100,000 or 200,000. I don’t think we’re going to see the big increase we have from the last year. I think that (pace is) going to start to moderate.

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