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Cox Automotive Analysis: Toyota’s Q2 FY2021 U.S. Market Performance

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Article Highlights

  1. Toyota/Lexus sales dropped 11%; Toyota brand down 13%, Lexus up 2%.
  2. Toyota incentives increased only 2% for an average of $2,779 per vehicle.
  3. Toyota’s overall ATP rose 6% to $35,905; Lexus surpassed $50,000.

Toyota Motor reports financial results for the July-to-September quarter (Q2 FY 2021) on Friday, Nov. 6, marking the midway point for its fiscal year that ends March 31, 2021.

After the last two profitable quarters, though soft ones, Toyota will likely show improvement. Briefing media and analysts recently, Toyota executives in the U.S. said they are optimistic about the industry’s – and Toyota’s – prospects through the rest of the year. They forecast the final quarter of the calendar year will be one of the best in Toyota’s North American history.

Their forecast for U.S. auto sales this year is 14.5 million (versus 17 million in 2019), with fleet sales still suppressed, and 15.5 million in 2021. They predict that Toyota brand will end the year with 1.75 million U.S. sales and Lexus at 265,000. In 2021, they see even better prospects with Toyota brand surpassing 2 million sales and Lexus growth continuing.

Here are some data from Cox Automotive on Toyota’s market performance in the U.S., one of the Japanese automaker’s most important markets, for the recently closed quarter.

Sales and Market Share
Toyota and Lexus brands combined sold 558,488 vehicles in the U.S. in the July-to- September quarter, down nearly 11% from the same period in 2019. That’s a tad more than the decline for the industry in general, which was 10% lower than a year ago. As a result, Toyota’s overall market share slipped a bit to 14.34% from 14.50% in the year-ago quarter.

The decline came from the Toyota brand, which sold 483,164 vehicles in the quarter, down 13% from a year ago. However, Toyota had severe shortages of some popular models. As a result, Toyota’s market share slipped to 12.40% from 12.79%.

Toyota executives, in their recent briefing, said North American production capacity closed September at 93.7% from 95.9% at the end of September 2019. Inventory was at a meager 33.7 days’ supply at the end of the quarter. But they expect by the end of 2020 that the inventory pipeline will be back to nearly normal.

In the recent quarter, Tundra full-size truck sales dropped 12%. Tacoma midsize truck sales fell 10%. Both trucks, particularly the Tacoma, have had extremely tight inventories. Tacoma has at times had the lowest in the industry. It remains the dominant player in the smaller truck market, owning about 40% share. Tundra is in the late stages of its current life, with a redesigned version coming soon.

Highlander was also down 10%. The Indiana plant began ramping up after the lockdown to produce the redesigned SUV, and the previous model sold out faster than Toyota anticipated.

Two of Toyota’s biggest sellers – and the industry’s top sellers – the RAV4 compact crossover and the Camry midsize sedan were down only 4% each. The Camry’s outperformance of the market is particularly notable since traditional car sales have plummeted to under a quarter of the total market. Toyota executives predict the Camry will be the best-selling car in the U.S. for the 19th year, and RAV 4 will be the best-selling SUV for the fourth consecutive year. In contrast, Corolla sales, both the sedan and hatchback, were down double digits.

The new Venza, a hybrid-only SUV that slots between the RAV4 and Highlander, just hit the market and demand is outstripping supply. The redesigned Sienna minivan, offered only as a hybrid, goes on sale by year-end. Meantime, Toyota is selling down some models, including the Yaris subcompact.

Lexus sales rose 2% to 75,284 vehicles in the quarter, lifting its market share to 1.93% from 1.71% in the 2019 quarter. More than twice as many models posted year-over-year sales gains than reported declines. Lexus’ volume-selling RX crossover had a 5% sales increase. Its UX utility sales soared by 19%, while GX was up 13%.

Incentives
Toyota increased total incentives by only 2% for an average of $2,779 per vehicle, which is still quite low compared with the industry, according to Kelley Blue Book calculations. The increase went to Lexus incentives, up 9% to an average of $6,325 per vehicle, its highest level for this quarter in the past five years. Toyota brand incentives dipped 4% to an average of $2,226 per vehicle.

Toyota executives said the automaker won’t be vastly increasing the amount of their incentives from their low levels of the last six months. However, expect a wide breadth of incentives as both brands will offer cash, low-interest financing and/or lease specials on every model through the end of the year. The Toyotathon sales event – in its 33rd year – is closing out the year while Lexus is launching another of its December to Remember campaigns.

Average Transaction Prices
Toyota’s average transaction prices (ATP) rose nearly 6% to $35,905, according to Kelley Blue Book calculations.

The Toyota brand’s ATP rose 5% to $33,705, its highest level in this quarter in the past five years. The new Highlander had the biggest gain – of 8% to $42,766, the first time the midsize SUV crossed the $40,000 mark. Other models with ATP gains were: Tundra, up 5% to $46,762; 4Runner, up 7% to $43,392; Sequoia up 6% to $62,051; and Land Cruiser, up 5% to $83,090.  Even the Camry had a 5% increase to $28,077.

Lexus helped with a 2% rise in ATP surpassing the $50,000 milestone – $50,089, to be exact – for the first time in the last five years. The RC sport coupe had a nearly 48% increase in ATP to $75,453. The GS and GX also had decent ATP gains.

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