Toyota’s U.S. Sales Decline Signals ‘Uphill Battle’

By Alan Ohnsman and Keith Naughton

Feb. 3 (Bloomberg) — Toyota Motor Corp.’s U.S. sales slid to a 10-year low in January as the company’s worst-ever recall crisis took its most popular models off the market and made drivers wary.

The decline snapped three months of advances as the company couldn’t take advantage of the U.S. auto market’s longest streak of gains since 2006. The Toyota City, Japan-based carmaker, which has recalled more than 7.6 million vehicles worldwide for defects linked to sudden acceleration, faces U.S. congressional hearings and a rising number of product liability lawsuits.

“This is going to be a tough, uphill battle for Toyota,” said Jesse Toprak, vice president of industry trends at researcher in Santa Monica, California. “In the next few months, it is going to be a challenge for Toyota to convince consumers to consider their cars.”

Toyota shares declined as much as 4 percent in Tokyo trading. The company’s U.S. sales last month dropped 16 percent from a year earlier while Hyundai Motor Co.’s sales rose 24 percent, Nissan Motor Co.’s gained 16 percent, General Motors Co.’s climbed 14 percent and Ford Motor Co.’s advanced 25 percent. Honda Motor Co.’s sales fell 5 percent.

U.S. industry sales rose 6.3 percent to 698,378 cars and trucks, equal to an annualized rate of 10.8 million light vehicles, according to researcher Autodata Corp. That beat the average estimate of 10.5 million by eight analysts surveyed by Bloomberg.

Asian Brands Lose Share

Toyota fell 3.7 percent to 3,470 yen as of the 11 a.m. trading break in Tokyo. The stock has declined 17 percent since Jan. 21, when the company recalled 2.3 million U.S. vehicles for a gas-pedal defect linked to unintended acceleration.

The carmaker’s sales drop fueled the first U.S. market- share decline for Asian brands since July. Japanese and South Korean brands accounted for a combined 45.7 percent share of U.S. sales last month, down from 49.5 percent, Autodata said. The combined market share for GM, Ford and Chrysler LLC rose to 45.1 percent from 42.5 percent.

Toyota’s sales slumped to 98,796 vehicles from 117,287, the lowest monthly total for the automaker since January 1999, based on data compiled by Bloomberg. Ford said it outsold Toyota for the first time since June 2009.

Buyers’ consideration of Toyota vehicles has dropped “dramatically” since last month’s recall, according to Kelley Blue Book, an automotive pricing and data service.

‘Difficult to Quantify’

“More than 20 percent of those who said they were considering a Toyota prior to the recall now say they no longer are considering the brand for their next vehicle purchase,” Irvine, California-based Kelley Blue Book said in an e-mailed statement late yesterday.

Toyota suspended U.S. sales of eight models on Jan. 26 while fixing the accelerator-pedal flaw, which meant customers couldn’t purchase models such as the Camry sedan and Corolla compact for the last five days of the month. Those were the top- selling cars in the U.S. last year.

“It’s very difficult to quantify the impact on sales,” Bob Carter, group vice president for Toyota’s U.S. sales, said in a conference call yesterday. The month’s results were 20,000 units, or 23 percent less than Toyota initially expected, he said. The company hasn’t yet adjusted its sales goal for the year, he said.

Market Share

IHS Global Insight forecasts Toyota’s U.S. market share will fall to 16.6 percent this year from 17 percent in 2009 and continue to decline in 2011, analyst Rebecca Lindland said.

Before the latest recall, Toyota had already begun to lose customers to Hyundai, Kia Motors Corp., Honda and Ford, she said.

“Smaller companies were already chipping away at Toyota, and now I see them having an even more difficult time getting conquest sales from other automakers and attracting new buyers,” said Lindland, who is based in Lexington, Massachusetts. “Trying to convince people driving something else to buy a Toyota used to be easy. That game has changed.”

While Honda’s U.S. sales fell last month, some models that compete directly with those Toyota couldn’t sell posted gains, including Accord and Civic cars. The Tokyo-based company hasn’t followed GM, Ford and Hyundai in creating incentive programs that target Toyota buyers.

Nissan, based in Yokohama, Japan, also decided against doing that, Al Castignetti, vice president of U.S. Nissan brand sales, said in an interview.

‘All Brethren’

“We’re not going to do anything on customer cash to target Toyota customers,” Castignetti said. “We’re all competitors, but we’re all brethren in this, as well.”

Sales of Nissan’s Altima, a Camry competitor, jumped 32 percent last month while demand for its Sentra compact, a Corolla rival, rose 41 percent.

“We can’t really tell what impact it’s having on consumers at this point,” Castignetti said of Toyota’s recalls. “Toyota tends to react very quickly, and I think they’ll minimize the damage.

The eight models Toyota was unable to sell make up about 60 percent of its volume, Carter said. Vehicles still on sale include the Prius hybrid, Sienna minivan and Yaris subcompact, as well as its Lexus and Scion models.

New-vehicle sales tumbled 22 percent last weekend at El Monte, California-based Longo Toyota, the brand’s largest U.S. dealership, President Greg Penske said.

‘Trust Toyota’

“We have to trust Toyota that the fix is the right thing,” he said. “Toyota has been our partner for a long time, and they’ve never let us down.”

Seoul-based Hyundai, which plans to deliver a revamped Sonata sedan to dealers this month, said it more than doubled sales last month for both its Elantra compact, a rival of the Corolla, and its Tucson sport-utility vehicle, which vies with Toyota’s RAV4 SUV, a model that was also temporarily suspended.

U.S.-based automakers’ results were measured against the average estimates of five analysts surveyed by Bloomberg, while the Asian brands were compared with an projection. The estimates are based on daily selling rates. January had 24 sales days, 2 fewer than in 2009. Without the adjustment, results reported by some automakers are about 8 percent lower.

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