Toyota's incentive deals drive interest. Can the company drive pricing back up?

Posted by: David Welch on March 10, 2010

Toyota is looking more like Detroit’s Big Three all the time. First the quality problems and now the company has a big incentive campaign to win back loyalty. Toyota is offering 0% financing for up to five years and some discounted lease deals as a way to get buyers to look at its cars in the wake of its seemingly unending recall problems. The latest problem came in San Diego when a driver of a 2008 Prius claimed he couldn’t stop the car even though he was braking hard.

The incentive deal appears to be working, according to Edmunds.com. The company said in this Bloomberg story that Toyota may report a 30% boost in sales in March thanks to the offers. That comparison comes off a particularly bad March 2009 when the recession was hammering auto sales. Still, it’s good news if Toyota can gin up more sales interest when the company’s recall drama is a mainstay in the 24-hour news cycle.

There is a bigger point here. As I pointed out in this Bloomberg BusinessWeek story, Toyota’s troubles will put its brand on a more even playing field with its rivals, creating an opening for Ford, Honda, General Motors, Hyundai-Kia and others to steal buyers. The first casualty of Toyota’s problems may be pricing. Getting fat sticker prices is partly a function of brand strength. Toyota’s brand has taken body blows and the company is discounting to lure shoppers to showrooms.

How long will this last? It could be quite a while. GM started 0% financing back in 2001 and never got off the discounting treadmill. To minimize the damage to its pricing, and therefore profits, Toyota will have to find an end to these recalls and tell a credible story that its quality is up to snuff. That means the company has to get a fix that stops these problems with runaway Priuses and other sudden acceleration claims. Only good engineering and time will heal these wounds.

Reader Comments

DanTe

March 10, 2010 1:17 PM

I know the Toyota demographics are "sheeps" that like to follow the herd and pick the same cookie cut designs. But sheeps are cowards. They would be too scared now to get inside a Toyota. I personally knew something like this would come down the pipe sooner or later. That's why I had never purchased a Japanese car. The Japanese are scared shatless in losing "face". They are culturally instilled with a need to lie as long as it can save Face. Any defects or problems, they would automatically, culturally, HIDE - to save face. That is a given. Just check on the problem with the steering wheel falling off in Japan a few years ago - all swept under the rug (not Toyota another Japanese car company). So what if you Die. They still have Face.

Scott Thomas

March 10, 2010 1:18 PM

Runaway Cars gas pedal that get stuck to floor mats? Or is it in the computer system I don’t know but it is truly scary. I had a recall on my car which is made in USA (Pontiac G8) I found out on www.carpedalrecall.com I had friends and co workers also discover their cars had a recall maybe not a serious recall but a recall none the less, and really what recall isn’t serious. They recalled the car for a reason.. People should be more aware of the ghost in their machines.

Robert

March 10, 2010 1:25 PM

First, Ed Wallace says people like me who are skeptical of the engineering and electronics, and not the mechanics on Toyotas are Chicken Littles! Now Dave Welch says that Toyota will start becoming more like American manufacturers (in regards to pricing power) because of engineering problems. Please Bloomberg/Business Week correlate your stories, and editors!

Randy M.

March 10, 2010 1:43 PM

The Big three auto makers in the US and recent news is blowing this recent Toyota issue all out of proportion! Ford had issues with tires that blow out while driving! - Dodge has sold engines that blow up at only 50,000 miles - Chevy has their issues - these are all on the same level as the recent Toyota hipe!

Driving_it

March 10, 2010 1:58 PM

"Only good engineering and time while heal these wounds."...No it will not. Here is the rule: Engineering a great product is easy, when compared to convincing people they should buy that product. That is the REAL challenge. Getting a perception changed is tough, and it is not a time or engineering issue. This is a marketing challenge the size of Mt Everest. Good luck with that one Toyota.

marge

March 10, 2010 2:10 PM

I think the California Prius drivers claim is a conspiracy. its too cooincidental and the news reports seem too unreal.

DanTe

March 10, 2010 3:02 PM

To those who likes to bring up American recalls. It's not so much as Toyota has a defect. It's so much as they HIDE it and refuse to recall to fix it until it blows up in the media. American automakers generally just recall rather than face lawsuits on deaths. The Japanese would rather people die and than fight the lawsuits. Recalls are bad for The Face. Must save Face.

Ken

March 10, 2010 4:00 PM

I bought my first Toyota in 1970 and considered them excellent buys for years. Then something changed in the cars in late '90s and they have never been the same. But at least their price went down when their quality did.

Today the Koreans have replaced Toyota as "the very good car with exceptional value". I really can't see a reason to look at Toyota, even after buying 6 over the years.

sam

March 10, 2010 4:24 PM

It's obvious that years of relentless cost cutting have cut into quality. The culture has been damaged and that will be hard to fix. US companies take heed.

Subroto

March 10, 2010 4:51 PM

I have been driving Toyota for last 8 years, never had a problem. Infact the least maintainance cost than others. This looks like a big framework by competitors, to ignite a flame into a massive fire. As for the Prius incident in California..what a dumb/stupid driver. why did he not change the gear to a neutral position, this would have disengaged the power from engine to the wheels, and slowed down the car. What a shameful driver..

Oclo

March 10, 2010 5:08 PM

Japan car is realy the best in the world. US cars are like in early 50's still demaged. There were olny some cases and I am realy sure that US want to destroy power of Japan Cars. best regard Oclo

Karl

March 10, 2010 5:27 PM

Marge, Did you 'Google' this- MY LEXUS IS DEFECTIVE, and watch the 9 minute 34 second video of a Lexus, a 2005 Toyota Camry, & a Toyota Prius yet? A total of 5 people died in two of those accidents. The woman in the Prius was lucky. Her car ended up crashing into a river, and was totaled! Do you believe all 3 of these accidents were a "conspiracy"?

VFan

March 10, 2010 6:01 PM

I agree with Marge. The fact the Prius driver wouldn't follow instructions or reply to the dispatcher's instructions to put the car in neutral is very suspicious.

Nevertheless, no one can deny that the Toyota brand is no longer on a pedestal.

cube

March 10, 2010 6:29 PM

I have a feeling the Prius driver will spend some 'quality' time in prison with the hot air balloon guy ;-)

siphandone

March 10, 2010 7:29 PM

It is good for me to buy Toyota with 0% financing...

Al

March 10, 2010 7:52 PM

Blowing things out of propotion? Can someone really think killing 50 of your customers isn't a small problem. I'll take the blown engine thanks.

Manvendra Kumar

March 10, 2010 8:14 PM

Toyota's Recall shows a phase in its growth cycle. In order to maintain its top position it has tested the tensile strength of it's production capability and failed. Such incentive of 0% finance will prove to be short term maximisation of profits. In order to win back brand equity it has to have a holistic view of this situation and work to improve the quality of its cars and the after sales service model which will maintain the loyalty and spread a positive WORD OF MOUTH

madeinjapan

March 10, 2010 8:15 PM

i completely agree with oclo and surboto...japanese car is best in world..i think when u drive a car oclo and surboto...what parts u deal with....steering wheel, accelerator and brake.. a company that cannot make sure about them is to be thrown out of market..too much robots in toyota both people and machine...i heard that each lexus is personally inspected by a takumi(japanese hype word for master expert etc..) what a takumi that cannot make sure about brakes and accerlator....shame on toyota....

simon

March 10, 2010 10:42 PM

I still remember Audi used to have the sudden acceleration problem. But look at them now, they come back in a big way.

I believe more than half of these sudden acceleration complaints were human errors, just like the Audi case.

By the way, the lady who testified in Congress, her Lexus has been resold to someone else who has never filed any complain. I don't know about you, but I don't think I can dial a number to talk to someone on the phone, even with hand-free, when the car is going 100 MPH.

Dave M.

March 10, 2010 11:38 PM

Why would someone even consider buying a runaway Toyota? Only discounts and free financing will manage to get some diehard loyal customers back into the showroom. Toyota hasn't convinced me yet that the problem is a floormat issue. No thanks Toyota; you can keep your discounts; my life is worth more.

joe

March 11, 2010 12:46 AM

fact is, 99.999% of Toyoas are still sudden acceleration complaint free and going back a decade means we are talking over 20 million cars. and we have 100 braking complaints on the 2010 prius? well, there's 450,000 of them on the road, do the math. So how do we collectively conclude, that with such miniscule percentages of complaints, a history confirmed by millions of trouble free low maintenance miles, that Toyota doesn't give a hoot about quality? Then how did they get there. If you want to make big money in hte car business, build better cars and they did. Toyota is hiding the records? what records? is anyone disputing the fact that using thin rugs or deep channeled all weather mats over the factory mats can and does in many cases bunch up and interfere with the brake and gas pedal?

fohpono

March 11, 2010 1:29 AM

It's obvious what's happening. The President's Dept. of Transportation is targeting non unionized Toyota for destruction to protect his special interest group ... the UAW! Ford had nearly as many complaints with sudden acceleration, and so did Government Motors (GM) cars, but you don't see the government going after them, do you?

dave

March 11, 2010 7:26 AM

I just bought a GMC Yukon Denali. Prior to the purchase I visited the Toyota dealership to price a Toyota Sequoia. They would only come down $2000 on a $60,000 vehicle. I never considered a Toyota and was quite shocked to realize how much people have been overpaying for their vehicles. Even with the recent problems, they are still acting as if they are selling a superior product.
The dealer actually tried to justify the price by mentioning Toyota's quality and high resale values - I just laughed at them, as I walked out the door.

Peter

March 11, 2010 8:38 AM

DanTe: What a shame you felt the need to generalize people like that. Everyone is an individual. Even big companies are made up of individuals.

Tompson

March 11, 2010 9:36 AM

It might be noted that though the Toyota head office is in Japan, a lot their vehicles are made in the US or Canada.

All the US chest thumping and borderline hate-mongering really rings hollow.

"in the age of globalization, when parts and vehicles can come from anywhere, a Toyota Camry can be more American than a Ford Mustang, and a Honda Pilot can have more U S -made components than a Chevrolet Suburban." - Time

Dontte

March 11, 2010 10:28 AM

Dante you're an idiot. American cars have always been plagued by recalls and poor quality. Japanese cars for years have been highly reliable. I guess you quickly forget the exploding gas tanks in the police interceptors that ford put out where 27 officers got killed and Ford refused to do anything about it because it would've bankrupted them. Toyota is going to come out of this stronger than before and once again topple Obama motors.

jambo

March 11, 2010 11:38 AM

What is DanTe talking about? Ford knew the Pinto would explode if struck from behind. They felt it was cheaper to pay out in a lawsuit than fix the problem.

john

March 11, 2010 1:45 PM

@DanTe: This is the giveaway that this guy DanTe is a racist moron. First of all, he doesn't know anything about Japanese culture at all, yet he's speaking as if he knows something. (I'm Japanese American, and I can tell right away you dunno what your talking about =). Secondly, I love how when you refer to (American) Toyota buyers are sheep, yet when you speak about Toyota itself you use the phrase "JAPANESE." That's a crucial difference, using a term for an entire race of people to describe a certain company, whose entire workforce is only a tiny percentage of the Japanese population. Very subtle, but the racism against Asians is alive and well in America.

Kinzua

March 11, 2010 2:08 PM

Sheep are those who would buy an inferior product produced by gutless management being gouged by welfare like union demands, because they throw an American flag over it.

John

March 11, 2010 2:13 PM

DanTe please shut you're mouth about them hiding it and acting as if american car companies don't do the same!

Ford was hesitant to react to the tires blowing out, I also used to own an explorer which the transmission died on 3 times while I owned it, this was a notorious problem for nearly 10 years which ford refused to acknowledge and is very well documented (google it).

While I am not a fan of Toyota and im not saying they didn't try to hide it get your fact straight before you act as though its only japanese manufacturers refusing to acknowledge problems.

DanTe

March 11, 2010 4:39 PM

HA! I love all the American apologists here. Hey dopes, I'm ASIAN. I know how Asians think. It's a cultural thing. The Japanese will hide all defects as long as possible. And their culture of conformity (that you sheeps love so much) makes for non-existent whistle blowing. Yes, you point to the Pinto. But the truth came out rather quickly for that defect. People have been complaining about Toyota for decades. One guy in Michigan has been in jail for 8 years already - for suddenly accelerating up a highway ramp into another car killing all occupants For No Apparent Reason. And Toyota hid the damning records requested by the courts (as Toyota's ex-AMERICAN attorney is now revealing). And that blown tire event has been proven to be driver fault after Ford lost the lawsuits. Apparently if you make sudden sharp turns in a heavy SUV you can flip and blow tires - as if anyone with even half a brain couldn't have realized. BUT, you're right. You all deserve to drive in a Toyota. Your spawns too. Please, please, drive Toyota.

DanTe

March 11, 2010 4:42 PM

Oh, and I love how you prove me right with your fascist dictates. Someone don't agree with you? Why, they should "shut up", eh? Freedom of speech only applies if they agree with you, right? Typical actions of a brainless sheep.

TKD

March 11, 2010 4:51 PM

I think there is more to the story than the cars going out of control...like the recent "2005" Prius that went 90 in CA. What happened from 2005 to 2010 some of the things is complete BS and i believe the media is working with american car companies esp(GM) to help bring down Toyota and you know what, Toyota's quality is way beyond GM or Ford. How many years did it took GM to realize that their cars sucked and had problems, until they needed to beg to the gov't. Toyota will come out stronger than ever. And get ready to hear more "made up" or "paid" stories from people.

Will

March 11, 2010 8:55 PM

Dan Te is probably Chinese or Vietnamese. It does matter because you are bashing the Japanese culture. That is why they told you to shut up. Freedom of speech has its responsibilities - one of which is not being racist.

ps

March 11, 2010 8:59 PM

Well DanTe you finally got it right. It is "sheep", not "sheeps". Your commentary is par for the course. You tend to forget exploding Pintos and Crown Vics. And while I agree that Toyotas are boring and way over-rated, the fact is that they have more American parts in most cases than Detroit iron (think Japanese made 5 speeds in Fords made in Mexico and Chinese engines in Equinoxes). I think there are a number of "sheep" or "sheeps" like yourself that badmouth imports while being clueless about what US made iron actually is. And you can thank your Detroit idols for that. They made Japan Inc possible via Dodge Colts and Plymouth Crickets (via Mitsubishi) while waving the American flag.

Steve

March 11, 2010 9:46 PM

I do find things pretty lopsided in the auto industry right now. Toyota has a recall, they want to fix the vehicles to provide safety for their customers. Why wouldn't they? For the past fifty years, of selling vehicles in North America, and the past twenty years of expanding their business to include producing these vehicles in North America, they failed to meet their own mark. So let's blast them out of the water. Check out gaspeadalrecall.com and find out who all has problems with sudden unintended accelaration, gee, it isn't only Toyota, but a couple other big names out there. Here's a clue, one is owned by the American government. Are they recalling, nope, are they coming forward with this complaint to make their customers aware, nope. So Dan Te, who is apparently a very bitter Asian American citizen, that has a deep rooted prejudice against his whole race, get some help with that. Freedom of speech doesn't include rasicts remarks, and belittling people, because they don't follow your actions, and apparent insight.But every-one marches to a different beat.

auto salvage parts

March 12, 2010 4:02 AM

Toyota should improve the cars safety features to come back in its position and to focus on its new car technology.
Thanks

DanTe

March 12, 2010 11:31 AM

Well "Ps" (Piece of S?): if I don't put in "misspellings" in quotes, how would nitpicking twits get a chance to respond? And if reading is fundamental with you, you'd note that I didn't "forgot". Look into the time line of investigation and resolution. Than compare it to the Toyota Stone Wall.

evolutis

March 12, 2010 11:36 AM

So from the above list of financially aware commentators it would appear we have boiled this chicken till there is absolutely no flavor left...Tato Nano anyone? From a “Bunchball” article the point was made that if U wish to get from point A to point B, you can purchase a 4 passenger vehicle for around $4k[this car meets the minimum safety standards blah, blah, blah]...

Buying a “virtual” car verses an “actual” car. So, when I pull off the lot in my new S - class Mercedes@ say $94k[ya Right!] - 4k = $90k of virtual automobile!![at least from the standpoint of function] How smart is that? Now if U like big numbers, as I just know U do, extrapolate this, cars at say $26k - $4k X all the autos purchased in the last 5 years in N & S America, Europe - wow all that “actual” money spent on a “virtual” world. We don’t even want to go into all the other crap we buy, now do we?

For life of me, I just cannot understand why the world is in such a financial mess; after all with the expensive window tint, I’m virtually Gates, or Bloomberg who is to know?[ You can bet that neither of these gentlemen play the virtual game, at least not 24 -7 like most of us]

Hammurabi economics needs to be completely replaced with behavioral economics. Surely we can collaborate to come up with something with good behavioral design elements. Let the triage begin.

evolutis

March 12, 2010 11:36 AM

So from the above list of financially aware commentators it would appear we have boiled this chicken till there is absolutely no flavor left...Tato Nano anyone? From a “Bunchball” article the point was made that if U wish to get from point A to point B, you can purchase a 4 passenger vehicle for around $4k[this car meets the minimum safety standards blah, blah, blah]...

Buying a “virtual” car verses an “actual” car. So, when I pull off the lot in my new S - class Mercedes@ say $94k[ya Right!] - 4k = $90k of virtual automobile!![at least from the standpoint of function] How smart is that? Now if U like big numbers, as I just know U do, extrapolate this, cars at say $26k - $4k X all the autos purchased in the last 5 years in N & S America, Europe - wow all that “actual” money spent on a “virtual” world. We don’t even want to go into all the other crap we buy, now do we?

For life of me, I just cannot understand why the world is in such a financial mess; after all with the expensive window tint, I’m virtually Gates, or Bloomberg who is to know?[ You can bet that neither of these gentlemen play the virtual game, at least not 24 -7 like most of us]

Hammurabi economics needs to be completely replaced with behavioral economics. Surely we can collaborate to come up with something with good behavioral design elements. Let the triage begin.

DanTe

March 12, 2010 11:37 AM

I also love this twit. It obviously have experience of being called out as 100% wrong many times in it's life. That's why it keeps using variable handles. Never too confident of itself to identify itself as one author. And when its stupidity is highlited, it resorts to the old standbys: "racist" "shut up" "responsibility". Oh I love that "responsibility" the best. Like it's responsible to hide data on sudden accelerations just to save a buck but watch a man jailed for 8 years for no reason. How "racist" of me. I must be a bigot against liars. But hey, please please buy Toyota cars. You deserve to drive one.

evolutis

March 12, 2010 11:48 AM

So from the above list of financially aware commentators it would appear we have boiled this chicken till there is absolutely no flavor left...Tato Nano anyone? From a “Bunchball” article the point was made that if U wish to get from point A to point B, you can purchase a 4 passenger vehicle for around $4k[this car meets the minimum safety standards blah, blah, blah]...

Buying a “virtual” car verses an “actual” car. So, when I pull off the lot in my new S - class Mercedes@ say $94k[ya Right!] - 4k = $90k of virtual automobile!![at least from the standpoint of function] How smart is that? Now if U like big numbers, as I just know U do, extrapolate this, cars at say $26k - $4k X all the autos purchased in the last 5 years in N & S America, Europe - wow all that “actual” money spent on a “virtual” world. We don’t even want to go into all the other crap we buy, now do we?

For life of me, I just cannot understand why the world is in such a financial mess; after all with the expensive window tint, I’m virtually Gates, or Bloomberg who is to know?[ You can bet that neither of these gentlemen play the virtual game, at least not 24 -7 like most of us]

Hammurabi economics needs to be completely replaced with behavioral economics. Surely we can collaborate to come up with something with good behavioral design elements. Let the triage begin.

Software Defect in ECU

March 12, 2010 1:18 PM

If it is not a floor mat, or the pedal stuck for CA Prius case, it is the ECU to blame (as are the other cases). Modern cars are controlled mostly by the driver input translated by the software running in the computer. If for any reason ECU was sending 'FF' (maxed out 16 bit signal) to the engine, it means it stopped translating the driver's input from the pedal. Then it also means it stopped translating the gear position (which is simply a big electronic switch in automatic transmissions). So setting to 'Neutral' position won't work.

Shutting off engine is safe as far as the key is not turned to the left to lock up the steering wheel. Drivetrain that is not disengaged from the wheel will still run and steering wheel assist pump will be running before the car stops.

ps

March 12, 2010 10:42 PM

Dan Te is Asian American but not Japanese American so his oral swill is meaningless. What everyone misses is that the cut cut cut mentality is American business management 101. Also, current CEO Toyoda-sama is the first AMERICAN educated CEO. So, while the idiot patriots post, the current problems seem to be the result of AMERICAN business practices, like the ones that have been espused in Detriot the last 30-40 years. Also how many of the issues are related to AMERICAN made Toyotas with AMERICAN parts. In that case, it's not Toyotas or the assembly guys, it's management, as in AMERICAN style management.

ps

March 18, 2010 4:46 PM

sorry for the mis-spells. Keyboard is shot..gotta buy an American one...wait a minute, there aren't any... :)

dingdong

March 22, 2010 9:58 AM

Well "Ps" (Piece of S?): if I don't put in "misspellings" in quotes, how would nitpicking twits get a chance to respond? And if reading is fundamental with you, you'd note that I didn't "forgot". Look into the time line of investigation and resolution. Than compare it
the Toyota Stone Wall.

ps

March 23, 2010 9:54 PM

@Dingdong- Gee, very courageous. Piece of "S"? You're obviously an idiot and a general loser I'm sure. Keep driving your Chevette.

Jim Roman

March 25, 2010 3:17 AM

quite frankly the demographic for this kind of instantaneous act is moral , the truth is auto manufacturing is at a dead point in Detroit, without its resources and allocation of a good CEO ; who withers his family away in trips to cabo while attempting to make cutbacks with his company soon shows how relevant this corporation could be to american society , in other words wth?

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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