Toyota discounts boost sales

The 2011 Toyota Avalon debuts at the Chicago Auto Show February 10, 2010.

DETROIT/WASHINGTON (Reuters) - Unprecedented discounts after a series of damaging recalls boosted Toyota Motor Corp's U.S. sales in early March, as U.S. regulators weighed new auto safety measures.

Toyota's U.S. sales surged by nearly 50 percent in the first eight days of March compared with the year-ago period due to zero-percent financing offers and other incentives, industry tracking service Edmunds.com and dealers said on Thursday.

Edmunds, which analyzes U.S. auto sales trends, also estimated that Toyota's U.S. retail market share in early March had jumped to 16.8 percent, up sharply from 12.8 percent a month earlier when safety problems had sent sales tumbling.

"What they're doing right now is they are picking low-hanging fruit," said Chester Schriesheim, professor at the University of Miami School of Business Administration.

"These are the people who are undecided about the brand but given the lower price, now that provides incentives to go ahead and purchase," he said. "But they're going to exhaust that pool of individuals and then they'll find it harder in the longer term to raise the prices backward."

The early sales estimate comes a week after Toyota launched the most aggressive discounts in its history to win over U.S. consumers and recover from an embarrassing slew of product safety problems that have tarnished its reputation and cut into sales and financial results.

Shigeru Matsumura, an analyst at SMBC Friend Research Center in Tokyo, said the sales jump showed the criticism of Toyota was waning, and that consumers were ready to return to showrooms, especially given the generous incentives.

But he added uncertainty over how long the incentives might last kept a cap on Toyota's shares, which rose just 0.3 percent on Friday morning in Tokyo, in line with the broader TOPIX index.

"(The sales rise) is positive news, but there is the caveat of the sustainability of these incentives," Matsumura said.

Toyota has recalled more than 8 million vehicles globally to address the risk that accelerator pedals on a range of its vehicles could become stuck because of a loose floor mat or a glitch in the pedal assembly.

Unintended acceleration in the company's Toyota and Lexus vehicles has been linked to at least five U.S. crash deaths since 2007. Authorities are investigating reports alleging 47 other fatalities over the past decade.

National Highway Traffic Safety Administration chief David Strickland told a congressional hearing on Thursday that the regulator is considering whether to make "black boxes" mandatory for all new vehicles.

The devices can capture data on speed, braking effort and other details which can be vital in reconstructing accidents.

Strickland also defended the agency's handling of investigations over the years into complaints of unintended acceleration in Toyota vehicles and sharply dismissed a characterization of NHTSA as too accommodating to industry.

TOYOTA, GM BOOST MARCH INDUSTRY SALES

Edmunds.com said that industrywide U.S. auto sales are tracking to hit a rate of 12.5 million vehicles in March because of the steep discounts on Toyota vehicles and a competitive campaign launched by General Motors Co.

GM is offering car shoppers rebates of up to $3,000 on vehicles including the Malibu mid-size sedan, or zero-percent financing.

Toyota, which has traditionally spurned such discount programs in order to protect resale values, has offered up to $3,000 in rebates and dealer incentives on a range of vehicles, including its top-selling Camry, or cut-rate financing.

Both manufacturers are offering steeper discounts on their competing full-size pickup trucks, GM's Chevy Silverado and GMC Sierra and the Toyota Tundra.

Edmunds said GM's sales incentives lifted Chevy's retail market share to 12.9 percent, up from 11.4 percent a month earlier.

Several major Toyota dealers said their own sales were running slightly higher than the Edmunds estimate through Tuesday. That would mark a sharp reversal from sales declines in January and February tied to the automaker's recall crisis.

Toyota said it did not disclose the March sales numbers. GM was not immediately available for comment. Automakers in general release only monthly sales figures and not part thereof.

Paul Atkinson, president of the Toyota national dealers' council and a Toyota dealer in Texas, said he expected that the March sales boost from incentives would mirror what the automaker saw during the 2009 "cash for clunkers" program.

Toyota was the big winner from that U.S. government-funded scrappage program, which offered tax credits of up to $4,500 to swap out of older and less fuel-efficient vehicles.

Toyota had a 19.4 percent share of vehicles sold under the "clunkers" program which ran from late July through the third week of August 2009. Toyota's share was the highest in the industry.

"I truly believe that March could rival cash for clunkers," Atkinson said.

Sales at his own dealership in early March were running at three times the level of January and February, he said. Customers shopping for the bargains do not appear concerned by Toyota's recalls, he said.

"Honestly, I think the public has had enough," he said.

Just this week, as Toyota sought to shift attention away from the safety problems, at least three U.S. drivers reported new cases of driving Prius or Lexus vehicles that appeared to surge out of control.

Atkinson has encouraged Toyota dealers to protest GM's incentives in March, saying they amounted to a taxpayer-funded program of discounts because the U.S. government funded GM's restructuring in bankruptcy with $50 billion in aid.

"We just want a level playing field," he told Reuters. "These GM incentives are kind of like using tax dollars to encourage my fellow citizens to not do business with me."

GM has defended its use of incentives, saying such discounts are a well-established part of the way cars are sold in the U.S. market.

(Additional reporting by Soyoung Kim in DETROIT and Chang-Ran Kim in TOKYO)

(Editing by Tim Dobbyn, Matthew Lewis and Muralikumar Anantharaman)