Japanese truck, SUV sales on a roll
Bloomberg News Service
General Motors Corp. sold Renzie Davis his first two cars and a truck. When the Chicago engineer decided to replace his 1999 Chevrolet Blazer sport utility vehicle last spring, he chose a 2001 Toyota Motor Corp. Highlander instead.
Associated Press
"After I had the Blazer a year, everything was rattling," said Davis, a 27-year-old engineer. Now, with the Japanese automaker's SUV, "it's like I have a luxury car."
The pride of the Toyota fleet for 2002 is the five-door Matrix, a compact crossover between a station wagon and SUV. Matrix, which rides on a platform similar to that of a Corolla, comes with front- or four-wheel drive, five-passenger seating and a flat load floor. The Matrix and a redesigned Corolla will also be Toyota's showpieces this week at the North American International Auto Show in Detroit.
Davis was one of thousands of Americans who switched car or truck brands last year as Asian makers led quality studies and offered a wider variety of trucks.
Asian automakers widened their share of the biggest market to a record 30.2 percent last year by adding SUVs, pickups and minivans in a trend that hurts U.S. makers because light trucks generate most of their profits. The push marked the fifth year of gains over General Motors, Ford Motor Co. and DaimlerChrysler AG.
"This is the biggest threat to General Motors, Ford and Chrysler's traditional brands, ever," said Art Spinella, an analyst with Bandon, Ore.-based CNW Marketing Research Inc., which tracks auto trends for 1,200 clients including the Federal Reserve.
"If they keep losing truck market share, they're basically doomed. That's the only thing they make money on."
And this year, Honda Motor Co., Toyota Motor Corp. and other Asian automakers are expanding their lineups of SUVs and adding car models to try to extend U.S. gains when new-vehicle demand is expected to slow.
Honda has planned to introduce its new Pilot midsize SUV at the North American International Auto Show in Detroit, which started with press previews yesterday. Toyota will display its five-door Matrix wagon and redesigned Corolla, aimed at sparking sales of smaller cars.
"Toyota and Honda have some very exciting products," said Dennis Virag, president of Automotive Consulting Group, which tracks industry trends for automakers and suppliers.
According to Virag, "sales erosion in 2002" will come from General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler unit "and they'll feel it mainly in the pickup and SUV sector."
After a sales surge late last year spurred by low-interest loans, a slower U.S. economy is expected trim demand this year to about 15.65 million vehicles, research and consulting company J.D. Power & Associates said. The sales total in 2001 was 17.2 million, according to Autodata Corp.
New models and a reputation for reliability mean Toyota, which ranks fourth in U.S. sales behind the three U.S.-based makers, and Honda, which is fifth, will "at least maintain their current sales level and add 2 percent to 3 percent each of market share," Virag said.
Toyota's share last year was 10.1 percent and Honda's was 7 percent, according to Autodata.
Light-truck sales in the United States rose 2.2 percent to 8.75 million last year as total sales fell 1.3 percent. Asia-based makers combined sold 8.4 percent more trucks, Autodata said.
Increasing truck sales will bolster Asian-based automakers' earnings. Profit per light truck is about $8,000, or as much as eight times the margin Toyota or Honda make on their smaller models, before subtracting incentives, said CNW Marketing Research, a Bandon, Ore.-based consultancy.
Toyota's overall U.S. market share rose 1.1 percentage points to 12.2 percent through November. Honda's market share gained a half-point in the same period to 8.5 percent. Hyundai, excluding its Kia Motors Corp. affiliate, gained 0.8 percentage points to 2.5 percent.
U.S. response
General Motors defended its light-truck market share last year and was gaining ground even before it began offering no-interest loans in September to counter the slowdown following the terrorist attacks, said company chief economist Paul Ballew. The largest automaker sported new full-size pickups and SUVs and added the mid-sized Chevy TrailBlazer and GMC Envoy models.
"We're still willing to step up and be competitive," Ballew said.
Asian rivals will probably keep gaining market share by adding models and dealerships until they match the U.S. brands in every segment, Ford spokesman George Pipas said. The trick will be to match demand to production capacity to make money, he said.
"Market share is not even on the top 10 things I worry about when I go to sleep at night," he said. "Ford has been reporting record sales even while losing market share."
The Asian gains are good news for larger U.S. and European automakers that own stakes in most Japanese and Korean carmakers — excluding Toyota and Honda. That partly explains why the increases haven't stoked political opposition.
Foreign automakers hold stakes in Nissan, Mitsubishi Motors Corp., Mazda Motor Corp., Subaru-maker Fuji Heavy Industries Ltd., Isuzu Motors Ltd. and Suzuki Motor Corp. Hyundai Motor is 10 percent owned by DaimlerChrysler.
The Asian inroads would have gone further if not for conservative investment plans that have left some automakers short of truck-making capacity, DRI-WEFA's Lindland said.
"It's a factor of Japanese risk management," she said. "I don't see them expanding exponentially because that's not part of their culture."
Picky consumers
Still, the U.S. recession could add more to the Asian automakers' allure as consumers pay more heed to quality and price.
"It does seem that consumers are becoming more picky in terms of quality," which especially benefits Toyota and Honda, said Norihiko Kamada, who helps manage $1.2 billion in stocks at Chuo Mitsui Asset Management Co. in Tokyo.
Toyota and Honda dominate U.S. surveys on performance of vehicles in the first 90 days of ownership. Asian models had the highest initial quality in five of the seven truck categories and six of the nine car segments, according to the latest J.D. Power & Associates survey.
On price, the drop of the yen against the dollar is sharpening the competitiveness of Japanese exporters.
Hyundai Motor is also luring penny-pinching buyers. U.S. sales of Hyundais in the year to November rose 42 percent, helped by Sonata sedans. Warranties on major parts for 100,000 miles also helped outweigh quality concerns, analysts said.
One-way traffic
The rise of Asian brands in the United States isn't being reciprocated in the automakers' home markets.
Japanese automakers alone run 19 North American auto and engine plants, while no foreign rival owns its own plant in Japan.
Asian automakers now have capacity to make 3.4 million cars and trucks a year in the United States, a tally that will rise to about 4.3 million by 2004 when all the expected expansion plans are complete, according to projections from Ward's AutoInfoBank.
Auto imports barely top 1 percent of South Korea's market, while car imports in Japan make up 9 percent, with European models the most popular.
Before domestic brands can seriously stem the tide in the United States — or win more overseas orders — they will have to win back consumers like Davis in Chicago.
"Now I consider myself just being smarter about my money," the 27 year-old said. "You may pay a few extra dollars for imports, but you get it back in the trade-in."
