Toyota: Incentives Not Required

DETROIT – Industry watchers have been predicting it. And competitors have been holding their breath waiting for the hammer to drop.

But a top Toyota official says the auto maker has no plans to start a price war – and aggressive incentive programs won’t be needed to regain its lost share in 2012.

Toyota relinquished more than two points of market penetration last year as the tsunami in Japan and subsequent flooding in Thailand hampered supply lines, and lingering effects of the 2009 sudden-acceleration scandal still had some buyers shying away from the auto maker’s showrooms.

Many industry insiders and analysts expect Toyota to unleash steep incentives in coming months now that vehicles are back on dealer lots.

But Toyota Motor Sales President and Chief Operating Officer Jim Lentz says a big product push, with 19 new or refreshed models bowing across its three U.S. brands in 2012, could translate into lower, rather than higher, spiffs for the auto maker this year.

“I think they should worry more about those manufacturers that (traditionally) start incentive wars, not us,” Lenz tells WardsAuto in an interview on the sidelines of the North American International Auto Show. “But no, we’re not (planning a big incentive push).

“The reality is, if you look at the 19 new or updated models we’re going to launch this year, and you add (the new) Camry, Camry Hybrid, Yaris and Prius V into that, 40% of our volume will come from new or updated models.

“Incentives typically are used to sell down old-generation product. So I would argue that our incentive exposure this year will be substantially less than it traditionally might be, not necessarily more.”

Lentz says 2011’s inventory problem probably took Toyota volume down by more than 100,000 units, as its share of the market fell to a 7-year low of 12.9%.

“(It’s) tough to say, because how much did we lose (and) how many were postponed to a later date?” he says. “I’m sure we lost 100,000-plus, but it’s hard to put a finger on it.”

This year, Toyota is forecasting sales of about 1.9 million light vehicles, up 27% from last year’s 1.5 million. That would give it about a 14.0% share, if U.S. industry sales match the auto maker’s 13.6 million-unit forecast.

“So, we’ll pick up one point of share this year,” Lentz says. “Then if you look the continuation of new product through the middle of this decade, I’m confident we’ll get back to the 15% range.

“Will we ever get back to the 17% of a few years back? I don’t think that’s realistic. But back then we had a lot of tailwinds helping us. Others in the industry were in trouble, financing was tough to get, gas prices spiked – all of those were big tailwinds helping us. So the 17% was probably a little extreme.”

Bigger things are expected for the Lexus luxury brand, which has ceded the top sales spot to BMW but is expected to lead growth at Toyota this year.

“Lexus was really impacted by supply due to the tsunami,” Lentz says of the 13.4% sales decline in 2011. “And it also was impacted to a degree by product cadence.

“(But) when you look at Lexus this year, they have nine new models to launch. We’re going to grow TMS in total 15%. I would not be surprised to see Lexus grow 20%. They’re going to be very strong.”

However, Lentz says he won’t match BMW and Mercedes incentive for incentive in a bid to put Lexus back on top the luxury-vehicle sales perch. “I’m not going to spend that kind of money to chase them.”

Enough capacity is in place to handle the sales rebound, he says. With the newest plant in Blue Springs, MS, expected to reach full output soon, Toyota will have 1.7 million units of capacity in North America, enough to supply about 70% of its U.S. sales demand.

“So we think we’re in good shape, based on where we see the market midterm, without adding additional capacity.”

Making its U.S. debut here is Toyota’s Prius C, which along with the new plug-in 5-door expands the Prius lineup to four models.

The tiny city car is nearly 19 ins. (48 cm) shorter overall than the standard Prius and weighs some 500 lbs. (227 kg) less.  It combines a 1.5L gasoline engine with a 144V NiMH battery pack and provides a combined 99 hp and 53 mpg (4.4 L/100 km) fuel economy.

The Prius C joins the standard model and the extended Prius V introduced last year, plus the new plug-in model also rolling out in 2012.

Lentz says total Prius sales this year should climb to 210,000-220,000 units, up from about 140,000 in 2011. All of that growth will come from the new models.

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