Toyota is building trucks and SUVs as fast as it can to meet the surprisingly strong consumer demand for new vehicles. The Japanese automaker is adjusting where it can, such as cancelling car rental orders to use its reduced capacity to make as many vehicles as it can for retail customers, said Bob Carter, Executive Vice President, Automotive Operations.
The nine new or refreshed vehicles planned for this year will all go ahead, said Carter. The new 2021 Toyota Sienna hybrid minivan made its debut online a few weeks ago, as did the 2021 Toyota Venza, a two-row hybrid crossover. Tonight is the global virtual unveiling of the 2021 Lexus IS sedan. Here is the full rundown on what Toyota and Lexus have in the works going forward:
All Plants Back At Work
Wait, isn’t everything hunky dory? Not exactly. The new 2020 Toyota Highlander got caught in the pandemic shutdowns. “We are in the midst of ramping up new Highlander,” he said. “We sold the old one down earlier than anticipated and were in the midst of ramp-up in the plant in Indiana when COVID hit and disrupted that. We postponed the launch and only did one wave of marketing and will bring it back later in the year now that Indiana is in production.”
The Highlander snafu speaks to a broader challenge. Toyota resumed manufacturing May 11 but plants are not operating at full capacity under new COVID-19 safety protocols, especially those in Mexico where there are more government hurdles to overcome. Workers complete a health questionnaire before reporting for work, get temperature checks, wear masks or face shields, stand further apart, work and eat separated by plexiglass, and have staggered shifts.
In the six weeks since manufacturing resumed, there have been some cases of infection but they appear to be community spread—not work contamination. There have been pauses in production, but no major shutdowns, said Chris Reynolds, Chief Administrative Officer, Manufacturing and Corporate Resources. And there have been no issues with getting temporary workers to return to the job. He is hopeful that as restrictions ameliorate, Toyota will be able to meet demand in the coming months.
Best Sales Weekend
On the sales side, Carter said Toyota is coming off its best weekend since the pandemic began. The market and consumer appetite continue to recover quicker than expected, he said in a virtual roundtable with media.
Through June 15, retail sales are running at 85 percent compared with a year ago and Carter thinks it will remain at this level for the next few months with “lumpy sales” for the rest of the month and into July as the supply chain struggles to keep up. It’s not just Toyota. Supply will restrict sales and create imbalance for the whole industry in June and July until there are enough parts available to build more vehicles. “I think it will plateau here until supply chain allows us to get more inventory out there.”
It’s been an interesting ride so far. March was the transition month and recorded an 11.3-million annual sales pace with a strong start to the month before the virus turned the spigot off and the world largely ground to a halt. The sales pace hit its low point at an 8.6 million rate in April but May saw a surprising upswing to 12.2 million, and that rate is holding steady through June 15. Overall, Toyota has revised its projected U.S. sales for 2020 to 13.6 million from the original forecast of 16.8 million.
We Need More Trucks
Even before the pandemic, pickups and SUVs accounted for 70 percent of sales, share that has not changed. As a result, Tacoma and Tundra pickups are in short supply. “I’m asking Chris to build everything. If it has four wheels, build it,” said Carter.
Demand for Tacoma is particularly strong (perhaps this has something to do with the rare incentives Toyota offered for the truck recently). It is made in Baja, California; San Antonio; and Mexico, each with its own regional supply chain and subject to government directives that have impacted production, especially in Mexico. But Toyota’s two Mexico plants are now running with staggered shifts, Reynolds said.
Overall hybrid sales are up 3.5 percent despite low gas prices, with the highest demand for the RAV-4 Hybrid and initially for the new Highlander until production was disrupted. Carter credits adding more performance and sport hybrids, instead of just relying on efficiency to entice buyers.
Incentives have been high, especially on luxury vehicles, which have gone as high as $10,000. But incentives are pulling back a bit in June, Carter said, noting deals like General Motors’ offer of zero percent financing for 84 months is extremely expensive. Toyota offers a more modest 60 months and is currently promoting its hybrids, many of them with zero percent financing.
Pent-Up and New Demand
There is some pent-up demand, but also new demand. Virtually all 1,500 dealers are open for business with appointments required for sales. Anecdotally, dealers in places like New York City are getting first-time buyers who have become uncomfortable relying on public transportation, Carter said. Toyota’s website is hitting record highs with people requesting quotes, averaging 4,000 inquiries a day compared with 2,600 a day in June 2019, as consumers change their buying habits.
Leases are coming back to dealers. Carter said Toyota is taking in vehicles from areas like New York and relocating many of them to more robust markets such as Florida and Texas that need more certified pre-owned inventory. The sale of these off-lease vehicles is pacing 40 percent higher than Toyota planned for in June. Most are being bought online. Few are making it to auction, he said.
Fleet Orders Cancelled
What is not recovering are commercial and fleet sales, which are only at 15–20 percent of normal. This represents about 20 percent of total sales. Instead of building basic-spec vehicles for car rental, Toyota has cancelled those orders and is reallocating the production to retail-spec vehicles. Toyota is not a big player in the rental car business; with Carter noting that it accounts for only 8 to 9 percent of its sales.
Meanwhile, non-manufacturing employees will continue to work from home until Sept 1. Carter admits he is old school; working from home had only been tried on a limited basis and he was worried Toyota would lose the efficiency it is famous for. That has not been the case, he reports, admitting some, including the customer call centers, are proving more efficient than when they came into the office.
The post How Is Toyota Weathering the Pandemic? With Surprisingly Strong Sales and Supply Limits appeared first on MotorTrend.
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