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.
The post Toyota’s Operating Profit Falters on Yen Exchange, Car Strategy – Time Invest in Toyota Tundra? appeared first on Tundra Headquarters Blog.
content first posted onhttp://www.tundraheadquarters.com/blog/toyotas-operating-profit-falters/
No comments:
Post a Comment