LOS ANGELES - With sales off 16.2 percent overall through March and its franchise car, the Camry, off nearly 30 percent, Toyota Division decided to step into the incentive wars - but gingerly.
While the Big 3 have raised the noise level with $500 and $1,000 loyalty coupons, Toyota has put a modest lease package and 4.8 percent loans for 48 months on the Camry and Corolla, and some customer rebates on the aging Tacoma and T100 pickups.
But that's about it. And why not? Inventories are still way below industry average at 46 days.
Just the same, the incentives seem to be working - April sales rose 6.6 percent over 1997.
'We don't want to overreact to the market with our incentive plan, but we owe it to our dealers and ourselves to be competitive. So we have to respond,' said Don Esmond, the new general manager of Toyota Division.
Esmond said the market is increasingly deal-driven, and not even Toyota can escape weakening purchase attitudes.
'The market is split between the value of the car and the value of the deal, and our competitors have escalated the value of the deal,' Esmond said. But he added quickly: 'We don't have to buy loyalty with coupons.'
Even after the latest push, Toyota incentives are still the lowest of the big six American and Japanese automakers, as much as $600 per unit less than General Motors and Nissan, according to CNW Marketing Research in Bandon, Ore.
CNW President Art Spinella says Toyota doesn't have to spend as much on incentives to get the same reward. According to his research, 80.3 percent of people who include Toyota on their shopping list end up buying a Toyota, compared to 58.1 percent for Honda, 47.6 percent for Fored and 21.6 percent for Chevrolet.
'Once a Toyota is on a shopping list, the chances of that person selecting something else or being convinced to buy something else, regardless of price, are very slim,' Spinella said.
'So while GM is shotgunning as many millions of people as it can into the showroom with coupons, Toyota can be more selective as to the people it wants to come into the showroom.
'The conversion of a consumer from shopper to buyer is the true test of the brand in such a price-sensitive market.'
WHY THE SALES SKID?
Esmond admitted that Toyota sales were slow in January and February not only because Toyota did not offer incentives, but also because a record December had pulled back sales and crimped inventories.
'We had a dynamite December, and we really didn't have any incentives in the first couple months,' he said. 'But now we have those in place, and it's making a difference.'
Toyota increased its incentive spending in late March, and continued in April. As a result, April sales climbed 6.6 percent. Camry sales in April were still off from a year earlier, but by only 4.6 percent, while Corolla sales rose 29.7 percent.
Despite the strong April, Toyota was off 10.8 percent for four months, and Camry was off 23.4 percent.
'Our plan is that we're going to sell more than we did last year, even though it's a tough, competitive market. I'm still confident we can do that,' Esmond said.
According to Esmond, Camry's steep sales drop can be explained by Toyota's launch strategy.
When Camry was introduced in fall 1996, Toyota wanted all emphasis on retail, so it delayed filling late-1996 fleet orders until the first quarter of 1997, he said.
SIENNA CRIMPS CAMRY
That touched off a sales boom that was almost impossible to equal in 1998, since fleet sales will be spread out more evenly this year, Esmond said.
What's more, the success of the Sienna minivan has come at the expense of Camry.
They are built on the same assembly line at Georgetown, Ky. But because it takes longer to build a Sienna, every minivan assembled costs Toyota two or three Camrys.
Toyota has made up for some of that by importing more Camrys.
Just the same, Esmond wants to sell more Camrys, so he has unveiled a value package promotion for the Camry CE. It has air conditioning and power everything, and is $600 less than those options would be if purchased separately.
He thinks Camry volume will be about the same as last year's 397,156.
Also, Toyota has reduced imports of the Tercel, and has dropped the Paseo. The Corolla is supposed to take up some of the slack, but its sales were flat through April. The mitigating factor is that those results are better than the slumping subcompact segment.
One analyst was not surprised by Toyota's move.
'The situation is becoming like the electronics industry, where everything is on special all the time,' said Bill Pochiluk, partner in Coopers and Lybrand Consulting's AutoFacts Group in West Chester, Pa.
'We're seeing that even Toyota is not immune to this, especially in the middle- and low-end of market, where you need incentives to be on a lot of peoples' shopping lists.'