As the Marketplace Shifts, Toyota Has a Truck Problem

Cars. They still make ’em, don’t they?

Automakers do, in fact, still produce cars, but they’re the last thing those companies’ bosses want to talk about, and they’re no longer on the top of most buyers’ shopping lists.

For the world’s largest automaker, the U.S. public’s shift towards trucks, SUVs and crossovers presents a problem. Toyota has them, but can’t build enough of them. With the rapidly declining interest in cars threatening its tentative No. 1 standing, Toyota needs to find a way to give buyers what they want.

Speaking to Automotive News, Didier Leroy, Toyota’s executive vice president and chief competitive officer, bluntly stated what his company needs to stay on top. Give dealers “more and more and more trucks,” Leroy said.

“Our commitment for the U.S. dealers is we will provide them more and more and more trucks and more SUVs,” Leroy told AN. “We provided them more trucks and SUVs this year than last year, and in 2017, we will even produce and deliver more trucks.”

Barring a significant sales bump in the last three months of 2016, this year could see Toyota’s U.S. sales decline for the first time since the 2011 Japanese tsunami. That disaster threw a wrench into the automaker’s operations, leading to a sales dip. Otherwise, sales have risen steadily since the recession.

However, the market has lost some of its heat. As sales flatten out, automakers have turned to ever-greater incentives to push new vehicles off the lot. Focusing on top-selling vehicles is key, and it’s trucks and SUVs that buyers want.

Through the first nine months of 2016, sales of Toyota cars have dropped 11 percent, and total sales are down 2.4 percent. The company’s truck production hasn’t kept pace with demand. To compensate, Leroy claims Toyota wants trucks to count for 55 percent of its sales, up from today’s 51.9 percent.

There’s only one problem: production is already maxed out, both in the U.S. and in Japan. In the fastest-growing segment — midsize trucks — Toyota’s Tacoma has seen its share erode in the face of competition from General Motors and other players. A $150 million investment in its Tijuana, Mexico Tacoma plant should boost production from 100,000 vehicles annually to 160,000, but those new vehicles won’t come online until 2018. The automaker has already added an extra shift at that facility, as well as its San Antonio, Texas assembly plant.

Leroy wouldn’t say what the automaker plans to do about its truck problem, only saying that it needs to be careful. An added shift here and there could hold Toyota over until capacity expansions arrive, but, Tijuana aside, it hasn’t yet committed to sinking money into new or expanded truck plants.

Toyota remains a cautious company, but that caution could see it lose its sales lead.

[Image: Toyota Canada]