Toyota's not immune - cuts Tundra production

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Toyota is drastically curtailing production of the new Tundra as demand for the pick-up drops, according to the Financial Times, even as Toyota has added incentives. Production in November, just under 19,000 vehicles, was down 29% from the October production level and about 25% below the average production for August, September, and October.
 
Though Toyota claimed the reduction in production was planned, due to anticipated slow sales in January and February, which are ordinarly slow-selling months, the size of the cuts belies Toyota’s explanation. The Tacoma production drop in the same time period was only 12% below October levels, as was Camry production. 
 
The drop in Tundra sales far outpaces the overall drop in the light pick-up truck market. Overall, light pick-up sales were down 8.3% from October to November, less than a third the drop experienced in Tundra production.
 
The decision by Toyota may have anticipated, to some degree, the introduction next year of a new Ford F-150 and new Dodge Ram Dodge Ram . Though those vehicles will not be in showrooms until later in 2008, they have been long anticipated and it is very likely that many buyers will elect to delay purchasing decisions until they’ve had a chance to see what the new Ford and Dodge will be offering. 
 
Moreover, the current nature of the pick-up market is working against Toyota. With the Chevy Silverado holding its own, and then some, against the Tundra, Toyota’s decision to offer rebates to move the Tundra only precipitated a price war. When the new Ford and Dodge are in the showrooms, the Tundra will suddenly become the older vehicle, with not even newness as a reason to buy it. Moreover, though Toyota owners overall repurchase the brand at a rate of 60%, that’s partially attributable to the typical Toyota owners preference for a non-domestic product. In light trucks, however, brand loyalty works against the Tundra. So far, Toyota has not been sufficiently successful in “conquest” sales to make the truck a success. The problem will only be exacerbated by the introduction of the new F-150 and Ram.
 
Toyota appears to have made two major mistakes in the introduction of the Tundra, and cannot now recover from either. First, the company failed to stock dealers with sufficient numbers of new Tundras to allow for buyers to pick from a selection of vehicles and buy off the lot. Unlike Camry buyers, who don’t demand a vast selection of options, truck buyers have very distinct requirements, and won’t buy a vehicle that doesn’t meet them. The truck buyer’s requirements are very specifically dependent on the type of use to which the vehicle will be put, and domestic automakers long ago understood that salient point. So, Ford, Chevy, and Dodge dealers stock a variety of pick-up models and options.
 
Second, Toyota failed to introduce a heavy-duty version of the Tundra at the same time it introduced the basic half-ton model, and then deferred indefinitely (some say cancelled) the plan to produce the heavy-duty model.
 
Heavy-duty trucks – those with a capacity above three-quarters of a ton – account for a smaller percentage of sales than the half and three-quarter ton models, but they are the trucks that establish the image for the entire line-up. If a reputation for toughness counts in selling trucks – and it obviously does – it’s the heavy-duty truck that establishes that reputation. It is for this reason that Ford Ford spends a disproportionate amount of its advertising promoting the Super Duty, or at least showing it off in the commercials. 
 
Toyota assumed it could roll out the new Tundra the same way the domestic makers introduce their new trucks: first, the light truck, then the heavy-duty models a year later. But, Toyota lacked the established “street cred” that the domestics already have, partly because it has never offered a heavy-duty model in its line-up. So, the failure to introduce the heavy-duty model at the same time was a failure to establish commitment to the truck market. When the initially poor sales figures came in, management got scared and dumped the heavy-duty truck from their plans, further diminishing the impact of the light-truck segment Tundra in the overall truck market.
 
Toyota’s problems with the Tundra have one basic cause: organizational arrogance. Toyota seems to have assumed that the Detroit automakers were entirely as stupid as their image has made them out to be. It underestimated the amount of expertise in meeting customer’s wishes that the domestic automakers have accumulated in the truck market. 
 
Ever since the early 1950’s – i.e., for more than fifty years now – Detroit automakers have excelled and prospered at the one vehicle they do better on than anyone else: vehicles weighing about two tons with a V-8. As government regulation forced cars to downsize, many buyers simply moved over to trucks and Detroit accommodated them, eventually creating the SUV. One reason that certain lawmakers have tried so hard to apply the same mileage standards to trucks as to cars is they simply despise people who prefer two-ton vehicles with V-8s and want to take them away.
 
Toyota failed to understand that the typical truck buyer is both more sophisticated and more fashion-conscious than their typical Toyota Toyota buyer. The truck buyer is looking for a high-quality and reliable too, but also understands that the nature of a man’s equipment and how he takes care of it says a lot about him. The typical Toyota customer thinks of the car as an appliance. The truck buyer does not.
 
Toyota will have great difficult overcoming the bungled introduction of the Tundra. In fact, it has probably lost the opportunity forever. The Tundra’s failure will further stigmatize the brand. 
 
It used to be said that General Motors figured people would buy whatever they produced.
 
No more.
 
Not it’s Toyota that has that attitude.


1 comments:

Ralph, Ralph, Ralph. Just when I thought you were starting to write unbiased articles, you’re still sticking with the "GM Rules the World" mentality.

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