Toyota to Continue Incentive Spending as U.S. Sales and Market Share Continue Slide

Toyota Motor Corporation will continue its current level of incentive spending in light of last month’s lackluster sales numbers according to executives with the company’s largest independent U.S. distributor.

JM Family Enterprises Incorporated CEO Colin Brown said, “Incentives are going to have to remain until Toyota regains the perception that it deserves a second look.” JM Family is the parent company of Southeast Toyota Distributors which supplies Toyota vehicles to 173 dealerships throughout the Southeastern U.S.

Toyota’s U.S. sales, including its Scion and Lexus brands, rose a meager 7%, and its market share fell 1.7 percentage points to 14.8%. Meanwhile, most of Toyota’s major competitors began rolling back their incentive spending and saw double-digit sales gains.

Honda, Ford, Chrysler, Hyundai-Kia and Nissan increased their combined market share by 2.2 percentage points in May. General Motors was the only major automaker other than Toyota to see its market share fall during the month.

According to, Toyota increased its average incentive to $2,169 per vehicle in May, up $458 from a year earlier. The industry-wide average incentive during May was still significantly higher, at $2,603.

Brown said Toyota is making progress in its efforts to rebuild the brand. He said, “If you’ve never been exposed to the Toyota brand and you were looking for a vehicle, all you’re reading about are safety issues. “We’re getting conquests,” he said, but added, “We’re paying for it.”

Contrary to Brown’s assessment of consumer sentiment, Compete Incorporated director of automotive practice Dennis Bulgarelli said the number of new car shoppers who would consider purchasing a Toyota continues to fall.

Bulgarelli said at the height of last summer’s Cash for Clunkers program, 23% of U.S. consumers shopped Toyota. That number fell to 18% in February as the automaker became more deeply embroiled in recalls and Congressional hearings. In April, only 16% of consumers said they would consider purchasing a Toyota product.

He said the percentage of “Toyota loyalists” who say they would consider a repeat purchase has remained “about the same. But fewer of those who research multiple brands include Toyota now.”

For June, Toyota will expand its 0% financing and deeply discounted lease plans to include 2011 models.

Toyota Motor Sales U.S.A. general manager Bob Carter said, “The effectiveness of promotions do run their course. That’s why we’re going back to brand and product ads. But we will stay aggressive with leasing and 0%.”

Anwyl said Toyota is experiencing the diminishing returns that naturally result from incentive spending. He said Toyota saw a bound in sales when it launched its historically high incentives last March. “The Toyota base responded to the bargain,” he said, “but that pool is shrinking, so sales get tougher.” He also said that consumers become jaded and immune to incentives over time.

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