Generous incentives help Toyota sales rebound

Washington Post Staff Writer
Friday, April 2, 2010

Toyota snapped back in March from one of its worst months ever, offering generous buyer incentives and boosting U.S. sales 41 percent, compared with the same month last year.

The Japanese auto giant, which has recalled more than 8 million vehicles in recent months, sold 186,863 vehicles in the United States in March, more than any other automaker except General Motors. The sales surge came in the face of a run of bad press not seen in the industry since Ford Explorers experienced a surge of rollovers a decade ago.

But Toyota paid for those sales with historic levels of buyer incentives. Each vehicle sold cost the company an average of $2,256 in incentives, according to the research firm, more than Toyota had ever had to give customers to buy its cars and trucks.

"Toyota's strong sales performance in March reflects our customers' continued confidence in the safety and reliability of our vehicles and their trust in the brand," Don Esmond, a U.S. sales executive for Toyota, said in a statement.

"Selling 186,000 units is really good, considering all the stuff that's been out there about Toyota," said analyst Jessica Caldwell. "People were afraid to see Toyotas on the road, much less buy them. I think we may have overestimated the fear consumers had."

Toyota's incentive cost, however, is low compared with those of the Big Three Detroit automakers. Ford, which recorded a 40 percent sales surge in March, offered incentives that cost $3,304 per vehicle, Edmunds said. General Motors bought part of its 22 percent March sales increase with incentives that cost an average of $3,519.

By contrast, Chrysler spent $3,359 per vehicle on incentives in March, but its sales fell by 8 percent compared with the period last year. Chrysler is trying to integrate with its new partner, Fiat, which owns 20 percent of the company and plans to bring the popular Fiat 500 to the United States by the end of the year. Fiat intends to increase its ownership stake in Chrysler to 35 percent in two years.

The infusion of the smaller Fiats may eventually boost Chrysler's sales, but the company is having a hard time making cars that Americans want to buy.

"Right now, there's no reason for Chrysler sales to get better," Caldwell said. "They need a new product line and brand identity."

GM has been trying to whittle its several brands down to four: Chevrolet, Cadillac, GMC and Buick. But the company has been unable to unload brands such as Hummer and Saturn, because would-be buyers have backed out. Consumers seem to be doing the whittling for GM. GM's four core brands accounted for 98.6 percent of all GM sales last month; sales of Hummer, Pontiac and Saturn vehicles dwindled to a trickle.

Last month, for instance, GM sold only 109 Pontiacs nationwide, compared with 17,583 in March 2009. GM has said it will allow Pontiac to die out after 103 years as an American brand. The last Pontiac rolled off the line in November.

Thursday's monthly auto sales report came on the same day that the last Toyota Corolla rolled off the line at the NUMMI plant in California, a 26-year-old joint venture of Toyota and GM. The plant was meant to give Toyota its first manufacturing foothold in North America and teach U.S. workers the Japanese way of building cars. The plant jointly produced the Pontiac Vibe (the U.S. twin of the Toyota Matrix), the Toyota Corolla, the Geo Prizm and several other vehicles.

But when GM entered bankruptcy last year, it pulled out of the plant, leaving the cost of operations to Toyota, which said it could not bear them alone. Further, Toyota's recent recalls have probably destroyed the idea of Japanese auto superiority, according to David Cole, chairman of the Center for Automotive Research.

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