Toyota's Big Foot
Jerry Flint, 02.21.06, 3:00 PM ET


Toyota rolled out its new big pickup at the Chicago auto show the other week, and the auto press went wild. From the stories, you would think the Black Death was about to strike Detroit and wipe out civilization as we know it.

Well, that isn't going to happen. This is Toyota's (nyse: TM - news - people ) third try at the big pickup market. The first, the 1993 T-100, was not big enough, lacked a V-8 and was far from a Toyota sales hit. The second try, today's Indiana-built Tundra, which went on sale in 1999 as a 2000 model, is a good truck, beloved by the Consumer Reports crowd, but still a bit small for mainstream America.

Toyota's new model, which it will build at a new Texas plant starting this fall, as well as in Indiana, is a true competitor. The new Tundra lineup offers many choices: three engines, a six-speed automatic transmission, three body styles and 10,000 pounds' towing capacity. It's a good pickup, but it won't become America's best-selling big truck.

Why am I so sure?

The additional new plant gives Toyota the capacity to make 300,000 Tundras a year. Ford (nyse: F - news - people ) sold 900,000 big pickups last year, and General Motors (nyse: GM - news - people ) sold almost 1 million Chevrolet Silverado and GMC Sierra models. Even if its new truck is a huge success, Toyota would need three more new factories to equal either Ford's or GM's capacity, and that's not happening in my lifetime.

Detroit's trucks are quite good. They don't have the quality problems that hurt domestic cars in the bad old days. Owners are generally happy with American-brand pickups, even proud of them and fiercely loyal. The new Toyota will be out in a year, but this fall GM will start rolling out its new pickups. Judging by GM's brand-new sport utility vehicles, which share underpinnings with the upcoming pickups, the new GM pickups will be world-class.

For once, Toyota won't have a cost advantage. The huge volume of GM, Ford and Dodge will give the domestics a cost edge over Toyota. The usual Toyota strategy is to introduce a new vehicle at give-away prices to build volume. That's a problem this time. Detroit could under-price Toyota's trucks, and would, if necessary. The home team didn't fight hard enough to defend other markets but will fiercely protect its turf in big pickups. Expect plenty of flag waving, too.

Toyota could start a price war. Its profits are so large, around $10 billion a year, that it could give away free every big pickup it could build and still come out more profitable than what the Detroit companies earn together a typical year, not a year like last year, when GM lost $8.4 billion. The problem is that even if it gave away all its pickups, the volume would be the same capacity-constrained 250,000 to 300,000 units a year--assuming they are sellouts. Some folks say that the big new Toyota, unlike the prototype Toyota showed off earlier, is bland and could get lost in the crowd next to Detroit's offerings.

A price war could also cost Toyota considerable political damage. And if Toyota keeps prices too low on the new Tundra, it could hurt sales of its smaller Tacoma pickups. It makes more sense for Toyota to try to get a premium price for its trucks and build up its reputation in this segment.

Though the new Tundra will be available in many flavors, Detroit covers more bases. The Tundra lacks a super-big version (the 250 and 350 models of Ford, for example), and these bigger boys often carry diesels that Toyota still doesn't offer.

The big question is how long the market will remain so large. Despite the big gasoline price increases last year, the market slipped only a bit from 2004. January's sales are down only slightly, too.

Nissan (nasdaq: NSANY - news - people ) entered the big truck market just two years ago. The big Titan, built in a new Mississippi plant, hasn't lived up to Nissan's expectations, but then the expectations were too high. The truck was new, the factory and the workers were new, and the launch wasn't trouble-free. The model variety was limited, and Nissan dealers had never sold a big truck before, either. Toyota will also have a new truck in a new plant with new workers, but the company has an excellent record for introducing new models. The company takes its time and gets it right.

Small pickups are another story. This is a shrinking market, but Toyota is now the leader: 169,000 sales last year compared with 163,000 for GM and 121,000 for the Ford Ranger. How did that happen? The domestics came into the small pickup market years after the Japanese and then failed to keep their entries competitive. Ford, which had been the best seller, let the Ranger grow old. GM hurt itself by building its new pickup with an engine compartment so small that the biggest motor that fits is an inline five-cylinder; there is not enough room for a six.

Small pickups are just one of many markets where Detroit played it dumb and lost. Big pickups are one business that the domestics cannot afford to lose--and won't.

I guess nobody could dominate in every category, so neither could Toyota.

Wow, way to state the obvious Jerry Flint :thumbdn: .

Anyone who thinks Toyota can all of a sudden lead the fiercely loyal truck market is a fool. This is a market where the domestics excel at, and continue to put a lot of attention and resources into. This is also a very loyal market, although that it slightly changing.

Toyota would be very happy if the new Tundra got to 300K annual sales.

Wow, way to state the obvious Jerry Flint :thumbdn: .

Anyone who thinks Toyota can all of a sudden lead the fiercely loyal truck market is a fool. This is a market where the domestics excel at, and continue to put a lot of attention and resources into. This is also a very loyal market, although that it slightly changing.

Toyota would be very happy if the new Tundra got to 300K annual sales.
what people fail to understand - which I find quite funny since Forbes is an business magazine - is that Ford will lose some 2billions in revenue and probably 300 millions in profit by simply loosing 100,000 sales of F150 to Tundra. And of course, Toyota will gain the same... At the same time, Ford will still be selling more than 2x more than T.

So for any business, most important thing is to move foward - to gain sales and profits. You can be #1 manufacturer in the world, but if you are loosing sales and profit, you are not doing well.

Why did the domestics totally neglect and throw away the compact truck market? Dumb.

what people fail to understand - which I find quite funny since Forbes is an business magazine - is that Ford will lose some 2billions in revenue and probably 300 millions in profit by simply loosing 100,000 sales of F150 to Tundra. And of course, Toyota will gain the same... At the same time, Ford will still be selling more than 2x more than T.

So for any business, most important thing is to move foward - to gain sales and profits. You can be #1 manufacturer in the world, but if you are loosing sales and profit, you are not doing well.
werd. I'm lookin forward to this new Tundra. Its definitely going to win a lot of people over.

Toyota will never sell more pickups than Detroit because Hank Hill would never buy a foreign brand.

Toyota will never sell more pickups than Detroit because Hank Hill would never buy a foreign brand.

Never say never. We don't know what the future holds.

Toyota will never sell more pickups than Detroit because Hank Hill would never buy a foreign brand.
I have only one thing to say to Hank Hil, charcoal tastes better!!!

:-)

I saw the new Tundra here in Chicago last week and was not blown away with the truck. I think they took a lot of the Ford design and added the Toyota touch to it.

I thought it looked good but it did not stand out in a crowd. I will drive it when it comes out but I think new GM will get the nod from me.

Toyota hopes to double annual sales with new Tundra

By MARK RECHTIN | AUTOMOTIVE NEWS

AutoWeek | Published 02/27/06, 6:20 am et


Traditionally cautious Toyota is taking a gamble on the redesigned 2007 Tundra.

Toyota's new assembly plant in San Antonio will double Tundra production, so the automaker must find lots more buyers for its full-sized pickup.

The problem: The current Tundra is not luring large numbers of Big 3 truck loyalists out of their pickups.

Toyota has been surprised by its inability to win over consumers who already own import-brand cars, says Ernest Bastien, vice president of Toyota's vehicle operations group. In 2005, Toyota sold Tundras to just 8.4 percent of full-sized pickup buyers who already had an import-brand vehicle in their garage, he says.

Toyota also has come up short in attracting first-time buyers of full-sized pickups. "That's where we've missed our greatest opportunities for growth," Bastien says.

Yet Toyota executives are confident they can add 150,000 Tundra buyers a year.

The redesigned truck is due in early 2007. With a 5.7-liter engine, towing capacity of 10,000 pounds and a slew of new model variants, they say the redesigned Tundra should overcome the shortcomings that have hampered its predecessors.


Few domestic trades

Toyota sold 126,529 Tundras last year, a record for the truck. But a surprisingly small number of those buyers were conquested from the Big 3.

Of those who bought a Tundra, just 8 percent traded in a Ford F-150, and fewer than 6 percent left a Chevrolet Silverado, according to Toyota data. By contrast, 30 percent of Tundra purchasers traded in another Tundra or a compact Tacoma pickup. Many more customers were import-brand loyalists who would not buy a big truck unless Toyota made it.

"We've had some success in appealing to traditional domestic owners," says Bastien. "But it has been limited because body and engine configurations were expanding faster than we were able to introduce them."

In the case of the popular four-door configuration, Toyota was late to the party and missed a big opportunity to lure domestic truck owners when it finally arrived in late 2003.

Toyota found that more than half the customers who rejected the Tundra said it did not offer the configuration they needed or that the dealer did not have the right model in inventory.

Another major reason for rejection was the Tundra's low towing capacity. The new model, with more configurations and higher towing capacity, will address both those concerns, Bastien says.

Toyota also loses some rural customers because it lacks a nearby dealership. Toyota has about 1,200 dealerships, compared with 3,800 for Ford, 4,100 for Chevrolet and 2,900 for Dodge. Toyota is adding rural satellite dealerships to appeal to farmers and ranchers. But that plan is expected to add a couple of dozen stores at most.

Then there's the matter of overcoming generations of brand loyalty to Ford, Chevrolet and Dodge, observes Leonard Northcutt, who owns Toyota and GM dealerships in Enid, Okla.

"There is a large cultural difference between Toyota and GM customers," Northcutt says. His Tundra sales are predominantly to Toyota loyalists.

Toyota builds the Tundra in Indiana and Texas. But, Northcutt says, "Buy American" sympathies are less important than product attributes.

More than half of domestic truck buyers looked only at replacing their existing truck with the same nameplate, according to the 2005 New Vehicle Customer Study by automotive consulting firm Maritz Research. About 78 percent disposed of a domestic vehicle when buying a domestic-brand full-sized truck.

On the other hand, Toyota is encouraged by Tundra owners' loyalty. Since the launch of the four-dour Double Cab, 43 percent of Tundra buyers were Tundra owners. For a vehicle with a short sales history, Tundra is competitive with the Ford F-150 at 54 percent loyalty and Chevrolet Silverado at 46 percent, according to Toyota data.

The numbers game

John Wolkonowicz, senior market analyst with Global Insight in Lexington, Mass., doesn't think the new Tundra will win over Big 3 loyalists. He sees the Tundra expanding the overall full-sized truck market, rather than securing a larger piece of the same-sized pie.

Wolkonowicz says shoppers born between 1978 and 1989 love pickups, and there are plenty of white-collar folks with horse trailers and boats who have been waiting for a larger Tundra to arrive. "There is no reason for that truck not to be a success. But customers are going to come from different places than (Toyota) might expect," Wolkonowicz adds.

The huge market for pickups is working in Toyota's favor, says Jim Hossack, an analyst with AutoPacific in Tustin, Calif. "The full-sized half-ton truck universe is 2 million pieces (per year), so Toyota going from 100,000 to 250,000 units is doable," Hossack notes.

"Big 3 truck owners have had a lot of problems, whether it's with GM's engines and transmissions, Ford's Triton with the spark plugs that pop out, or general disenchantment with Dodge quality," says Hossack, who owns two GMC pickups with recurring glitches.

"The Big 3 have given Toyota an opening with their less-than-ideal quality."

source : autoweek

Why did the domestics totally neglect and throw away the compact truck market? Dumb.
okay. The Ford Ranger is like 100 years old.

okay. The Ford Ranger is like 100 years old.

So... why didn't they update or remodel it? The Ranger used to dominate its market and it had great name recognition.

So... why didn't they update or remodel it? The Ranger used to dominate its market and it had great name recognition.
I was agreeing with you. I have no idea why they just let the Ranger go so long without a total revamp. it must still sell well.

R there compacts anymore? All these compacts are now huge