KOHLER, Wis. - In a move away from its roots as a maker of economy-priced subcompact cars, Toyota Division will severely curtail imports of the Japanese-built Tercel and Paseo for the 1998 model year and may discontinue them after 1999.
If Toyota drops the subcompact Tercel, its bottom-rung product would become the compact Corolla, a car now priced $2,300 to $2,475 higher across the range than Tercel, not including options.
In a similar move earlier this year, Ford Division walked away from the Kia-built Aspire, making Escort its entry-level product.
Toyota executives, interviewed here last week at the press introduction of the 1998 Corolla and Sienna minivan, said the upcoming Corolla will be priced below the current model, diminishing the case for a Tercel.
The current base Corolla starts at $13,418, while the base Tercel starts at $11,118. But the Tercel's price rises to $14,223 for a four-door equipped with air and automatic transmission. Prices include a $420 destination charge.
'Toyota customers often compare a new Tercel with a used Corolla and often they prefer the used Corolla. The horsepower is better, and since the build quality is so good, a 3-year-old Corolla is not in bad shape,' said Hideaki Matsuki, senior executive coordinator for Toyota Motor Sales U.S.A. Inc.
WANTED: YOUNGER BUYERS
However, since Toyota still needs younger, entry-level buyers, at least a base Tercel will stay in the lineup for the rest of the model cycle, he said.
'It's tough to attract younger buyers to Toyota because the styling of our vehicles is not very young.
The current Corolla attracts a lot of retired women,' Matsuki said, adding that the styling of the next Corolla will be more youthful (see photos on Page 2).
Executives said Toyota may import fewer than 10,000 Tercels in 1998, which would be down from 56,492 last year and 24,361 so far this year.
A sales target for the Tercel-based Paseo coupe was not given, although sales through June are off 59 percent to 1,758 units.
Executives acknowledged that another reason to kill off Tercel/Paseo is that it would allow Toyota to import more hot-selling Camrys from Japan.
With only 12 to 15 days' Camry supply in most regions and the Georgetown, Ky., plant already running full-tilt, Toyota will need to import more Camrys to fill booming U.S. demand for the car.
However, any great increase in car imports from Japan would be sure to trip U.S. trade sensitivities, executives acknowledged.
'There's the political part of the equation in that we're limited by how many Japanese-built vehicles we can import,' said Alan DeCarr, vice president of series teams for Toyota Motor Sales U.S.A.
'MAYBE IT DIES'
'It's how many vehicles we can bring in, not how many we want to bring in. So we want to bring in the best products we can within those limits.'
At the same time, Camry also makes more profit than Tercel -so swapping Tercel import credits for Camry also makes sense on the bottom line.
Lastly, Tercel buyers may be depressing Toyota's customer-satisfaction ratings at a time when the company has mounted a major push to improve them, said an industry analyst who declined to be named.
Tercel buyers may expect too much from the entry-level car, and thus can be disappointed when it seems to under-deliver, the analyst said.
However, Tercel scored better than Corolla in the 1997 J.D. Power and Associates initial quality survey - 65 problems per 100 vehicles to 70 for Corolla.
As for Paseo, 'maybe it dies,' said Suguya Fukusato, chief engineer for the 1998 Corolla.
With a new Solara coupe coming from the Camry platform next year, Toyota will have to move the pricey Celica downmarket if it wishes to maintain that vehicle's brand equity, Matsuki said.
But a simpler, lower-cost Celica might result in a sales clash with Paseo, which lacks the Celica's name recognition.
The Celica was last redesigned for the 1994 model year, and sporty coupes typically have four-year cycles.