* Toyota incentives now at two-thirds industry
* Seven new or revamped Toyota brand products in US in '11
By Bernie Woodall
SAN FRANCISCO, Feb 4 Toyota Motor Corp
has increased incentives to lure buyers but its U.S. Toyota
brand chief vowed on Friday that high resale and residual values
will be maintained.
Bob Carter, Toyota brand sales chief in the United States,
said higher incentives including a current program offering
zero-interest financing does not signal a change in business
strategy for the world's biggest automaker.
"Our position on incentives has not changed. We use it as
part of our strategy to address the competitive marketing
environment and the inventory," Carter told reporters on the
sidelines of a J.D. Power & Associates auto industry conference.
Carter admitted that Toyota went from incentive levels that
are about a third of the industry average to two-thirds of that
average. Incentives lower the price of a car or truck but
generally cut into profit margins for the automaker.
They also usually lower the residual value of those vehicles
when they hit the used vehicle market.
Toyota's incentives were a third of the industry average
before the fall of 2009 when safety recalls that have reached
more than 14 million worldwide began to plague Toyota's
Toyota lost share in the U.S. market in 2010 as its sales
fell 0.4 percent while the industry's sales rose 11.1 percent,
according to AutoData. It was the only major automaker in the
United States to report a drop in sales last year.
"What you see us using is attractive interest rates and
leasing as a competitive advantage," said Carter. "We don't do
things like (large cash discounts), nor do you see 30 or 40
percent of our volume as fleet because one our core strengths is
resale value, residual values."
Carter said that U.S. consumers who buy a Toyota want to
know that three years later the vehicle will have more worth
than most of the cars or trucks in the same class.
"That's been a core strength for 20 years and we will not
touch that," Carter said.
Toyota's top two markets are its home market in Japan and
the U.S. market, which in the past few years have been
exchanging first and second positions.
Carter said that the Toyota brand in the U.S. market chooses
not to grab more share by offering more fleet sales to rental
agencies, which are not as profitable as fleet sales to
businesses or governmental agencies. In 2010, fleet sales made
up 8.5 percent of the automaker's new-vehicle sales.
Leases make up about 26 percent to 28 percent of Toyota
brand sales, a level that Carter calls "the sweet spot" that he
wants to maintain.
"Incentives are not part of our pricing strategy," said
Carter. "We do not price up and discount down. We price our
vehicles at value."
Carter said that he does not expect a major escalation of
auto prices at Toyota or in the U.S. market in general. Auto
prices as measured as a percentage of household income is at its
lowest since the late 1960s, he said.
Seven new products on the U.S. market in 2011 will help
boost Toyota sales but are likely to also increase incentives
for the last months of the life cycle of the models the new or
refreshed products replace.
(Reporting by Bernie Woodall; Editing by Sanjeev Miglani