Toyota: Full-Size Truck Buyers "Need" Incentives
September 17, 2007

By Bill Visnic
Toyota Motor Corp. has endured some scoffing over the sometimes unseemly incentives of several thousand dollars consistently laid on the hood of its all-new Tundra full-size pickup. In July, Edmunds.com estimated Tundra incentives reached a height of $4,625; Toyota execs say they now are at about $3,000.

But at a meeting last week for financial institutions and media, one Toyota executive says so many customers are upside-down, that without big cash incentives, the full-size truck segment is a “No Sale.”

Jim Lentz, executive vice president, Toyota Motor Sales U.S.A. Inc., rattles off some interesting statistics about Tundra transactions:

• About one-half of all Tundra buyers trade in something.
• Some 40 percent of those trade-ins are Toyota products.
• Another 40 percent of trade-ins are “conquests” from domestic manufacturers -– and half of those conquest trade-ins are full-size pickups.

That’s enough food for thought (about 10 percent of all Tundra sales come from buyers trading a domestic pickup).

But it gets better.

Lentz said of all customers trading in a full-size pickup to purchase a new Tundra, a stunning 36 percent are “upside down” (owe more than the vehicle is worth).

And the average upside-downess? A giant $3,600.

“Incentives are required to help these customers buy our products,” Lentz flatly said.

“We always use incentives for tactical purposes,” he adds in defense of the un-Toyota-like incentives ladled onto Tundra transactions, saying current conditions in the full-size truck segment will harbor nothing less.

Weakness in the full-size pickup market hasn’t helped Toyota’s cause, where lingering high gasoline prices appear to have helped sustain a downward trend, but Lentz said Toyota can’t blame another unfavorable condition, the blowup of the subprime mortgage industry, for its trials in the truck market.

“Credit availability really hasn’t affected the sales side at all, thus far,” Lentz said.

With Tundra sales now tracking close to projections, Lentz said Toyota is sticking with its initial company forecast for a slight increase in overall sales this year.

“The general trend we see is positive going forward,” Lentz said, adding that Toyota has no plan to ratchet up incentives towards the end of the year in order to maintain market share.

He does admit, however, that Toyota will approach incentives on a segment-by-segment basis going forward as the overall U.S. market continues towards what appears to be a significant contraction in 2007. Edmunds.com forecasts that industry sales will come in at 16.2 million this year, down from 16.5 million in 2006.

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