Toyota's Jim Lentz: Opportunity with trucks
Wrong. Although people in the Midwest, for example, still prefer domestic-brand cars and trucks, import brands are making steady inroads.
Both Toyota and Honda have identified the Midwest as their next growth target, unveiling heartland strategies to their field staffs and advertising agencies.
"The biggest opportunity for incremental growth is in the heartland," says Jim Lentz, Toyota Division general manager.
In the past five years, domestic brands have lost nearly 8 points of retail market share in 13 heartland states. (See box.) Almost all of that lost share has gone to Asian brands, according to data from research company R.L. Polk & Co. of Southfield, Mich. Although Daewoo has disappeared and Isuzu and Mitsubishi have fallen sharply nationwide, every other Asian brand has made gains. The figures exclude fleet registrations.
Even in Michigan, where the Big 3 have a home-field advantage, domestic brands retailed 96,090 fewer vehicles last year than they did in 1999. In 1990, Toyota led in retail car sales in seven of 42 heartland metropolitan markets. Last year, Toyota led sales in 22 metros in the heartland.
There are various ways to define the heartland. Toyota's 13 heartland states are Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Texas and Wisconsin.
Next up: Pickups
The next step is for the Asian brands to challenge the domestics in the hugely profitable pickup segment. Toyota and Nissan hope that assembling Tundra and Titan pickups in the United States will convince rural buyers that their trucks are as domestic as Fords, Chevrolets and Dodges. After all, U.S. production helped the sale of Toyota Camrys, Honda Accords and Nissan Altimas.
Toyota is asking its established metropolitan dealers to add satellite dealerships in rural markets. The showrooms will concentrate almost solely on light trucks. In Alabama, Toyota runs TV commercials pitching its Tundra pickup directly against Ford's F series.
"The heartland is receptive to import brands due to their positive experience on the car side," says Toyota's Lentz. "We see a lot of houses with a Camry and an F series in the garage. It gives us an opportunity for the future."
Over the next two years, Toyota will examine about 50 rural markets and approve companion stores in about a dozen cases. Already, four dealers have signed letters of intent.
Further expansion of the plan will occur only if those pilot stores show an immediate return on investment, says Al Cabito, group vice president of sales administration for Toyota Motor Sales U.S.A. Inc.
"These are not growth markets. They are not places that would be a feasible dealership point 10 years from now, unless IBM rolls into town," Cabito says. "We want to make sure these guys make money. It's not a slam dunk for any of these guys."
Lonnie Miller, director of analytic solutions for R.L. Polk, says that Asian automakers will continue to make inroads with such tactics. "You can talk product all you want, but it's also about how you are taking your distribution channel into all these areas," he says.
Jerry Bawcum, dealer principal of Toyota of Paris in Paris, Texas, is spending $2.7 million in land and construction costs to open a companion dealership in Mount Pleasant, about 50 miles away in the northeast corner of the state.
Toyota hopes the new point will generate about 500 new-vehicle sales annually. Last year Bawcum sold 1,000 new Toyotas at his Paris store.
"In Texas, there are about 600 Chevy dealerships, 600 Ford dealerships and about 60 Toyota dealerships," Bawcum says. "You have to drive past a lot of our competitors to get to a Toyota store."
You may e-mail Mark Rechtin at [email protected]