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Toyota races to match model mix of Tundra to the market

Mark Rechtin | Automotive News / April 16, 2007 - 1:00 am

NEW YORK -- Three months into the launch of its redesigned Tundra, Toyota is scrambling to revamp its model mix and make a series of other fixes on the run.

Toyota executives admit they have made missteps in their first venture into the full-sized pickup fray.

"As we try to go from 5 percent share to 10 percent segment share, we are learning the hard way," Jim Farley, Toyota Division vice president of marketing, said at the New York auto show.

Toyota is selling more CrewMax units than it can supply. Demand for the top-dog 5.7-liter V-8 also is outstripping supply. And Toyota is cutting production of standard-cab models because it is selling fewer than expected.

But a lot has gone right since the Tundra's launch in February. The company sold 13,196 Tundras in March, 12 percent above sales of the old Tundra in March 2006. Based on availability and inventories, Toyota says that it's on the right track, and that the Tundra will be selling at its planned 200,000 annual pace by summer.

But in studying its miscalculations, Toyota is noticing some intriguing trends.

The extended-cab versions represent 40 percent of sales, as planned. But the CrewMax has proved more popular than expected, said Ernest Bastien, Toyota's vice president of vehicle operations. That presents a supply problem.

The production ramp-up calls for Toyota's Princeton, Ind., plant to build the CrewMax, while the new San Antonio plant gets its feet wet with the standard-cab and extended-cab versions. San Antonio won't build the CrewMax until August.

"We didn't come to the prizefight with all our tools," Bastien said.

And by engaging in the "bar stool debate" with its 5.7-liter V-8, Toyota has sparked more demand for that engine than expected.

"The 5.7 has been 70 to 80 percent of our mix, and we thought it would be 50 or 60 percent," Farley said. "The 4.7 (V-8) and V-6 are not as popular."

On the flip side, the basic two-door model has missed its sales goals, even though it was expected to account for only 10 percent of the mix. Typical basic-truck buyers don't want a lot of extras, even when extras are rolled into the basic sticker price.

The regular cab Tundra starts at $22,935, including shipping. Chevrolet's new Silverado pickup starts at $18,760, with shipping.

Tundra's lessons
Some things Toyota has learned since launching its full-sized pickup
  • CrewMax more popular than expected
  • Standard cab models aren't moving.
  • Sales of the 5.7-liter V-8 are stronger than predicted.
  • Transaction prices vary by region.
  • Truck shoppers are Internet-savvy.
Standard goodies

Standard safety features on the Toyota include antilock brakes, brake assist, electronic brake force distribution, vehicle stability control, traction control, and seat and side curtain airbags. Most of those features are optional on domestic trucks.

But Toyota won't decontent the big truck.

"We're not taking the safety equipment off Tundra" to hit a lower entry price, Bastien said. Instead, Toyota is "backing off" production of the standard-cab model. Toyota will push budget-minded shoppers into the largest Tacoma compact pickup, he said. The Tacoma stickers from $14,825 to $25,820 including shipping.

Most frustrating to Toyota is that the number of days Tundras sit on dealer lots is higher than expected.

"Traffic counts have been pretty high, but these (buyers) will wait until you have the exact truck that they want," Farley said.

Toyota needs to do better at tracking regional inventories, so when buyers want a specific package it can get the vehicle from the regional pool to the dealer as fast as possible. Toyota customers traditionally are happy to buy from whatever the dealer had in stock. That's proving different with buyers of full-sized pickups.

More surprises

Meanwhile, transaction prices have varied. Depending upon region, Farley said, prices for identical trucks have swung as much as $2,000. Buyers in some regions appear more willing to pay for standard safety items, he said.

Another surprise: In the past, trade-ins usually accompanied about 40 percent of Tundra sales. In the case of the new Tundra, it is closer to 60 percent. Dealers are scrambling to cope with the additional used vehicles, including lots of domestic pickups.

Many of those owners owe more on their trade-in vehicles than those vehicles are worth, making appraisals and negotiations more difficult for dealers.

Toyota's Farley notes one other surprise -- the amount of Internet shopping done by full-sized truck buyers. He says online visits for the Tundra are about the same as for Camry, the best-selling car in America.

"We have changed our thinking in terms of interactive marketing for Tundra," Farley said. "We got as many eyeballs on AOL as we did for a primetime network spot. Now Internet is as important as broadcast TV."
With Crewmax's and 5.7's in shorter supply (right now), I don't think they will be eager to put good incentives on them too soon. It doesn't surprise me that the CrewMax and 5.7 are popular and may actually be the most popular, but it's surprising that Toyota thought otherwise. It's more powerful and looks like it has the same or better gas mileage than the 4.7 in most configurations.
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