Though Toyota faces a serious uphill battle to win converts to its new Texas-built full-size Tundra, it keeps checking off the list of details necessary to successfully do so, according to Global Insight analyst Aaron Bragman.
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“The product is right, the distribution will be correct, and efforts are being made to turn Toyota’s image as red, white, and blue as Chevrolet’s,” he said in a research note on Tuesday.
“Whether or not the message resounds with rural Americans, who can be far more traditional-minded than their urban counterparts, remains to be seen.”
Bragman said Toyota Motor Sales USA, the Torrance, California-based US sales arm of the giant Japanese automaker, has recognised the importance of rural buyers for big trucks, and is opening ‘satellite’ dealers in small towns to accommodate them.
“Toyota dealers have typically been found only in urban markets, establishing themselves with urban and suburban consumers throughout the United States, but the company is now going after the American heartland where the majority of pick-ups and sports-utility vehicles (SUVs) are sold.
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By GlobalData“Unlike its previous efforts at marketing a “full-size” pick-up to US consumers [with the previous-generation, smaller US Tundra lines], Toyota is following up the introduction of the new Texas-built Tundra with a push into the heartland for distribution. The company knows that success with rural buyers will be crucial to establishing itself as a credible alternative to the domestic competition,” Bragman said.
Toyota is beginning a pilot programme to open dealerships in previously unserved rural areas in an attempt to attract crucial rural business for the launch of the redesigned, now-full-size 2007 Tundra pick-up in February.
All of the outlets will be satellite branches of existing dealerships in urban markets, which Toyota has been content to serve for decades. But with the goal of more than doubling Tundra sales with the introduction of the all-new model, growth opportunities must be sought, and the automaker feels that those opportunities lie throughout nearly 50 identified markets throughout the central and mid-western United States.
Currently only five such rural satellite dealerships have been finalised, all of them in Texas, but if the programme proves successful, Toyota’s senior vice president of automotive operations, Don Esmond, has said that additional programmes will be pursued in rural states like Montana, Kansas, and the Dakotas, Bragman said in his note.
The dealerships operate in a different way to a typical full-service Toyota dealer. All are satellites of established and successful urban dealers, and share a lot of common back-room functions and personnel. Warehousing, parts, and ordering are common to both the urban and satellite dealer, creating lower costs for rural dealers who would not be successful as stand-alone operations. Customers will not notice any difference, as the satellite stores will feature all of the amenities and services that the urban store features, such as large service departments.
“In order for Toyota to be successful with the new Tundra and increase volumes to the point where they start to make a meaningful impact in the full-size pick-up market, two things have to happen,” Bragman wrote.
“First, the product must be unquestionably correct. Rural buyers use their pick-ups for true work purposes, and as such, domestic pick-ups have a flexibility and solidity that must serve as both a people-mover in the evening and a workhorse during the day. Options lists for domestic pick-ups allow for nearly thousands of variations, with bed lengths, drivetrains, interior options, and equipment that allows for a customer to order a vehicle specifically tailored to their needs.”
Bragman noted that Nissan has not had as much success with the Titan as it had hoped for, partly due to the limited variation that the company offers on the truck; only one powertrain, for instance, and little in the way of work-truck type options.
Data supplied to just-auto by Texas-based analyst Bill Cawthon supports Bragman’s argument.
Nissan originally set a sales target of around 120,000 units for its petrol V8-powered Titan launched with two body style options in January 2003.
“I think they hedged it to about 100K. The Titan hit 86,945 sales in 2005. This year, it’s current pace looks to be perhaps 10,000 units shy of that. By the end of October, sales totaled 61,750,” Cawthon said, noting that November is not a strong sale month in the US and that petrol prices are headed back up as heating oil cuts in on refinery capacity.
“December should be better, but I doubt it will take the Titan to much over 75,000 [this year],” he added.
“Of course, the Titan is hampered by its relatively narrow range of body styles and took a beating during the summer. The Titan’s best month was July 2005, the only month it broke 9,000 sales.
“In terms of Texas, the Titan is back in the back of the pack in full-size, non-luxury pickups.”
After rising US petrol prices hit truck and SUV sales earlier this year (Nissan also builds an SUV spinoff of the Titan), Nissan was reported to be eyeing a bought-in diesel engine option for its truck to better match the Detroit ‘Big Three’ rivals who all offer bought-in diesel engines in their larger, ‘commercial use’ variants.
Bragman said Toyota has come up with an impressive product in the Tundra, however.
“Multiple drivetrains, superior power, and a cabin that easily matches the domestics in terms of size puts it squarely toe-to-toe with the American offerings.”
He said that the other thing that will make the Tundra a success, and the concept much harder to adjust, is image.
“Despite how right the product may be, Toyota is a Japanese company, and foreign nameplates do not enjoy nearly the same following among rural Americans as urban Americans.
“Overcoming literal prejudices against foreign nameplates, especially in a segment in which customer brand loyalty is something that can actually be accurately described as intensely passionate, will require serious skill and money.
“Toyota is actively pursuing this second piece of the formula however, taking steps to ingrain itself in the culture of the United States to be seen as an acceptable alternative to Ford, Chevrolet, or Dodge. It has entered NASCAR racing, been present at county fairs all over the Midwest and Plains states, sponsored all manner of professional sports, and demonstrated its awareness of the fact that buyers want an American-made product by playing up the truck’s San Antonio roots.
“Whether or not Toyota’s efforts can overcome decades of anti-foreign sentiment among rural buyers in the country’s most hotly contested segment remains to be seen. While Toyota’s goal of roughly 200,000 Tundras may be but a fraction of the millions of full-size pick-ups that the US Big Three move every year, given Toyota’s track record of successes in the United States, the Big Three automakers have cause for serious concern over Toyota’s inroads into their last bastion of customer loyalty and profitability,” he concluded.
Graeme Roberts
