2010 Toyota PriusEnlarge Photo
Lexus models haven't been nearly as affected. Looking across all models, even the LS 460 and LS 600h, which were hit by an engine recall last month, they haven't seen a major dip in sales or had the same sorts of aggressive incentives applied as with the more affordable Toyota vehicles. And Lexus, breaking it down, has managed to keep its market share—even though the impact of more recent Lexus recalls might yet be seen later in the year with Mercedes-Benz overtaking it as the number-one luxury automaker.
However one of the biggest sales losers, over the longer run, is the iconic Toyota Prius flagship, which for the past two months has been significantly down in sales versus last year—despite incentives going from an average $218 per vehicle last July to $1,644 per vehicle this past month. The Prius had been affected by yet another highly publicized brake issue.
"The Toyota brand was more clearly associated with the recalls," said Toprak, who said that Lexus' superior ways of matching demand with production, and maintaining a very slight lack of supply, have paid off when demand stumbled slightly.
Market share quickly lost, and hard to win back
While prices aren't showing much difference and discounts haven't really been that deep, the overall impact can be seen in looking at market share. The price Toyota paid for the recalls, Toprak says, is "a dramatic decline in market share"—about 1.5 percent of the entire U.S. light vehicle market, as well as a loss of consumer confidence. Before the recalls, Toyota was pushing 17.5 percent market share; now they've steadied at about 16 (after dropping below 13 percent in February). That might not sound significant, but over the course of a year that could be 180,000 vehicles.
Toprak says that it will be a struggle for Toyota to regain any of the market share they lost so quickly. "It's not a death sentence, but the outlook for them is not great," said Toprak. When they kicked off their major incentives program, in March, he said, "At first they were only able to attract their loyal customers…Unfortunately there is not an unlimited supply of loyal Toyota buyers."
The aftermath: A little smaller, perhaps stronger
The recalls, the huge loss associated with them, and particularly the public humiliation of the hearings, have clearly been cause for company officials to take a step back and reconsider the breakneck pace and rapid expansion of the company in recent years—to the degree that some have openly admitted that the company has missed some of the crucial elements of its kaizen (continuous improvement) methods.
After years of going aggressively after market share, and falling into some of the same issues as GM and Ford, Toyota ended up weakening itself as a company—of which it's now aware.
"Clearly, Toyota is looking like they might be okay with 16 percent [market share]," said Toprak. With consumer confidence in the brand shaken, Toyota might hold the line for a while, working toward profitability with a lower volume, controlling cost, and returning to core values like reliability, quality, and affordability.