By on February 18, 2010

To the victor go the spoils. Who will be the victors, and how much spoilage will be there in the protracted Toyota battle? Of course, this is all in the name of safety and the children, and any sales dislocations will be unfortunate collateral damage. Really.

As optimistic as Toyota might want to be, over the next few months, their sales will decrease. They already do decrease.  “Toyota’s US sales tumbled 16 per cent in January from a year earlier and are set to record another hefty fall this month,” reports Financial Times. Stoppage of deliveries and production, topped by a media onslaught, can have that effect.

Maybe Toyota’s ideas of an increased warranty and more incentives will work, long term, but in the short term, they’d better prepare themselves for negative numbers at the end of each month ahead.

As the first law of thermodynamics infers, energy cannot be created or destroyed, merely transposed. If customers are leaving Toyota, they don’t just disappear like Toyota‘s reputation for reliability China’s interest in US debt, they have to go somewhere. So where will they?

The price research site TrueCar.com (via FoxNews) says that the searches for the recalled Toyota models had dropped off by almost half.  25 percent of the lost traffic absconded to Ford, another 25 percent made off to Honda, whilst 20 percent hopped over to Hyundai.

The virtual spoils of war went – not surprisingly –  to three marques with reputations for quality and reliability (let’s not get sidetracked by the fact that Ford announced a recall recently,  as did Honda.)

TrueCar thinks their numbers are significant, because TrueCar usually gets a lot of traffic from shoppers looking to get a final run-down of the numbers as they close in on closing the deal on a new vehicle.

Competing site CarGurus.com came up with a report that found something slightly different. Like TrueCar, the Gurus found less clicking on Toyota and more on Ford. But CarGuru’s visitors did nor flirt with Honda or Hyundai. They pulled up the pages of that other pinnacle of quality and reliability, Chevrolet. Yes, CarGurus found that GM’s products were seeing increases in traffic to their brands.

Back to Financial Times. The pink sheet finds “little sign so far of a stampede to embrace” Toyota’s rivals. They cite Art Spinella, president of CNW, an Oregon-based market research group, who said: “The long-time Toyota owner considers this a pretty major issue, but the faith in the brand is still strong.”

CNW research shows that the proportion of prospective Toyota buyers who have decided to opt for another brand had fallen to 7 per cent, from 18 per cent immediately after last month’s recall of eight models with potentially faulty accelerators. Customers are a fickle bunch and prone to changing their minds for on a dime.

Weighs in Dave Cole, chairman of the Center for Automotive Research (CAR, get it?) that UAW and Detroit industry-funded mouthpiece think-tank. Cole hopes cautions that any flight from Toyota is likely to start slowly but could easily snowball. Drawing from extensive Detroit experience, Cole says: “Car owners are notoriously disloyal.”

While some armchair generals see massive desertions amongst the Toyota ranks, and some are not so sure, other analysts predict that Toyota could regain most if not all of its lost market share with a vigorous marketing campaign and reassurances on quality.

Time and most of all hard sales numbers will tell. Until then, it’s reading of green tea leaves.

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21 Comments on “Toyota Customer Retention: Breaking Up Is Hard To Do. Or Not...”


  • avatar
    Tricky Dicky

    Cammy – thank you for that entertainingly cynical article; very enjoyable. Frost & Sullivan have published an article trying to crunch some numbers for Toyota in the US here:
    http://www.frost.com/prod/servlet/market-insight-top.pag?docid=192823606

    What would be interesting to see is how Toyota sales are standing up in their near monopoly market (Japan) and their most strongly competed market (Europe). Overall, I’m finding the reactions to these issues somewhat hysterical but am really interested to see how Big-T will face up to the challenge. As an engineering company, there’s so much to admire. As a Brand Management organisation, I think they are somewhat naive and are held back by their mono-culture.

    In my humble opinion, the organisations that tend to perform well in terms of risk management and response to crisis are those that can draw upon the strengths and insights of a plurality of cultures. Is the legendary “Toyota Way” the biggest obstacle right now, imposing as it does, stability instead of agility?

    • 0 avatar
      Cammy Corrigan

      Thank you, Mr TrickyDicky, but I did get some help (and thanks to you know who you are!). However, another topic which I think is worth a mention is my reference to interest in US debt dropping.

    • 0 avatar
      baldheadeddork

      About China cutting its holdings in Treasuries – I wouldn’t be too worried about it. The reduction is less than 5% of their holdings in T-bills, which is a long way from “dumping” as some sites have said. And the interest rate didn’t jump in the most recent Treasury auctions, which indicates demand remains high.

    • 0 avatar
      talkstoanimals

      I agree with baldheadeddork that interest in Treasuries is unlikely to decline in the short to short/medium term. Especially with people running to Treasuries and away from euro denominated debt, courtesy of the fiscal basket cases that are Greece, Spain and, to a somewhat lesser extent, Ireland. (The latter has at least taken more [pun alert] creditable steps than the others to gain control of its finances.) And in coming weeks British gilt owners may make a similar run for the exits and into the welcoming arms of Uncle Sam’s IOU auctions. However, in the long/medium to long term, Treasuries may be in trouble, because our finances are hardly in very good shape. The latest issue of The Economist has a very alarming, er, interesting article in which the US is ranked the 7th most likely OECD country to experience a sovereign debt crisis based on an averaging of four risk characteristics. Time will tell the long term tale, but for what it’s worth, I was still able to get 0% financing last month on the Mustang purchase described below.

  • avatar
    Dynamic88

    I’m wondering what will happen to resale value. If the average (non-pistonhead) shopper were looking for a used car, how comfortable would they be buying a Toyota? How’s the average buyer going to know if the new gas pedal has been installed or not? How many buyers will take the used car salesman’s word for it?

  • avatar
    Runfromcheney

    I live in Detroit, and everybody here seems to be convinced that all of Toyota’s customers will trade in their Camrys for Malibus because of GM offering that incentive to get you out of Toyota leases.

    Keep dreaming….

  • avatar
    highrpm

    I’m also near Detroit. It’s funny to see a lot of folks around here seemingly dancing on Toyota’s grave.

    I own a Toyota. I know a lot of folks that own one or several. Not one person that I know is worried about these recalls. The fact is that our cars have been dependable for years and will continue to be dependable. In fact, some of us are thinking of upgrading to a nicer/newer Toyota or Lexus since this panic might cause a temporary price dip on the cars.

    • 0 avatar
      SkiD666

      Your attitude is exactly what ticks off a lot of people that visit this site (and others) and why Toyota’s recent issues have been given so much attention by the MSM. Perception and Sheeple.

      I wonder how badly does Toyota (or other manufacturers) have to screw up before people stop apologizing for them -or- how much improvement do companies like Ford, Hyundai and yes even GM have to accomplish before they get some recognition for change.

      Just because Toyota has made good reliable and safe vehicles in the past, does not necessarily mean that they will always continue to do so. People should never assume that things always stay the same (otherwise we would never have seen these Toyota issues).

      I am not suggesting that everyone should stop buying Toyota and start buying Ford/GM/etc. – but they should at least do some research and be open minded when they make a new car purchase (and this should apply to Honda buyers too, since Edmunds reports they are the least likely to do any research on their purchases).

    • 0 avatar
      Suprarush

      Highrpm

      I think you are correct. Virtually every manufacturer benchmarks Toyota quality and production. Whether you agree or not, Manufacturers and consumers have Toyota to thank for Toyota raising the bar for so long and waking up the D3 and other useless manufacturers from building utter crap. Almost every add I see in Canada is about GM/Ford having better fuel mileage than Toyota, having the same (ugh..) quality or close to it. Why would a company want to attack Toyota and then compare themselves quality wise to them? Does that even begin to make sense??
      Warranted or not, perceived or realistic Toyota still will be the quality measure for years to come. Yes the D3 have closed the quality gap, but again thank Toyota for their manufacturing process, their “flex” plants etc… How one associates a safety recall with quality is beyond me, I mean safety of course is one thing, but the quality part I don’t get, it’s less than a percent of a % of actual incidents. Why hasn’t Toyota been levied a fine from NHTSA or Transport Canada or any other safety committe for thier “alleged” cover-up? Oh yes Toyota’s lining their pockets….

    • 0 avatar
      baldheadeddork

      Let us know how happy you are – and how this recall isn’t affecting you – when you see the trade-in value for your current Toyota.

      Edit to add: Got a letter today from the dealer where I bought my Tacoma. He doesn’t run a numbers shop, in fact he never advertises prices. But this is what he’s sending out to his current customers:

      I am sure you are very familiar with the recent Toyota recalls. If you or someone you know is driving one of the affected vehicles please call us at (800) 378-5111. We will be able to help you through the process of getting it remedied.

      Naturally, this has hurt our business. We believe that things will improve as Toyota continues to address the recall issues, but it has been tough on the dealership – particularly our sales associates.

      In light of these circumstances, I’ve chosen to send out this email solicitation to my customer database in hopes of generating a lot of extra sales this month. Below, I’ve listed prices for three new Toyota models – Camry LE, Prius II, and Corolla LE. These prices are the absolute lowest prices we have ever offered on these models.

      Included in the Camry and Corolla price is a $1,000 Loyalty Incentive from Toyota. Also included in the Camry and Corolla price is incentive cash of $1,500 (Camry) and $1,000 (Corolla). This additional incentive is offered in lieu of special finance rates from Southeast Toyota Finance. You can still opt for these rates, but the sale price would be raised by the amount of the cash incentive. Please call or email us for the particulars.

      I should also mention that all vehicles in my inventory affected by the recalls have been remedied by my highly trained technicians.

      Here are the prices:

      *New 2010 Camry LE automatic MSRP $22,974. Sale price $17,900 plus tax and tag.
      *New 2010 Prius II MSRP $23,844. Sale price $21,900 plus tax and tag.
      *New 2010 Corolla LE automatic MSRP $18,024. Sale price $13,900 plus tax and tag.

      Thank you for taking the time to read this email and to consider buying a new Toyota from me. As you know, I do not normally advertise price, but I feel the situation justifies making a temporary change.

      Sincerely,

      Earl Stewart

      Twenty percent off MSRP for Corolla and Camry is going to mean at least that much off trade values for existing cars.

    • 0 avatar
      Suprarush

      By the time I trade in my car it will be worth more than (insert any MFG here) in its class, so I won’t have to worry. Plus it won’t drive like a piece of wood after the warranty expires like said manfacturers. They fix the problem, so where’s the problem???

      I hope they discount more! Toyota has lagged in incentives and discounts forever and were still #1. Now I may have an opportunity to get the FJ.
      1.9% finance and $2000 off SOLD!!!!

    • 0 avatar

      I am ithching about getting an FJ while sheep are panicing. Unfortunately, I just got a Lexus IS last year and typically I drive cars into the ground (resale value? what’s that?).

  • avatar
    talkstoanimals

    I was in a DC area Ford dealer on the last day of January taking delivery of a new Mustang (my first domestic car ever), and the place was lousy with people trading in Lexuses and Toyotas. The dealer sold 15 new Fords on that snowy, foreshortened Sunday, and I’d say roughly half were turning in Toyota brands. This is purely anecdotal evidence to be sure. But seeing that many east coast import fanciers snapping up their wares makes me suspect Ford will be a beneficiary of this (wildly exaggerated) Toyota angst.

  • avatar
    craigefa

    Saw a sign on the Saginaw Cadillac dealership this morning that said something like, “Scared of your Toyota? Park it here”. If I drove a Toyota, I’m not sure I would be swayed by that pitch. What kind of trade-in could I expect from a dealership that has told me up front that the car I’m driving is unsafe? I think I’d be more likely to drive my Toyota to the Toyota dealership and have the recall taken care of. I don’t doubt these recalls are going to have an effect on Toyota’s sales going forward but I don’t see current owners dumping their cars in huge numbers.

  • avatar

    +1 Runfromcheny, highrpm
    Yes Toyota will take a hit but the vast vast majority of people driving Toyota’s or other brands for that matter are not in the market for a new car at this exact moment. In the short run they will definitely take a hit but the biggest factor that will probably influence these drivers is how did their ownership experience rate. Was their last (current) car from Toyota a good car or a lemon? I have a 2006 Scion Xb I don’t plan on replacing it for another 6 to 8 years. Will I buy another Toyota? We’ll see then. So far 4 years and 100,000 miles trouble free so I see no reason at this time to feel that I have been cheated. I also suspect that Honda Ford Nissan and Hyundai would be the biggest beneficiaries of any brand switching but that’s just my opinion. (only because a lot of people deliberately fled GM and Chrysler and in my opinion they won’t be back)

  • avatar
    psarhjinian

    Interesting that Spinella and CNW said that, considering they’re the author of the Prius-Vs-Hummer study that’s practically emmenthalish in it’s holes.

  • avatar
    Mr Carpenter

    http://biggovernment.com/brjohnson/2010/02/17/toyota-and-the-union-backed-government-led-witch-hunt/

    Last week when LaHood said “stop driving the cars” 8.7 billion dollars was immediately wiped off the Toyota stock value. That’s everyday people’s 401(k)’s (in the US, or their equivalents if they live elsewhere in the world) VERY badly affected.

    Interestingly enough, I read something yesterday where it was posited that the B.O. administration is expressly punishing Japan via this Toyota witch hunt, for asking that the GI’s leave Okinawa, in these actions. May as well kill two birds with one stone? Which administration lives by the words “taking advantage of any crisis”?

    It’s going to back-fire on the folks trying to “murder the competition” though. It always does.

    For just one example; Toyota (was) the most profitable auto company in the world, and over the past 2 years or so, has lost a small fortune (as virtually all car companies also have) – but were in a position of strength by having money in the bank (unlike most of the competition). A huge proportion of the worldwide losses for Toyota have been in the United States. As a businessman, realizing that, what would your thinking be? After all, the US espouses “free trade” and nobody actually forced Toyota to spend BILLIONS on US factories over the prior decades. It’s even affected Toyota and Toyota’s British workforce in Cammie’s country since Toyota have closed down there temporarily.

    Given our “free trade” arguments and NAFTA, what would happen if Toyota said “sayonara” to manufacturing cars in the US, and simply closed the US plants? If the Federal Government is your obvious enemy, why stick around? If the game is rigged and the other team “owns” the umpires, why bother showing up to play? They could still import vehicles from Canada, Mexico, England, Japan, Czech Republic, wherever… in fact, costs are lower for them in Mexico & Czech Republic. It’s not like they wouldn’t be doing exactly what GM, Ford and Chrysler already have been doing for 20 years (exporting jobs). Did you know that GM is now larger in China than in the US? But it was our money which bailed GM out? Not a penny of Chinese money.

    Given the “domino” effect of parts suppliers and the affect on towns where Toyota and parts suppliers are, I suspect this would add about ½% to 1% to the US unemployment rate. Of course, the “official” unemployment rate would mysteriously only go up a tiny bit… but I digress.

    Maybe the current administration should stop, think and change course. But of course, they won’t, will they? They think they’re in (and desire) TOTAL control of everything. Hubris? You bet. What comes before a fall? Pride.

    In the meanwhile, our Federal government foolishly keeps ticking off the people we are relying on to keep this national Ponzi revolving debt scheme going and as a consequence, they are taking the entirely logical decision “not to play” any more. If the game is rigged and the other team “owns” the umpires, why bother showing up to play? Or in this case, why voluntarily go into a Mafiosi controlled neighborhood and lend them money at less than rates you can get elsewhere, when the probability is that they won’t pay you back anyway? http://www.lewrockwell.com/rogers-j/rogers-j76.1.html Possible long term consequences of this? It could become a tipping point which would eventually make the United States into a huge combination of Zimbabwe, Venezuela and East Germany (let’s face it, we’re already slowly becoming “Venezuela North” – interestingly enough, Chavez is “angry” at Toyota and threatening to “nationalize” their factory in Venezuela! – this came about before the US Toyota debacle).

    Is the purposeful destruction of our country in order to obtain total control the intent behind the actions by the powers that be in this country? I have to wonder – it’s not like people do things without an agenda. Look at people’s actions, not their words. I would also even say “look to the prior administrations over the past 50 years and take into account how many freedoms were lost to citizens.” (Two sides of the same coin – is the same coin).

    Actions have consequences. Once fair play and the rule of law are abandoned, what does that leave us with? Is this the New American Way? I prefer the Old American Way. This “isn’t just about Toyota” you know. Iceberg, tip of. Disease, symptom of. Warning sign, evidence of.

  • avatar
    Tricky Dicky

    @Skid666 “I am not suggesting that everyone should stop buying Toyota and start buying Ford/GM/etc. – but they should at least do some research and be open minded when they make a new car purchase”

    Isn’t this the difference between buying a car and buying a brand? OEMs put a whole heap of money into building up brand image for this very reason – switch off the competition in the consumer’s mind by offering a promise of a consistently desireable product/ service.

    @Suprarush “Why hasn’t Toyota been levied a fine from NHTSA or Transport Canada or any other safety committe for thier “alleged” cover-up? Oh yes Toyota’s lining their pockets….”

    I think the word ‘alleged’ is pretty relevant here. Some might substitute with the words ‘wildly accused on the basis of self interest’, but I’ll leave the cynicism to Cammy, who does it so well ;-)

  • avatar
    tomLU86

    The dynamics of this whole Toyota pedal situation are fascinating! And I don’t mean the root cause of the defect.

    So many angles!

    I don’t like Toyotas–they are conservative, boring, and they play to the worst tendencies of the American psyche…fat and lazy, just like Buicks used to. They’re last noteworthy product was the 92-96 (gen III) Camry. Also, to their credit, they were among the first to adopt 4-valve per cylinder engines (maybe THE 1st mass producer). The original MR2 was a blast to drive. Since then, boring, coasting on that reputation.

    On the other hand, their manufacturing system is the envy of the world. At GM, we were trying to emulate it.

    Toyota’s arrogance is amazing! They have only one computer that can download their black box data–give me a break!

    Yet, one can’t avoid the conflict of interest–if GM gets some of the sales lost by Toyota, this will help move forward toward become a publicly held company again. If the govt could sell it’s share, that would take a nasty election issue off the table in Nov 2010…and more importantly Nov 2012.

    Also, while (some of us) rejoice in the struggles of the boring car company, how will our never-satisfied Federal govt and the Obamites use this to further their power at EVERYONE’s expense and make all cars more boring than the basest Corolla or Yaris?

    I hadn’t even considered the Okinawa situation (thank Mr Carpenter above), where the Japanese govt was elected, among other things, with a pledge to ‘reassess’ US bases there. We want to stay, they don’t really want us. We are broke anyway–maybe Obama’s Secty of State can persuade the Japanese to pay to repatriate the US troops back to the US, and the brake pedal will finally ‘fade’ away….

    In the end, I may wind up supporting Toyota against our overbearing govt–caveat emptor–buyer beware–but for now, it is interesting.

    And by the way, Toyota’s vaunted manufacturing system is overrated, and enabled by small businesses in Japan that take up all the slack. But that’s for another time.

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