Toyota aims for a surge in sales

Toyota dealers are gearing up for something they haven’t seen in a while: a crowded showroom.

After a series of recalls and questions about the safety of Toyota vehicles kept buyers away, the Japanese automaker is hoping for a sales surge this weekend fueled by an unprecedented advertising blitz and a slew of financing deals.

Graduate student Chaviva Edwards, 26, who had checked out financing offers from other automakers, said she was now seriously considering the Toyota Yaris. With lawmakers and the media trained on the company’s every move, she believes Toyota will sell only the best cars available.

“The deals Toyota is putting out there are pretty tantalizing,” said Edwards, who lives in Storrs, Conn.

In a rare move, Toyota last week began offering no-interest financing for 60-month loans and $1,000 cash back on some models. Sales of Toyota vehicles slumped nearly 9% in February after the automaker issued nearly 6 million recall notices in the U.S. to address sudden-acceleration problems.

On Friday, Orange County Dist. Atty. Tony Rackauckas filed a civil lawsuit against the U.S. sales arm of Toyota Motor Corp., saying it had “endangered” the public by using “deceptive business practices” to sell “defective vehicles.”

A number of lawsuits have been filed by individuals, but the Orange County filing may be the first by a public entity.

The suit accuses Toyota of “ignoring, omitting, obfuscating and misrepresenting evidence” of sudden-acceleration problems as the company strove to dominate the auto market. The lawsuit seeks $2,500 in fines for each violation of the Unfair Business Practices Act.

Toyota said it could not comment because it had not yet received the complaint.

The latest sales incentives appear to be helping local Toyota dealers.

At Longo Toyota in El Monte, new-car sales over the first 11 days of March are double those of the same period in February, said President Tom Rudnai. Vehicles across the board are selling well, and many new customers are trading their cars for Toyotas, he said.

Other deals include two years of free maintenance for current customers who buy another Toyota.

“The incentives are phenomenal,” Rudnai said. “We’re anticipating another very good weekend.”

Toyota said its North American sales overall jumped more than 50% over the first eight days of March compared with the same period in 2009.

Rivals, including Mazda and Volvo, also began offering cash and other deals, ratcheting up the incentives war as the industry emerges from the traditionally slow winter months.

Though a boost for buyers, the incentives could be costly for the automaker, according to Barclays Capital analyst Brian Johnson. The financing package could cost $4,657 on average per car, he said. Toyota spent an average of just $1,833 per vehicle on incentives in February, according to The industry average was $2,588.

In all, the incentives could cost the automaker $1.1 billion, on top of the $4.4 billion it could end up spending on repairs for the recalled vehicles, according to a report by Kohei Takahashi, an analyst with JPMorgan Chase & Co.

Since the repairs began about a month ago, just under 1.2 million vehicles have been fixed, or about 20% of the 5.7 million vehicles that have been recalled in the U.S., said Toyota spokesman Brian Lyons.

But the pace is slowing, to roughly 40,000 a day from about 50,000, Lyons said. Many customers are expected to wait until routine scheduled maintenance to make the recall fixes.

In the week since the company rolled out the deals, the number of shoppers researching certain Toyota vehicles surged nearly 58%, auto information company Kelley Blue Book said.

On automobile research website, buyer interest in Toyotas rose 40% to a 14-month high on the day the incentives were unveiled. At the same time, the percentage of customers who said they were looking to buy from other automakers, including Chrysler, Honda and Ford, fell.

Prices for used Toyotas affected by the recalls fell 2.5% last month as negative publicity turned off potential buyers and rental car companies returned significant numbers of Camry and Corolla models, according to Edmunds. Across the board, used-car prices rose 2%.

Still, recent Toyota sales are showing “initial evidence of improvement” thanks to the incentives, said JPMorgan Chase analyst Himanshu Patel in a note to investors Wednesday.

Instead of defecting entirely to other automakers, Toyota’s “loyal consumer base” only postponed buying new cars during the recalls, according to Patel. And pent-up demand and better weather, along with competing deals from other automakers, could boost industry sales, he said.

January and February were both “decent” sales months for South Bay Toyota in Gardena, said Mike Pike, a sales manager. But March is shaping up to be better than both months combined.

The incentives make buying a Toyota “a little more enticing for customers,” Pike said.