Toyota has just announced a slew of new incentives – dubbed the ‘March Sales Event,’ which the automaker says will be the most far-reaching sales program in its history. Toyota’s sales program includes special interest rates, low lease rates and complimentary maintenance programs.
As Toyota ’s worst February sales figures in over a decade are released, the automaker is wasting no time to fire back with a plan to shore up dipping sales and consumer confidence.
Historically, Toyota has relied on strong consumer confidence due to top safety ratings, leading fuel economy and strong resale values in order to charge a premium for its vehicles, while still being a sales leader. Other automakers – especially domestic name plates – were caught in a catch 22 in which they offered greater incentives in order to boost sales, but at the cost of reduced resale values for their customers.
Although the increased incentives helped domestic automakers temporarily boost sales in the mid-2000s, the eventual collapse of two brands led to bankruptcy, and the near collapse of the third resulted in the need for drastic action and the accumulation of debt.
Toyota’s recent negative publicity stemming from multiple recalls totaling over 8.5 million vehicles worldwide, as well as the subsequent congressional hearings, has put a chink in Toyota’s previously shining armor. Toyota reported a 10.3 percent decrease of sales in the U.S., with Lexus reporting just a 4.5 percent increase compared to February sales for 2009. Other automakers averaged increases over 20 percent for the month – with Ford coming out on top with a group sales increase of 43 percent.
March Sales Event explained
Toyota will be offering zero percent financing on several models including the 2010 Avalon, Camry, Corolla, Highlander, Matrix, RAV4, Tundra and Yaris for as much as 60 months. For those looking to lease, Toyota promises low lease rates for Avalon, Camry, Corolla, Highlander, Matrix, Prius, RAV4, Venza and Tundra – with an example being the Corolla at $179 a month. Toyota is also turning its focus on showing loyal customers that it intends to repair its tarnished image, and in this case in that involves a complimentary two-year maintenance program for households that currently own a Toyota product when purchasing a new Toyota, Lexus or Scion model.
“We launched this program to expand the focus on our customers, and thank them for their loyalty by adding value to our products,” said Bob Carter, group vice president and general manager of Toyota Division for Toyota Motor Sales, USA. “We are standing behind our customers and our vehicles. It’s a great time to buy a Toyota.”
While Toyota’s massive sales campaign will certainly help to replenish its drastically reduced sales volume, the automaker now runs the risk of alienating existing Toyota owners by creating the inevitable drop in resale value due to the increased incentives. KBB.com has reported that used Toyota, Lexus and Scion vehicles have already been dropping in resale value between one and 1.5 percent each week since January as safety concerns loom. Historically speaking, vehicles that are moved from dealer lots due to abnormally high incentives also face reduced resale on an accelerated pace compared to models sold closer to the manufacturer’s listed asking price.
The combination of already downward-trending resale values and sharp increases in dealer incentives may potentially result in long-term damage to Toyota’s typically strong resale values – making this strategy a risky proposition for all parties involved.
References
1. ‘kbb.com: Toyota brand…’ view
