Good News for Advertising Industry – Auto Manufacturer Spending $1B Big!
September 18, 2009
Toyota plans marketing blitz to reverse U.S. slide
By Bernie
Woodall and Kevin
Krolicki
DETROIT (Reuters)
- Toyota Motor Corp is preparing a $1 billion marketing campaign to boost
flagging U.S.
sales, expanding hybrid models under the Prius name and allowing its dealers
more room to keep pricing competitive.
The moves by Toyota
reflect some of the first big changes in the way the top global automaker is
running its business in its largest single market since Akio Toyoda took over
as president in June.
Toyota dealers
at a meeting with Toyota executives in Las Vegas this week were told that the automaker would
adjust pricing on new Toyota
models by widening dealer margins to give sales representatives more leeway to
close deals with car shoppers.
The changes were described by dealers who attended the
briefing and confirmed by Toyota
spokesman Irv Miller. About 1,400 Toyota
and Lexus dealers attended the meeting.
The $1 billion Toyota
has budgeted for fourth-quarter marketing is about 30 percent to 40 percent
higher than the automaker would typically spend in the quarter and will include
funding for stepped-up advertising and incentives, Miller said.
In addition, Toyota told
dealers the company would offer lower-rate lease deals because of higher resale
values and would refrain from raising prices on the next vehicle to launch in
the U.S.
market, the 4Runner SUV, people who attended the meeting said.
Dealers said the steps show Toyota’s new management led by Toyoda — the
grandson of the company’s founder — is serious about reversing a recent slide
in car sales that hit it harder than more nimble rivals led by Hyundai Motor Co.
“The message is that Toyota is going on offense,” said Pete
DeLongchamps, a vice-president at Houston-based dealer group Group 1 Automotive
who attended the meeting.
Group 1, one of the largest U.S.
dealership groups, counts on Toyota
and Lexus for 35 percent of its overall sales.
“We’re feeling pretty good about our 35-percent
position right now,” he said.
By widening that dealer profit margin, Toyota is giving its dealers a better return
on new car sales and making it easier for them to offer car shoppers a higher
price on a used-car trade-in, dealers who attended the meeting said. The
changes to the vehicle pricing will vary model-by-model, dealers said.
The plan comes as Toyota
struggles with its worst downturn since it was founded in 1937. Toyota’s decline in sales of 29 percent in the United States through August has been in line
with the slide in overall U.S.
auto sales.
PUTTING THE PRIUS ON CENTER-STAGE
In a move intended to take advantage of its market-leading
position in hybrids, Toyota
also will add one or two variants to its Prius line-up, Miller said. He
declined to provide a timetable.
Toyota
executives in Frankfurt this week said the
company planned to sell 500,000 to 600,000 hybrid vehicles globally in 2009.
The Prius has dominated the hybrid market since it went on
sale in the U.S.
market in 2000. The new version, the third generation of the aerodynamic
hatchback, accounted for almost 60 percent of all U.S. hybrid sales this year despite
new offerings from Ford Motor Co and Honda Motor Co.
“They are getting back to the basics for Toyota, which is making fuel-efficient cars at an
economical price,” said Jim Ziegler, a dealer consultant based Atlanta.
“They are also drawing a line in the sand with the
Prius because right now Ford Fusion and Honda Insight are making a run at the
hybrid market.”
The dealer discount — or profit margin — is the difference
between a vehicle’s retail sticker price and its wholesale cost offered to
dealerships.
By widening dealer margins, Toyota is taking advantage of its relatively
stronger financial position.
Rival General Motors Co, which rolled out its own more
aggressive ad campaign this week, has asked its dealers to accept lower margins.
One model singled out for attention at the Toyota dealer meeting this week was the
4Runner sport utility vehicle, dealers said.
A redesigned version of the 4Runner is to make its debut
next week in Texas.
The vehicle has been the automaker’s worst-performer in terms of sales this
year.
Sales of the 2009 4Runner, which has a starting sticker
price of $28,640, are down 63 percent from a year earlier amid a collapse in
demand for truck-based SUVs across the industry.
Toyota told
dealers it would keep pricing on the new version of the SUV unchanged, holding
the line against price increases that often follow redesigns.
That move could be costly in the short run. The 4Runner is
manufactured by Toyota at its Tahara plant in Japan and exported to the U.S. market.
The yen has been strengthening against the dollar since early April.
Many of the details from the Toyota meeting were reported first by the
Wall Street Journal.
(Reporting by Bernie Woodall and Kevin Krolicki; editing by
Lisa Von Ahn, Andre Grenon and Carol Bishopric)
