For Toyota dealers, it's back to normal, full speed ahead
For Toyota dealers, 2012 marked a return to a kind of normalcy. Having weathered allegations of runaway vehicles in 2010, then inventory shortages after the 2011 tsunami, Toyota last year simply had to compete against other brands for recession-wracked buyers.
Now with the U.S. economy turning around, Toyota is primed for a big 2013, with lots of new or redesigned products arriving in dealerships.
Jay Caldwell, chairman of the Toyota National Dealer Advisory Council, spoke with Staff Reporter Mark Rechtin.
How was 2012 for Toyota dealers?
It was a great year. It was the first time we've sold 2 million units since 2008. Share is up to 14.4 percent from 12.9. Camry was No. 1 for the 11th consecutive year. Our store was up 20 percent over a record 2011. When you talk about volume and share, you get dealers' blood going.
What major issues do Toyota dealers face this year?
The competitive nature of our business and our marketplace is as competitive as it's ever been. We need to remain aggressive as dealers.
We need to help launch nine new and updated Toyota products. We need to focus on training our staff to know those products.
Toyota Care [maintenance included in the purchase price] has been out there for two years, so [those customers] are coming off that program now. We have to pay close attention to ensure we retain those customers and not present them with overpriced services and running them off.
What do you hope to accomplish as chairman of the dealer council?
As dealers we try to keep Toyota focused on reliability, durability, quality and safety, to remain a leader and raise the bar. But we need more than that to break through in our market. We need fun, exciting and sexy vehicles and innovative marketing that will present our products clearly while connecting with our customers. With strategic incentives, we can sell a lot of cars in 2013. If Avalon is any indication, I like our chances.
Are Toyota dealers profitable?
Yes. The last few years have made us better businesspeople and car dealers. We've reduced unnecessary expenses, maximized efficiencies within our operations and focused on used-vehicle departments and service retention. With our new-car sales resurging, it's an exciting time to be a Toyota dealer.
Are Toyota dealers making money on new-car sales?
For the most part, yes. It's tougher and tougher to be profitable. Our margins are facing pressure from all sides. Transaction prices are driving everyone's margins down.
Now that times are better, is Toyota pushing harder about its dealership-renovation program?
I don't hear that. In 2008, we made the jump to Image USA II. Right before the meltdown, we built a LEED-certified store, the first one in Arkansas. The stores are a huge long-term commitment and investment for dealers. Reasonably so, dealers are concerned about that. But we have to look at the competition. Right next door, a Chevy dealer is putting in a brand-new, beautiful store. But we don't just look at car dealerships.
We look at all retail, restaurants, bank branches that are nicer than any car dealership. We have to be mindful of the level of expectation of our customers.
Does the certified Toyota pre-owned program work for dealers?
I'm hard-pressed to find a way it could be improved. It's more effective than anyone else's program. It answers the question of "Is it going to be a good car for a good length of time?"
Are customers still talking about unintended acceleration?
I haven't heard that question in quite some time. I think most customers have let it go. We don't hear much about it.
What is Toyota doing to attract service business?
ToyotaCare is the exact right thing for Toyota to be doing. The best opportunity to retain a customer is when we sell a brand-new car. It has done a fantastic job. Since ToyotaCare began in 2010, our 2012 versus 2009 customer-pay [service] is up 30 percent in a three-year period. I think [what Toyota pays us for ToyotaCare work] is extremely fair. In some cases, it's more than we were charging customers.
How would you rate Toyota Financial Services' performance with dealers?
I sat behind a finance desk for three years, learning my way through the car business. The relationship with your lender is the most important thing that you have. With Toyota dealers, [TFS is] the majority of their business, and they buy deeper with TFS than anyone else. TFS has been a great partner for us. They really stuck by us and stuck with leasing, all the way through the recession. Recently, the dealer council was invited to the customer service center in Iowa, where they are focused on nothing more than retaining customers. We were completely blown away by the professionalism of the employees and the process.
Is Toyota doing enough on the social media front?
They've been at it a while, and it's evolving extremely quickly. As dealers, we have done a better job over time because it's such a personal way of communicating. Toyota is on the right path.
What's missing in the lineup?
We still want a true sports car for the Toyota brand. The FR-S is exciting for Scion, but for Toyota a real identity in a sports car is something we want. In Arkansas we would love to see a full offering of [heavy-duty and diesel] full-sized pickups. It's a huge market, and we would love to be a part of it.
What could the factory do to help boost new-car margins -- or what is it doing that squeezes dealer margins?
Our margins are important, obviously. As Toyota dealers, we have one of the best margins to work with. But the transaction margin of what we're able to sell it for is the more important one.
The one thing we need help with, in this aggressive market we're in, is continued support from Toyota with incentives.
Anything they do with margins or below the line doesn't do much with transaction prices. All that information is out there on the Internet.