Toyota Enriches Tundra Incentives
March 29, 2007

Toyota has added dealer incentives on some versions of its newly launched Tundra full-size pickup truck in an effort to stir slow sales, Edmunds.com’s AutoObserver has learned.

“Toyota apparently is coming up short on sales numbers and wants to drive volume,” said Alex Rosten, manager of pricing and market analysis for Edmunds.com’s AutoObserver. “This is not a good sign for Toyota.

Tundra incentives are: 3.9 percent to 5.9 percent financing on all models, depending on the loan term; special lease rates on all models; $1,000 trade-in assistance for early termination of leases on the previous-generation Tundra; $2,000 dealer cash incentive on Regular Cab models; $1,000 dealer cash incentive on Double Cab models. The incentives run through the end of April. Some dealers already were offering as much as a $1,500 discount on the basic Tundra work truck, which is selling particularly slowly.   

Tundra's launch has been hampered by the delayed introduction of the CrewMax version, which prompted many customers to wait in a holding pattern until all the Tundra variants were available. Now that it is on sale, the CrewMax is selling well, and none of the dealer cash incentives are offered on it.

The Tundra launch was further marred by news from the National Highway Traffic Safety Administration that the new Tundra achieved four stars in its frontal-impact crash test ratings when its prime competitors earned the top five stars.

The next move will be up to Toyota's competitors, who expect Toyota to be aggressive and do whatever it takes to sell 200,000 Tundra's a year.

Currently, General Motors is offering on its newly introduced Chevrolet Silverado 1500 and GMC Sierra 1500 a customer cash incentive of $1,000 and low-interest financing of 0 – 4.9%. Ford is offering a $3,000 cash incentive or 0 - 2.9% financing on its F-150. The Dodge Ram has $3,000 to $5,000 in cash incentives or  0 – 5.9% financing. Nissan is providing a cash incentive of $3,000 to $3,500 or 0.9% financing.

"Toyota seems to have priced this vehicle too high, alienating many potential buyers who might otherwise have been swayed to consider a Texas-built truck produced by an import automaker with a solid reputation," said Edmunds.com's Senior Analyst Jesse Toprak. “With a market share battle in full force, we expect the truck incentive war may continue throughout the year."

So far, Toyota has made few inroads with loyal owners of Chevrolet and Ford trucks, in particular. Edmunds.com's analysis shows the Tundra is drawing sales largely from Toyota loyalists, particularly current Tundra owners, rather than stealing sales from competitors.

Based on February sales data, Edmunds.com puts Toyota's loyalty rate on the Tundra -- calculated based on what make vehicle was traded in for the Tundra -- at 50 percent, up dramatically from 38.3 percent the month before. That indicates Toyota owners are trading their Toyotas – current Tundras, largely -- for the new Tundra. To meet its goal of selling 200,000 Tundras that are built at its new plant in Texas annually, Toyota will have to steal sales from existing truckmakers.

Advertising for Tundra, as well as its competitors, has been immense and pervasive.
Moves and counter moves in incentives and advertising likely will continue in this long chess match. The stakes are high. Toyota is trying to gain legitimacy in the domestically loyal full-size truck market, and the domestic producers battle to hold their ground.

"Truck shoppers would be wise to take advantage of this unexpected opportunity to get a great deal on a new truck," remarked Phil Reed, Consumer Advice Editor for Edmunds.com. "There are many terrific new vehicles on the market, and yet market conditions are forcing the automakers to offer dueling incentives that will allow consumers to save a lot of money on the purchase."

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