Toyota's Image at the Crossroads

toyotas image at the crossroads

For the last few years, the American public has embraced Toyota's products as clean, durable and efficient. Exhibit A: the demure Camry, which has maintained its position as America’s favorite automobile. Exhibit also A: the Hybrid Synergy Driven Prius; the poster child for environmentally and foreign policy-conscious consumers. No surprise, then, that Toyota's been held up as America's responsible automaker, the one who doesn't bitch and moan about federal regulations, but just puts its head down and does the right thing. And makes money doing it! And then Toyota released the new Tundra.

The new Tundra is big and brash, with tremendous attention to detail and an [available] stonking great V8 engine. In the first quarter of 2007, Toyota spent over $100m telling Americans that the transplanted Japanese automakers had built a proper, full-sized, all-American truck– deep in the heart of Texas (no less). What they didn’t mention: the most popular version gets a combined EPA average of 15 miles to the gallon.

Perhaps that’s because, at the same time, ToMoCo ran a national TV campaign advertising the fact that its Hybrid Synergy Drive is now available in the Camry. Talk about cognitive dissonance. And when you're done, consider Toyota’s dirty [not so] little secrets: the FJ Cruiser, Sequoia and Land Cruiser.

According to the EPA, the 4WD FJ Cruiser gets 17 mpg city and 21 mpg on the highway. While GM gets slated for building big thirsty trucks, the FJ's city mileage is only slightly better than Chevrolet’s entry into the “compact” SUV segment, the Trailblazer. Ye Olde Trailblazer gets 15 mpg city in 4WD trim, and it ties the FJ for highway efficiency.

The current Toyota Sequoia is another big ass gas-guzzler. The mondo-sized SUV travels just 15 miles per gallon of gas in the city, and squeezes out a mere 18 mpg on the interstate (4WD Limited). Sequoia’s older, full-size brother, the Land Cruiser, gets a shocking 13 city, 17 highway mpg (4WD). Compare this to the GMC Yukon 4WD, which has a bigger engine, tows more, weighs more and still manages 15 mpg city/21 mpg highway.

In 2008, both the Sequoia and Land Cruiser will be replaced with bigger, better behemoths, powered by Toyota’s new 5.7 liter V8. (The new Sequoia is built on the Tundra platform.) The size of the new Sequoia and Land Cruiser and the mileage of its mighty mill have some execs within ToMoCo shaking their heads.

Don Esmond, Senior VP of Automotive Operations at Toyota Motor Sales USA said, “I worry about the Sequoia being too big and not having enough fuel economy more than I do the Tundra… there are a lot of choices besides an SUV for hauling your kids to soccer practice."

Releasing two new bigger full-sized SUVs into a declining market, into a world of three dollars a gallon gas, is a serious miscalculation on Toyota’s part. Granted, the profit on one Land Cruiser is probably greater than the margin on five Prii, but how many Land Cruisers can Toyota sell, and at what cost?

How many potential Prius buyers will be turned off by Toyota ads pushing the new Sequoia and Land Cruiser? While the Prius currently owns the hybrid mindspace, Honda, GM, Ford, etc. are not standing around waiting for people to find their new, improved gas – electric models. In fact, Honda’s recent TV ads, touting their status as makers of “America’s most fuel efficient fleet of cars,” were specifically (and effectively) designed to steal the moral high ground from Toyota.

While you could argue that Toyota allowed itself to be painted as a friend of the Earth, rather than actively campaigning for eco-sainthood, the ultimate effect could also backfire in the SUV category. How many SUV owners are going to trade in their Suburbans for full-sized SUVs made by the green company that makes Suburban owners feel guilty for owning a Suburban, instead of a Prius?

In other words, Toyota’s vastly disparate products put their marketing efforts between a rock and a green place. If they promote the Prius and other small cars on the basis of their fuel efficiency, they risk being exposed as hypocrites (done) and alienating buyers of large SUVs and pickups. If they promote their large SUVs and pickups, they look even more morally ambiguous and risk alienating buyers of small cars.

All of which place Toyota at a crossroads. As a full-line automaker, ToMoCo’s U.S. products have been defined by their low price and class-leading reliability. The Prius was a game changer, wrenching their corporate image into another category AND emphasizing their lineups’ frugality (originally an off-shoot of price, i.e. cheap to own). Now, they must either embrace the new reality and change their product mix or do nothing and suffer the consequences.

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  • KixStart KixStart on Aug 29, 2007

    Martin Albright: Not around here (a corn producing state). The differential is on the order of $.60 or less. GasBuddy doesn't track it but the forum suggests the difference is often less. Edmunds looked into this, too: E-85 Comparison In their test, the cost of using E-85 was significantly higher for their test trip. And I still can't imagine those soccer moms are going to want to spend more time at the gas station.

  • Obbop Obbop on Sep 02, 2007

    One thing I will say for Toyota, in my own experience and for those I know who have had warranty work performed, Toyota did what it took to fix the few defects while the new Chevy I bought, well, it IS a decent truck but three years of hearing "We can't relicate the problem" thus absolving their need to actually diagnose the defect in the dealer's minds (went to three separate dealers) has left a bitter taste in my mouth and mind. Corporate GM shunned me.... it wasn't their problem. Just go back to the dealer. Sheeesh, I did, over and over and over and over.. leaving the truck for up to five days at a time. Interesting how when I picked the truck up with no defects fixed there was less than a one-mile increase on the odometer. No more GM products here. Toyota's far superior response to warranty work will bring me back to them. Sorry I left you, Toyota. I thought I was helping the "home team" when I bought a truck made in a Ft Wayne Indiana factory. It's a shame the "home team" doesn't offer loyalty in return.

  • Lou_BC Stupid to kill the 6ft box in the crewcab. That's the most common Canyon/Colorado trim I see. That kills the utility of a small truck. The extended cab was a poor seller so that makes sense. GM should have kept the diesel. It's a decent engine that mates well with the 6 speed. Fuel economy is impressive.
  • Lou_BC High end EV's are selling well. Car companies are taking advantage of that fact. I see quite a few $100k pickups in my travels so why is that ok but $100k EV's are bad? The cynical side of me sees car companies tack on 8k premiums to EV's around the time we see governments up EV credits. Coincidence? No fooking way.
  • EBFlex "I'd add to that right now, demand is higher than supply, so basic business rules say to raise the price."Demand is very low. Supply is even lower. Saying that demand is outstripping supply without providing context is dishonest at best.
  • IBx1 Took them long enough to make the dashboard look halfway decent in one of their small trucks.
  • Mcs You're right. I'd add to that right now, demand is higher than supply, so basic business rules say to raise the price. The battery tech is rapidly changing too. A battery tech in production today probably won't be what you're using in 2 years. In 4 years, something different. Lithium, cobalt, and nickel. Now cobalt and in some cases nickel isn't needed. New materials like prussian blue might need to be sourced. New sources might mean investing in mines. LMFP batteries from CATL are entering production this year and are a 15% to 20% improvement in density over current LFP closing the density gap with NCA and NCM batteries. So, more cars should be able to use LMFP than were able to use LFP. That will lower costs to automakers, but I doubt they'll pass it on. I think when the order backlogs are gone we'll stop seeing the increases. Especially once Tesla's backlog goes away. They have room to cut prices on the Model Y and once they start accumulating unsold vehicles at the factory lot, that price will come tumbling down.