Toyota Adds Incentives to Help Boost Tundra Sales

When in Rome: Toyota Adds Incentives on Tundra

SAN FRANCISCO March 29, 2007; Shawn Langlois writing for MarketWatch reported that Toyota Motor, facing disappointing sales for its big Tundra pickup truck, is offering buyers ever fatter incentives to accelerate its bold foray into a market famously loyal to domestic manufacturers.

The seemingly bulletproof Japanese manufacturer on Thursday said it is offering an additional $1,000 in sales incentives on its new Tundra full-sized pickup, not including the CrewMax. That's on top of the $1,000 already on the hoods of most Tundra models. has said it's looking to sell about 200,000 Tundra trucks a year.

In February, its first month in the showrooms, the Tundra sold 9,669 vehicles. By comparison, Ford delivered 55,251 F-Series trucks. And that was a slow month for the best-selling vehicle in the U.S.

While Toyota executives called this an "impressive start," the incentives -- often blamed for devaluing vehicles and eating away profits for domestic carmakers -- tell a different story. But Toyota spokesman Bill Kwong stood by the company's 200,000 unit target and pointed out that the spending is mild in comparison to the competition.

True. Sales incentives for the Tundra don't add up to nearly as much as for the Dodge Ram, the clear leader at $5,655 per vehicle. The Ford F-150 offers $3,792 each. And, unlike the competition, Tundra buyers cannot bank on 0% financing, an Edmunds.com report showed.

Kwong added that Tundra sales nationwide, particularly in the Northwest and Gulf Coast states, have performed "exceptionally" well. Nevertheless, luring customers away from home-grown favorites has hit a few snags along the way.

"Unfortunately, many interested consumers are in a negative equity situation with their competitive product that they're looking to trade-in," he said. But it's more than that, according to Edmunds.com analyst Jesse Toprak. "The Tundra's price point has put off many potential buyers who might've considered a worthy, Texas-built truck from an import automaker with a solid reputation," he said.

That's a big hurdle, made even bigger by a deep slump in the U.S. home building market and lofty prices at the gas pump.

The majority of new Tundra buyers are previous Toyota owners, not drivers won-over from other brands, which is key to the vehicle line's success. In order to hit the buying bone of some Ford Motor Company and General Motors die-hards, Toprak says the cost needs to be adjusted.

"The domestic truck makers have built a very good reputation," he explained. "And Toyota is having a difficult time taking away their customers; the price point has to be more attractive."

The Tundra's average transaction price is $33,151, the car-buying website reported. The Ford F-Series, on the other end of the pricing spectrum, goes for $29,591.

Pricing isn't the only speed bump Toyota has encountered in its journey to take a piece of the profitable U.S. truck market. The Tundra earlier this month earned four stars in its head-on collision crash test conducted by the National Highway Traffic Safety Administration.

Not bad on the surface, but GM and Ford grabbed five stars in the frontal tests, and every advantage helps in this fiercely competitive segment.

Still, if history is any indication, Toyota will likely prove a worthy competitor, despite what may turn out to be a few early hiccups. In fact, the company's move to quickly cut prices on the Tundra is part of what has made it such a success and likely the dethroner of General Motors as the world's leading carmaker.

"Toyota does a great job assessing future demand and are proactive in dealing with it," Toprak said. "Some automakers allow their products sit for months and months without doing a thing. Not Toyota. They'll do what they need to do to fix this."

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