Thursday, August 4, 2005

Toyota readies blitz of new cars

Automaker's move to introduce 16 models over next 30 months puts pressure on Big 3.

By Ed Garsten / The Detroit News

Robert Galbraith / Bloomberg News Jim Press, president of Toyota Motor Sales USA, says he thinks there will be continued demand for hybrids such as two the automaker hopes to launch soon. Comment on this story Send this story to a friend Get Home Delivery

TRAVERSE CITY -- Toyota Motor Corp. will launch 16 new models in the United States over the next 30 months, including two gas-electric hybrids, as part of an aggressive push to boost its sales and output in North America.

The automaker also expects to be selling 600,000 hybrid vehicles a year in the U.S. market early in the next decade, Jim Press, president of Toyota Motor Sales USA, said at an annual industry conference here.

That hybrid sales target amounts to nearly one-third of Toyota's U.S. sales of 2.1 million vehicles last year.

Toyota's plan to expand its U.S. lineup will heighten pressure on Detroit's automakers, who already trail Japan's leading manufacturers in the pace of rolling out new models. They also lag in production of hybrids, a fast-growing market niche.

But Toyota's relentless expansion plans are cutting into its profits. After increasing research and investment spending this year, the Japanese automaker reported a second consecutive drop in quarterly income.

Toyota is adding new models for the U.S. market across its Toyota, youth-oriented Scion and premium Lexus brands, Press said. The new vehicles include the Toyota FJ Cruiser, a small sport utility vehicle, two replacements for the Echo compact and hybrid versions of the Camry sedan and Lexus GS luxury car.

It now sells 30 models across the Toyota, Scion and Lexus brands in the United States.

Toyota already is the industry hybrid sales leader, with three gas-electric vehicles on the market: the Toyota Prius, and the Highlander and Lexus RX400h sport utility vehicles.

It plans to broaden its hybrid offerings and has 10 additional models under development.

Toyota's new president, Katsuaki Watanabe, has set a goal of selling 1 million hybrids per year globally early in the next decade.

"At our current rate, that's about 600,000 hybrids in the United States," Press said. "To achieve that, we will have to look at offering hybrid power systems in virtually all of our vehicles, including trucks."

Although it was once considered a niche technology, Press said there is growing evidence the public is embracing hybrid vehicles. Last month, for example, sales of the Prius trailed the popular Chrysler 300 passenger car by just 905 units.

"The demand is there," Press said in an interview on the sidelines of the Management Briefing Seminars in this resort town.

"Gas prices are going to continue to push demand. As the manufacturers increase the availability of products, the share is going to increase."

Toyota has months-long order backlogs for its hybrid vehicles, but some analysts say its forecasts may be optimistic. Hybrid vehicles now account for just 1 percent of U.S. light vehicle sales.

"How do you convince the meat of this market to pay for something that'll cost thousands of dollars more?" said Lindsay Brooke, an auto analyst at forecasting firm CSM Worldwide in Farmington Hills.

Although rising gas prices have boosted demand for hybrids, "they would have to go over $3.50 a gallon to really start to force people to make profound changes in their car purchases," Brooke said.

Toyota, the world's second-largest automaker after General Motors Corp., has increased its research and investment budgets for the Japanese fiscal year starting April 1. For the first quarter that ended June 30, Toyota said net income dropped 7 percent to $2.4 billion.

"We are spending a lot of money now so that Toyota can reach our next level" of global growth, Toyota Senior Managing Director Takeshi Suzuki said at a news conference Wednesday in Tokyo.

The automaker's financial results also were hurt by the yen's rise against the dollar, which reduces the value of revenues generated in North America.

In July, Toyota posted the best sales month of its 48-year history in the United States. But the automaker's monthly market share slipped to 12 percent from 12.9 percent in July 2004 as Detroit's automakers generated huge sales with employee discount pricing. Sales of domestic brands surged 22 percent in July.

"The only reason our share declined is because their market grew," said Press. "We don't share the same customers."

Toyota has captured 12.8 percent of the U.S. market so far this year, compared with 8.7 percent five years ago. Its sales are up 10 percent this year.

Toyota and its top Japanese rivals, Nissan Motor Co. and Honda Motor Co., have made steady inroads in the U.S. market, bolstered by reputations for solid reliability and a brisk rollout of new products.

Although Detroit's automakers are accelerating product launches to sharpen their competitiveness, GM and Ford Motor Co. lag the model-renewal rate of the leading Japanese automakers, according to a recent report from Deutsche Bank. This year, GM and Ford are selling new models, replacements or restyled vehicles that represent 18 percent of their annual U.S. sales, compared to 22 percent for Japan's Big Three.

In 2006, GM and Ford will have new products accounting for 19 percent of sales, compared with the Japanese renewal rate of 23 percent.

Detroit News Staff Writer Christine Tierney and Bloomberg News contributed to this story. You can reach Ed Garsten at (313)223-3217 or egarsten@detnews.com.