Toyota’s Lentz Forecast Tough But Promising Industry Future

Toyota’s Lentz Forecast Tough But Promising Industry Future

By Michelle Krebs August 8, 2007

Jim Lentz, executive vice president of Toyota Motor Sales, predicted a promising long-term future for the U.S. auto industry, with sales reaching 18 million vehicles a year. But along the way, he sees formidable challenges.

Speaking at the Center for Automotive Research’s annual management seminars in Traverse City, Mich., Lentz said sales this year likely will be 16.3 million vehicles, down about 2 percent from 2006. However, he forecasted a rebound in 2008 with steady growth into the next decade.

The major challenges facing the industry in the meantime, he categorized as politics and powertrains, pleasing new youth buyers and improving the industry’s retail reputation.

Demographics headed the auto industry's way

Lentz said Toyota predicts industry sales potentially growing by 100,000 vehicles or more per year, eventually reaching 18 million sometime after 2010. “In fact,” he said, “4 million potential new drivers are entering the market each year for the next 10 years,” Lentz said.

That means, Lentz pointed out, for the first time in history – around 2011 – five generations from the traditionals and baby boomers to Generations X, Y and Z will be car buyers.

“It will be the greatest market we’ve ever seen and all automakers will have a chance to profit from it,” he said.

But along the way, the auto industry – all automakers – face the same challenges.

Politics and powertrains

“By politics and powertrains, I mean that we are at an historical turning pointing our relationship with government and society. Fuel prices, energy independence, global warming and growing environmentalism all touch our industry in some way,” he said.

“We’ve faced regulatory threats before, but never the tidal wave heading our way. And it really doesn’t matter that we’re a relatively small contributor to some of these issues,”  added Lentz, noting vehicle create only a fifth of major greenhouses gases.

“But cars and trucks are a highly visible part of American life and an easy target for regulators,” he said, adding that the auto industry, nonetheless, be part of the solution and let Americans know the industry is, indeed, part of the solution.

Selling to the youth market

Attracting youth buyers is another major challenge. America has 148 million people aged 35 and under with Generation Y, the largest group, already holding $2.3 trillion in buying power and set to inherit another $17 trillion – nearly three times the current national debut.

“Young consumers now represent more than one third of the driving population and will continue at that pace for 17 years through the year 2025,” Lentz said.

Yet they are demanding customers, he noted, insisting on personalization and unlimited choice as well as instantaneous service.

Improving the retail experience

But snagging the new buyers in the retail environment. Lentz noted car salespeople ranked dead last in honesty and integrity in a Gallup poll and a fourth of car shoppers leave a dealership without buying a car because of a lousy experience. He quoted verbatim comments from Toyota’s focus groups and customers about the dealership experience:

“I’d just rather go into a funeral home than a car dealership.”

“The auto sales industry has a cloud hanging over it. All of them are out to take advantage of you.”

This has to change, insisted Lentz. “Clearly’ we’re not doing enough to address this long-standing, critical, front-line activity in our business.

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

First, he suggested, automakers must make sure they are not adding to the dealer’s problems, he said. “We have to ask ourselves: do our policies encourage the behaviors our customers seek at our dealerships? Do our associates model and support the efforts dealers need to excel with our customers?”

He added the car-buying process needs to be streamlined and be injected with fun.

Improving the retail experience is a top priority at Toyota, he said, and the automaker is looking at eliminate obsolete polices and scrutinizing “sacred cows,” such as vehicle allocation and dealer award programs.

“We’ll continue using Scion as a listening post and a lab for learning the needs of youth customers, and we’re transferring what we learn to Toyota and Lexus.”

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.