Incentives Wake Up Toyota Sales, But at What Cost?
Jason Lancaster | Apr 02, 2010 | Comments 13
Yesterday Toyota’s March sales numbers came in and they were – in a word – huge. Toyota’s aggressive March sales incentives led to a 44.7% increase year over year, considerably higher than the industry’s impressive monthly gain of 24%. While many analysts have pointed out that Toyota’s 44.7% sales increase isn’t sustainable, that’s not really the point. Of course 40%+ sales increases aren’t sustainable. Here’s the real question: Did Toyota’s decision to get aggressive on incentives kick-start the auto industry, or did they simply pull sales forward?
The evidence that sales were pulled forward is pretty compelling. Toyota’s sales gain last month was phenomenal, but it doesn’t look like Toyota’s sales necessarily came at the expense of another brand. Let’s take a look at Toyota’s best-selling model, the Camry, to see what really happened with sales last month.
March 2010 increase in mid-size car sales. Click for a larger view.
The chart above shows March sales increases of the top 7 mid-size cars by sales volume. While the Camry’s sales were quite a bit higher than average, so were sales of the Altima, Sonata, Fusion, and Subaru Legacy. While the Legacy’s 124% sales increase should be discounted a bit (Subaru only sold about 3,500 Legacy, compared to 36,000 Camry sales), as should the Fusion’s sales (closing out an old model and heavy fleet sales), the trend is that Toyota’s incentives did not result in significant market share gains.
If market share isn’t growing and monthly sales are accelerating, there are two likely explanations:
- The entire market is getting bigger.
- The sales increase is only temporary (also known as ‘pulling sales forward’).
Of course everyone expects the entire auto market to get bigger this year, the growth is expected to be around 10-20%. Year to date, the industry isn’t tracking for more than a 10% gain. The market is getting bigger, but not 40%+ bigger.
Here’s more evidence that Toyota’s incentives have pulled sales forward. Cars.com announced that Toyota models experienced a pretty dramatic increase in customer contacts to Toyota dealers this month (as tracked on the Cars.com website). However, Toyota’s gain didn’t seem to come at the expense of other brands. Perhaps only the sales growth of Toyota SUVs came from the Acura MDX.
While there’s no way for anyone to know for sure, it seems likely that there will be a hangover from March’s big sales increase. Toyota has indicated that they will continue their aggressive monthly incentives, a sure sign that they believe sales would drop off without incentives.
Toyota’s decision to continue zero percent financing and discounted leasing is not a problem in the short term, but the long-term impact of aggressive sales incentives can be severe. More on that later…
Filed Under: Auto News
Still Jason it’s good to see car sales moving forward. To me it means people are done with the sticking pedal crap. I have to wait another year before I can trade-in for a Platinum series Crewmax.
Mickey – True – great point. This is proof that the news cycle is terribly, terribly short. In another year, it will be as if the whole pedal fiasco never happened. I’m going to dive into this more next week, but the downside is that there’s no easy way to stop these incentives once you start them.
the con, the incentives will lower resale value or at least a current trade-in value of toyota vehicles
the pro, the struggling big3 will have to keep doing the incentives too and will be less profitable per unit sold. in otherwords it will take longer for chrysler and gm to recover since they will have to sell more vehicles to obtain the same amount of profit. gm and ford have been trying to exit large incentives but now they have to reconsider.
danny – You’re stealing my thunder! 🙂
Even longer for Dodge if they can get sales on the positive side. At the same to Danny by the others doing the same as Toyota they lower their resale value also.
hahahaha
Sorry Jason, didnt mean to overstep my boundaries. lol
you can have it back,
And the Tunder rolls…………………..
I’m mulling over whether I get rid of the Highlander for a Corolla with all these incentives.
Danny – LOL.
TXTee – For some reason I responded to your question in another post! 🙂 If you can live with less space, the Corolla is a great way to save a lot of money.
I downgraded also from a RAV4 V6 4wd to a corolla. I got money back on the deal and got an 09′ corolla for 16K out the door with msrp being 19.3K. Not the spunk of a highlander V6 or RAV4 V6, but getting 34-35 mpg (avg mpg on cars computer says 36 mpg) vs. only 25 mpg with RAV4 sure saves us money weak after weak about 15 bucks per week in gas savings. I can easily go 5 days and can push 6 full days of driving vs. only 4 pushing 5 with the RAV4 V6. The corolla has had a few issues like replacing driver seat and track due to sloppiness and also a few plastic rattles that come and go, but sure beats the Big 3 small 4 cylinder fuel efficient cars I think and very quiet on the road and decent ride quality.
Yeah I noticed that post issue, Jason! Yes, I can deal with the Corolla. Always liked it and still do. The Highlander is literally a back up vehicle that stays in the garage most of the time. If I need “space” then I jump in Big Daddy Tundra. Most of the time, I am the only occupant in the vehicle so space isn’t an issue…..really thinking the Corolla might be a good option and could use a little extra space in the garage too. We’ll see what happens the next time I visit the stealership and have too much time on my hands.
TXTee – “Stealership” – LOL.
I love my service advisor but yeah it’s still the stealership! I’m feeling a bit bored so I may visit tomorrow and see what the Corollas are running or maybe a Solara for my mom.
TXTee – Good luck! I don’t blame you for calling them the stealership – I just thought the word was funny. I’d forgotten that one.