Heading to the heart of truck country

Toyota plans to plant its flag in the nation's biggest pickup market

LOS ANGELES -- For all their gains along the coasts over the past half century, Japanese automakers haven't been able to exert their dominance across the vast middle of America, from the Midwest and Plains to the heart of Texas. And the market for pickup trucks has been even more elusive.

With its move to Texas, Toyota is not only planting its flag in deep in the heartland but also announcing itself to the epicenter of the pickup market.

Texas is the second most populous state in the nation, with eight of the 15 fastest growing cities in the United States, according to Census Bureau figures. It's also the nation's second-largest light-vehicle retail market, with 1.2 million units sold in 2013, according to Polk data from IHS Automotive. Only California sells more, at 1.5 million units last year.

But when it comes to pickups, Texas is second to none. Indeed, more pickups are sold just in the Dallas and Houston areas than in any other state, including No. 2 California, according to Polk data. One of every six pickups sold nationally is sold in Texas.

Down in Texas
Toyota Motor Sales' share of the Texas retail car and light-truck markets is down from 2009.
 CarLight Truck
Source: IHS Automotive by Polk

Toyota has a truck plant in San Antonio, making it the only automaker that builds pickups in Texas. Yet Toyota has barely a sliver of this colossal market. Last year, Ford held nearly 36 percent of the full-sized light-duty pickup truck market. General Motors held 24 percent, and Ram was at about 16 percent, according to Polk. Toyota had just 11.3 percent of the full-sized segment last year, up from 10.5 percent in the depths of the recession.

Meanwhile, Toyota has seen its share of the car market erode. In 2009 Toyota Motor Sales held nearly 20 percent of the car market in Texas; by last year, it had dropped to 17.1 percent. With GM's car share holding steady, Chrysler Group and Ford Motor cars have made significant inroads. Toyota's combined car and truck market share in Texas has declined since 2009.

"We've seen vehicles from [competitive brands] move their products, in terms of specs, quality, powertrain offerings, and other characteristics, towards the segment leaders," said Tom Libby, IHS loyalty solutions consultant. "This has put pressure on Toyota and Honda."

Back in 2006, Texas was just one of the many frontiers targeted in Toyota's Rural Opportunity Market strategy, an effort to build beyond its strongholds along the Atlantic and Pacific coasts and in the Sun Belt. By expanding into rural areas of the Midwest and other regions with small satellites of existing big-city dealerships, Toyota hoped to grab some market share surrendered by the struggling Detroit 3, whose dealers were closing shop in those small burgs.

Soft in the middle
Toyota's brands have given up some of their light-vehicle market-share gains in the American heartland: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Texas and Wisconsin.
Source: IHS Automotive by Polk

Satellite stores popped up in such places as Madisonville and Mount Pleasant, Texas; Hilton Head, S.C.; and Johnstown, N.Y. Eventually, the pilot program was to grow to at least 20 satellite stores in America's bread-basket towns.

The strategy initially provided some gains, but the recession of 2008-09, which hit the Midwest hard, brought those gains to a halt. Following Toyota's unintended-acceleration recall crisis and the Japanese earthquake-tsunami disaster in 2010 and 2011 -- a period that saw brands such as Hyundai and Ford soar, along with a resurgent GM and Chrysler -- Toyota Motor Sales' market share momentum in the Midwest slowed substantially and has only recently begun to recover.

How much will the move to Texas do to speed that recovery?

Not much, says Karl Brauer, senior director of insights for Kelley Blue Book.

"There are reasons Toyota can spin into it, such as wanting to conquest the rest of the country," Brauer says. "But even if people care where the headquarters is or have issues with where the cars are made, I don't see many people changing their mind if the headquarters is in Texas as opposed to L.A." c

Mike Colias contributed to this report.

You can reach Mark Rechtin at mrechtin@crain.com -- Follow Mark on Twitter: @markrechtin

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