Toyota Launches Incentives, Crosses Fingers

By Brendan Moore

Toyota had a 9% drop in new vehicles sales in February and thinks it lost approximately 18,000 sales last month due to public uncertainty over the current recalls, and it is going to do something about it.

That something is what Toyota describes as the most far-reaching sales program in its history,” and includes 0% financing on eight of its models, and subvented lease deals on nine. It also includes a customer loyalty bonus to past customers who buy a new Toyota in the form of up to two years of free regular maintenance.

The incentives, which expire April 5, also include cash back on certain Toyota vehicles. This is something that happens rarely in the world of Toyota. The company prefers to spend money subsidizing finance rates as opposed to giving rebates on the vehicles themselves; rebates tend to devalue the vehicle in the eyes of consumers.

Many auto industry analysts, however, were surprised that that Toyota didn’t lose even more sales. There is some feeling that the Japanese automaker actually exceeded expectations in terms of sales, particularly in the area of retaining their customers. Toyota themselves say it appears that almost all of their customers are sticking with the company so far; the problem is that the company is not picking up new customers at the same rates as they were previously.

Toyota’s sales incentives are not unusual in the world of auto retailing, just unusual for Toyota.

Toyota has also launched a series of television commercials featuring recent Toyota buyers (most of these repeat Toyota owners) to market the new incentives. The ads are intended to reassure consumers that buying a new Toyota is still a good decision.

No one thought the Japanese colossus was just going to sit around and do nothing while sales plummeted, and it was assumed that any company with the deep pockets Toyota has would be spending some cash in terms of incentives in order to mitigate the drop in sales numbers. The problem for Toyota’s competitors is that the company’s incentives require a market response, that is, incentives from the competitors. And, Toyota already enjoyed a clear advantage in that area – as an example, their incentive spending of $1833 per vehicle was only a little more than half of what Ford was spending per vehicle ($3300) before the recall furor.

Still, it’s an ominous sign for Toyota. If the average consumer starts looking at a Toyota as just another car, more or less equal to any other car, then the company and its retail dealers will have to close sales based on the “deal” available on the car instead of closing the sale based on the car. Whatever special deal is available on the vehicle sells the car, not the car itself. Because the Toyota car will be, in effect, just like any other car in the collective mind of the consumer, and therefore, not any more valuable.

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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