More misery for Toyota, Honda
Sales slip, floods delay, shoppers stray
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October was supposed to be a breakout sales month for Honda and Toyota as they bounced back from months of meager inventory. But it didn't happen -- and the immediate future is looking gloomy for the two Japanese companies.
Not only were supplies still limited by the lingering effect of Japan's March earthquake, but there were signs that some previously loyal customers are now shopping other brands rather than waiting for Honda and Toyota to restock.
And floods in Thailand are forcing new production cutbacks.
"I'm having crow for lunch," said Toyota brand boss Bob Carter, who had predicted a sales turnaround in October and a year-over-year gain for the month.
Toyota and Honda were the only major automakers with lower year-over-year October sales. Overall, U.S. light vehicle sales rose 8 percent, matching February for the year's best seasonally adjusted annual selling rate of 13.3 million.
Sales at American Honda fell 1 percent, and Toyota Motors Sales U.S.A. was off 8 percent.
And as Toyota and Honda struggle to restock barren dealership lots and regain their market footing, the new natural disaster in Thailand threatens to prolong the sales funk. Heavy flooding there halted critical parts output and forced both companies to slash production in North America and elsewhere.
Al Hendrickson Sr., chairman of Al Hendrickson Toyota of Coconut Creek, Fla., says he normally has 500 to 600 new Toyotas in stock. He had just 150 most of October and ended with 200 after getting a surge of Corollas and Camrys in the last few days of the month.
Even though Honda and Toyota reported their smallest percentage year-to-year decline in six months, the continuing decline still stung. For example, Carter noted that with half as many Corollas in stock as there were last October, sales of the high-volume subcompact fell 11 percent.
Toyota and Honda have lost a combined 4.1 percentage points of U.S. market share so far this year. Since March 1, just before the quake, Toyota group inventories plunged 56 percent by Sept. 1. American Honda stocks fell 67 percent by Aug. 1.
Carter did not specifically blame the Thailand flooding for hampering Toyota's efforts to restock. But Toyota added only 10,700 units to inventory last month, after gaining 20,300 during September. Toyota started November with a 39-day supply, unchanged from Oct. 1 but well below the 65 days it had March 1.
"Honda said there will be supply problems until the first of the year," said Steve Landers, partner at RLJ-McLarty-Landers Automotive, a multibrand dealership group.
Landers also owns a Toyota store but says: "Toyota is really pouring units on us now. Honda is struggling more than Toyota on supplies."
Eroding loyalty?
Toyota and Honda, putting the best face on the situation, have said many loyal buyers are simply waiting for dealers to restock.
But not all, says the Nashville research firm Dataium, based on samples of 100 Toyota and 100 Honda online shoppers. Dataium studied buyers who had researched only one brand or the other before May 1, when both still had normal supplies, and then tracked their shopping behavior as Toyota and Honda inventories shrank rapidly.
Among the Toyota shoppers, 53 percent still shopped only that brand after May 1, while 16 percent completely abandoned the brand. The other 31 percent widened their search to include other brands or used Toyotas.
But just 24 percent still shopped only new Hondas once supplies tightened, and 29 percent abandoned the brand completely. The other 47 percent widened their search, Dataium said.
"This was a big change from normal," said Dataium researcher Dylan Snyder.
"It's very clear the public was aware of the supply problems."
Snyder said Toyota normally has the lowest "lead-loss rate" of all major manufacturers and Honda is among the lowest.
Dataium says "lead losses" occur when a shopper researches one brand but submits a lead -- a request for dealer contact -- for a different brand.
To stimulate November sales, Toyota began offering financing and leasing incentives on Nov. 1, even before marketing starts for the annual Toyotathon sale later this month. Lexus started its "December to Remember" lease and financing deals Nov. 1, though marketing for the annual event won't start until late November.
Carter said Toyota expects fourth-quarter sales to beat those of the same period of 2010.
Rivals add share
But while Toyota and Honda supplies are tight, rivals are boosting sales without heavy incentives.
In October, Chrysler Group sales jumped 27 percent, and average per-vehicle incentives fell 3 percent from October 2010, to $3,303, said TrueCar.com.
Hyundai-Kia Automotive sales rose 22 percent, and it cut spiffs by 23 percent below October 2010, to $1,300. Nissan North America sales surged 18 percent, though its incentives rose 15 percent, to $2,917.
Ford Motor Co. boosted sales 6 percent. General Motors was up 2 percent.
October's sales pace picked up despite the economy, not because of it, said Jeff Schuster, senior vice president of forecasting for LMC Automotive. "At this point, it's not the economy driving sales; it's pent-up demand ... from the recession and from this summer's inventory shortages," he said. "The economy is picking up but it's not contributing to any auto sales momentum."
Executives expect gradual improvement into next year.
Don Johnson, GM's U.S. sales boss, said: "Despite the volatility, we continue to believe that the U.S. economy will continue to grow slowly [and] help release the pent-up demand created by four years of below-trend sales."
Erich Merkle, Ford's chief sales analyst, added: "It appears we will see strength as we finish the year out."
Jamie LaReau and Mike Colias contributed to this report
You can reach Jesse Snyder at jsnyder@crain.com.
