Toyota’s Operating Profit Falters on Yen Exchange, Car Strategy – Time Invest in Toyota Tundra?
Tim Esterdahl | Aug 05, 2016 | Comments 11
Toyota announced its operating profit fell 15 percent in the latest quarter and they are lowering their annual forecast to a four-year low. Executives blame the profit loss on a strong Yen affecting exchange rates and the changing appetites of U.S. consumers who simply aren’t buying staple models – Camry, Corolla and Prius – like they used to according to an Autonews.com story. Toyota says they will respond by cutting payroll and looking for additional savings. While that is a short-term fix, the long-term solution, I think, should be reacting to the market trends and investing more resources into the Tundra.
The Toyota Prius is a perfect example of the changing face of the U.S. consumers buying habits in that it isn’t selling that well compared to Japan where it is a perennial top seller.
For the past few years, the U.S. automotive market – one of the largest and most profitable in the world – has been trending away from cars and into larger vehicles like trucks and SUVs. The reasoning is complex with many factors playing a role like improved fuel economy in SUVs and trucks, a decrease in gasoline prices and the appetite for larger vehicles.
All companies have been working on adjusting their plans to match up better with this ongoing trend. For example, Nissan is making a larger focus on SUVs and trucks with a big push on both fronts. FCA is killing both the Chrysler 200 and Dodge Dart to build more trucks. And Ford continues to make improvements in both the F-150 and SuperDuty to stoke demand while small car sales are stagnant.
On the other hand, Toyota has been slow to respond to these market changes – this seems to be their nature – and has been refreshing their core car models instead of focusing on their large vehicle lineup. For example, the Camry, Corolla and Prius have all been overhauled in the past two years while the Tundra has had a minor update, the Sequoia hasn’t been updated in nearly a decade, the Tacoma finally got an update and the 4Runner has had only minor refreshes. Arguably, the only SUV with a significant update lately has been the much improved Highlander.
While the Camry, Prius and Corolla updates were all needed and they are significantly improved, I would argue more focus needs to be on SUVs and trucks. My reasoning is simple after looking at monthly sales reports for years. For example, year to date sales as of July illustrate the point with the Highlander (+6.6%), Rav4 (+16.1%) and 4Runner (+17.3) all seeing significant sales growth against last year while the Prius (-25.9), Camry (-8.0) and Corolla (-2.9) are all struggling. In fact, as I detailed in my 2016 Toyota Rav4 Limited Hybrid review, the small SUV is on the verge of beating the Camry in consumer sales.
Adding to the issue is being late to adopt other trends like turbocharged engines, more multi-speed transmissions and technology like Apple CarPlay or Android Auto. This especially hurts in the truck business where competitors like Ford, Ram and GM have all added 7, 8, and even 10-speed transmissions into their products mated to a variety of powertrain options like diesel and small displacement turbocharged engines.
Plus, all the other trucks manufactures like Ford, Ram, GM, Nissan and Honda are offering or will offer Apple CarPlay and Android Auto into their products. While Apple CarPlay and Android Auto may seem like a dumb feature for a truck to true truck buyers, if you have ever used them, you would be signing a different tune.
In my view, short-term cost cutting is helpful for addressing the bottom line and impressing shareholders. However, a significant investment into their truck business would do more to offset losses than cutting back on air conditioning.
Filed Under: Auto News
agreed Tim,
and I think we have a double or nothing 6 pack that there will be no changes again in 2017 to the tundra
and I agree 100%, carplay needs to be brought in, so much better than the nav, ipod, etc integration they have now
Imagine that, failing to invest in your products and making them up-to-date hurts your bottom line! Earth to Toyota! Hello?!
Tundra rolling along with 2006 designed engine and chassis. 4Runner, rolling along with basically the 4.0 and 5-speed tranny from 2004. Sequoia, same story! Americans want these cars and none of the models I mentioned are competitive interior, drivetrain, MPG or technology-wise! All the most important things to buyers!
I have been a loyal Toyota brand guy from the beginning, but the lack of updates and competitiveness has finally turned me away from the brand. Paying top dollar for not state of the art up-to-date products will not happen with me anymore.
DJ,
I am right there with you. I was going to get a Tundra to replace my 2011 Titan but got another Titan. At the time, it was not worth paying a premium for something I could get for thousands less. Nissan is adding diesels, new transmissions, a nice interior and technology that’s first rate. I was looking to get my wife a sequoia but it doesn’t compare to the new Armada especially the interior. My wife wanted the 4Runner until she drove it. She said she couldn’t justify 46k for a plastic interior and no power.
Maybe this will open Toyota’s eyes and get them investing in all their products not just hybrids and boring hydrogen cars.
I consider Toyota to be a victim of their own success. I have a 1985 pickup, and a 1990 4runner. I have owned them both since new. I know it’s unusual to keep vehicles so long, but they continue to be trouble free, and inexpensive to operate.
I don’t need a new vehicle just for the sake of owning a new vehicle. I drive them until they break, and mine aren’t broke.
Touché!
Your comment reminds me of this great satire article from the Onion:
http://www.theonion.com/articl.....ly-s-50480
-Tim
I’m exactly the same way, but fortunately for Toyota most people aren’t. Always gotta have that shiny new car. Keeping up with the Joneses and all that.
Good info Tim, Once again we see US managers investing in areas that will not be a stable part of the US market. Your comments on turbos, transmissions etc are a big part of the auto industry and this industry for trucks is also attached at the hip for recreation vehicles.
Most of us who tow 5th wheels with our Tundra will eventually have to move on. Comments like I heard (leave the HD market to the big 3) by US managers I put in the same bucket as the idiot who decided to remove the driverside grab handle in the Tundra. No long range protocol in place for trucks. It is really time Toyota looks for managers who are willing to change with the truck market. I guess I could say it really does not matter considering how many pickups are out there for sale, but as long as I have a Tundra and as long as I tow my Grand Design 5th wheel with my Tundra I am going to argue for change. Maybe we should sending emails to HQ Japan.
Let’s do it.
Akio’s email Akio.toyoda@toyota.co.jp
Jim Lentz – james.lentz@toyota.com
Email sent. This should be fun.
You guys are cracking me up!
-Tim