Toyota may face a long, hard road back


Toyota still faces major hurdles in rebuilding its image and market share even though a federal study found no evidence that electronic defects accounted for sudden acceleration in its vehicles.

The results of a study conducted by NASA engineers were welcome news for Toyota Motor Corp., but it doesn’t change the biggest problem the world’s largest automaker faces — the lack of dynamic products at a time when competitors are coming out with greatly improved cars, analysts say.

“Customers are walking away with the perception that even though a Toyota is well built, they don’t see it as the next step in design, styling and innovative features,” said Alexander Edwards, president of Strategic Vision Inc., an automotive research and marketing consulting firm.


For the first time in years, the Ford and Chevrolet brands are outselling Toyotas. The Japanese automaker is losing market share and has had to offer incentive after incentive on its vehicles, which were once among the least discounted in the industry.

Toyota is losing customers such as Jennifer Polis, a social worker from Fontana.

Polis purchased a Hyundai Tucson SUV last month after test driving and rejecting Toyota’s Venza and RAV4.

“I liked the people at Toyota the best, but the cars didn’t have enough power. They lagged a bit,” both in styling and acceleration, Polis said. She also liked the interior of the Tucson better.

Toyota’s share of the U.S. auto market fell to 15.2% last year from 17% in 2009, hampered by the recall of millions of vehicles, and the record payment of nearly $50 million in federal fines for failing to promptly inform regulators of defects in its vehicles and delaying recalls. It was the only major automaker to log a sales decrease from 2009.

Bob Carter, the automaker’s group vice president and general manager, acknowledged that the tumult over the sudden acceleration incidents and the long string of recalls made for “a challenging year for Toyota.”

The company is responding with a flood of new products and will launch a new advertising campaign this month that reminds consumers that it remains the top retail car brand in America, he said, adding “You are now going to see a relentless focus on our product.”


Toyota plans to introduce seven new or refreshed vehicles during 2011, including the new Prius V station wagon. Many analysts expect Toyota to also unveil a new Camry.

Carter declined to respond to the speculation but noted that the current version of the Camry was nearing the point when Toyota typically makes a change and that the automaker plans to announce “major new products that are core to the Toyota brand that will generate significant volume for us.”

Others aren’t convinced they will be enough to bring shoppers back to Toyota’s dealerships.

“Toyota needs to get back to basics and focus on what it is good at — building high-quality cars with bullet-proof reliability that perform well in their segment, and it must pay more attention to detail,” said David Champion, director of Consumer Reports’ auto test center.

The problem for the Japanese automaker is that competitors are improving reliability and styling, especially in the subcompact and family sedan segments of the market that have long been Toyota’s bread and butter.

Toyota’s Corolla and Camry models accounted for more than a third of the company’s U.S. sales last year. Although they remain among the bestselling vehicles in America, analysts say new rivals are eating away at their market share.


The Corolla is not expected to get a full redesign until the 2014 model year, and although it still gets top fuel economy, its styling and features have fallen behind new entrants such as the Hyundai Elantra, the Ford Focus and the Chevrolet Cruze, said Dave Sargent, vice president of vehicle research at J.D. Power & Associates. And a new version of the top-selling vehicle in that segment — the Honda Civic — comes out later this year.

“The competition is very tough,” Sargent said.

Toyota also has fallen behind in the family sedan segment, said Champion of Consumer Reports.

“Toyota used to be way out in front in terms of reliability, but now you have to pick and choose,” he said. The Camry with a V-6 engine “has only average reliability, and while the four cylinder is above average, the most reliable family sedan is now the Ford Fusion,” he said.

Problems are cropping up in other important segments, he added.

Champion said Consumer Reports just completed road tests of the new Sienna minivan and found that “some of the interior materials are low rent compared with the previous generation Sienna,” Champion said.

Design changes that diminish Toyota’s perceived reliability and durability hurt because “customers are now open to looking at all of the brands and products out there and do side-by-side comparisons,” and for many, Toyota is no longer the default choice, Edwards said.

That’s why the automaker is starting to pile on the incentives, Sargent said. Although Toyota still discounts its vehicles less than other major car brands, the gap has shrunk significantly in recent years.


“In the past, people were willing to pay close to full price because they saw the value. Now Toyota is having trouble selling cars on their merits, so they have to bring the price down and make them more attractive in relation to competitors,” Sargent said.

Just five years ago, Toyota had an average incentive per vehicle of $838. That average incentive almost doubled to $1,598 in 2009 and rose to $2,125 last year, according to auto information company

Incentives dropped back slightly in January, but Toyota launched a new round this month, offering no-interest loans and lower lease rates as well as cash back, depending on the region and the model.

Toyota also began offering two years of free maintenance to its customers.

Carter is upbeat about Toyota’s prospects this year.

“Yes, it is a very competitive market. There are a lot of good entries out there, and that is good for the consumer. But we are well positioned,” he said. “The economy is getting better, and we have a fantastic pipeline of new product about to enter the market.”