Tundra Tanking?
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Call it the miscalculation of the decade, at least so far: the Toyota Tundra.

The first note of taps for the Tundra was sung last week.

Toyota is cutting production of the Tundra. According to the Wall Street Journal, they may even pull production of the light truck from the Princeton, Alabama plant that Toyota built expressly for the Tundra and consolidate it with Tundra production in San Antonio, Texas.

Build a state-of-the art new plant to build a new truck. Within two years of introducing it, the nation’s premier financial newspaper says you may pull the entire show out of the plant designed for the product.

It’s ironic. The problem actually turns out to be that GM has too many dealers.

In trucks, turns out that’s not so bad.

(more after the jump)

The new Tundra was the first truck with $2,000 rebates on the hood to move the metal. That set off a price war among the four major truck manufacturers that hurt all of them, Toyota included. Of course, Toyota trumpeted sales increases by comparing sales of the new full-sized truck to its obsolete mid-size predecessor. But, the discount dollars told a different tale.

Toyota cited the overall ten percent decline in sales in the light truck market as justification for the production cuts, asserting that they were merely designed to keep production in line with demand.

But, according to the Wall Street Journal, Toyota is considering moving Tundra production out of Princeton and consolidating it with the Tundra line at the San Antonio, Texas plant. If they do, that would free up the Princeton plant for production of cars – we may speculate that it might be a new Prius-branded line, a move which has been rumored for over a year, particularly since the Scion brand has failed to sell.

What it all means is that - long-term - the Tundra is dead.

Both Ford and Dodge introduced new pick-up trucks at the North American International Auto Show this February, in dealer showrooms by fall. Both the Ford and the Dodge will be newer, fresher and available with far more features and options than the Tundra. Chevrolet, which has dominated (at least when combined with the companion GMC brand) the light truck market for the past decade, isn’t going away, either.

Toyota, of course, can plead that it was blind-sided by the collapse of the light truck market. It wasn’t the only one. So, too, were General Motors, Ford, and Chyrsler.

The fact remains that the light truck market is essential to all big automakers and, faced with a downturn in that market, Toyota flinched when the others did not. It dropped the plan for a heavy duty truck line, considered by most to be essential to credibility of a truck brand, and then put incentives on the Tundra, exactly the desperation strategy that everyone in Detroit long ago learned sacrifices long-term interests for short-term gain. Most thought Toyota both rich enough and wise enough to avoid that strategy.

Toyota is a fascinating company, still riding on the crest of the wave, still acclaimed for its marketing triumphs, still able to get its mistakes ignored.

But, the Tundra may turn out to be a defining moment for Toyota, its management and its marketing.

The light truck market in the United States is not likely to go away. General Motors has invested heavily in the two-mode hybrid concept, in order to be able to provide the size and power Americans want in a truck or SUV, while still meeting economy and emissions standards. Because Daimler bought into the concept with GM (and BMW and others, in a joint venture), Dodge is a beneficiary of the same technology and will be able to produce vehicles using the same systems.

Toyota, however, can no longer hope to compete with the Detroit car makers in trucks - a segment of the market which is enormous, even if somewhat smaller than before.

In this instance, the large number of GM dealers, vs. the small – albeit large in size – number of Toyota dealers, means dealers GM dealers have large stocks of GM trucks available to the buyer, on the spot. Ditto for Ford and, also, Dodge.

Truck buyers are the most option conscious shoppers in the world – it’s not just convenience options, but also powertrain options: engines, axle ratios, transmissions, etc. They are the most sophisticated automotive shoppers in the world. That is because, for a large percentage of the buyers, the truck is not merely transport, but it is also a very essential tool. These are people who take care of their tools, because their tools make them money.

That is where the individual dealer really matters. Having selection, having the ability to get a truck from another dealer in a dealer trade, having an educated sales force, all of these things matter to the truck buyer. They mean he or she can get what he or she wants, when it’s wanted.

And, all of those are things alien to the Toyota dealer. Toyota dealers live and breathe on quick turnover of inventory – on the margin. Stocking large numbers of distinct vehicles – which is what a Chevy dealer must do to meet demand – is very, very expensive, to the dealer and, ultimately, to the manufacturer who must find a way to support that cost.

That, ultimately, is the investment Toyota decided not to make.

If they were going to build the plant, they should first have understood the market.

Instead, they ran away.

Ralph Kalal
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  (5990) posted on 03.17.2008


  (47) posted on 03.17.2008

You are drawing all of your conclusions about the demise of Toyota from a bunch of if’s and maybes’.

Just because Toyota is "considering" moving production of the Tundra means that the Tundra is dead? You would like to think that, but in reality the Tundra is taking away market share from GM.

Back in 2006 before they redesigned the Silverado GM was offering combined rebates of up to $10,000 on certain models. If the Silverado didn’t die of a $10,000 rebate the Tundra will certainly not die of a $3,000 rebate.

I’ve been reading TopSpeed for a while and I find your articles to be highly biased and very inaccurate.

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