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http://www.businessweek.com/stories/2010-03-09/toyotas-incentive-deals-drive-interest-dot-can-the-company-drive-pricing-back-up

Businessweek Archives

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


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.


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