Lifestyle

Toyota Takes Stock in NASCAR


To help sell its new Tundra truck, Toyota is entering NASCAR, but many fans may regard the car company as an interloper

Toyota Racing's countdown clock is only a few days away from a momentous moment for America's homegrown automotive pastime, NASCAR Nextel Cup racing. This Sunday afternoon, around 2 p.m., following a color guard presenting the flag, an invocation, and the singing of the National Anthem by a country-Western singer, a squadron of military jets will do a fly-over and then the moment thousands in the stands and millions of TV viewers have been waiting for: A celebrity intones the famous phrase, "Gentlemen…start your engines!"

With those words, 43 drivers' fingers will flip the switches that start the powerful engines of the vivid multicolor NASCAR racecars, adorned with sponsors' names and decals. The engines will cough and splutter, then spring to life, first with a low rumble that increases in intensity and volume until it becomes a raging, rumbling, deafening roar of power. And for the first time, Toyota's (TM) Camry will add to that roar.

A Parallel Path

The Camry, the best-selling car in the U.S. for the past seven years, will be in the stock-car-racing equivalent of the World Series, Super Bowl, and Final Four rolled into one: the 49th Daytona 500. But despite the car's huge popularity off the racetrack, on the track the Camry has fostered more than a bit of controversy—and a little irony, too.

Odd as it may seem, there is an historical parallel—albeit coincidental—between NASCAR, the U.S. auto-racing sport phenomenon, and the phenomenal growth of Toyota, the Japanese car manufacturer in the U.S.

Fifty or so years ago, both began in an uncalculated manner—NASCAR in the hills, dales, curves, and ruts of semipaved roads in the backwoods of the South where fearless young men in souped-up production stock cars—Chevys, Fords (F), and Dodges—loaded with illegal moonshine whiskey (the story goes) tried to out run government "revenuers."

A Narrow View

Almost simultaneously in a nondescript suburb of Los Angeles with little more than a storefront to call a dealership, Toyota Manufacturing of Japan, showing just three odd-looking vehicles, entered the U.S. marketplace. In a half a century much has changed.

NASCAR claims it has built a base of 75 million fervent fans. It has morphed into a powerhouse brand, fostered an industry generating billions of dollars of sales, and in the process has become an American icon. Toyota has grown from an obscure Japanese automotive curiosity to a competitive contender that is now the corporate challenger to General Motors (GM) for the title of the world's largest car company. It has billions invested in U.S. plants, offices, and technology centers; employs thousands of Americans; and incidentally, has sold millions of cars.

Toyota and NASCAR have done more than just join forces: Together they are changing the appeal and dynamics of the U.S.'s second-biggest spectator sport. Stock-car racing, with its roots deep in the South, has had some fan resentment posted on blogs—nothing from the tracks, yet—about a "Japanese" brand invading its favorite sport.

Who's American?

There have been some vitriolic comments at media events about Toyota, and a couple of outspoken NASCAR team owners. Bordering on the xenophobic, the tone was so vituperative and offensive, one blogger suggested that the most vocal, Ford team owner, Jack Roush, who runs five Ford teams, "Just shut up! Let the drivers decide who is best."

Yes, NASCAR is a true American sport, but put in the "made in America" spin machine, some facts are clear. Chevrolet's Monte Carlo, on which the racer is fashioned, is built in Canada; the Ford Fusion in Mexico. Dodge's entry is owned by a German company, DaimlerChrysler (DCX). Gee, Toyota builds the Camry in the U.S. Did I misunderstand something about what makes an American car? It's not worth discussing any more…period.

Why did Toyota enter NASCAR? The quick answer: To sell more cars, right? Not quite. It's all about the new Tundra truck, Toyota's first full-size pickup introduced a couple of weeks ago that's out to knock the bolts out of Ford's F-150 and Chevy's Silverado pickups (see BusinessWeek.com, 1/30/07, "First Drive: 2007 Toyota Tundra").

Employee Picnic

In a recent interview, Jim Farley, the group vice-president for marketing at Toyota Motor Sales, was beyond candid when he said to me, "Camry has been the best-selling car in America for seven years now, so we didn't have to race on Sunday for the car business."

Farley added, "There are business imperatives with Tundra. First, NASCAR fans are pickup customers and secondly, to give the part of Toyota that's important to us, the technicians that work in dealerships, the people that work in our assembly plants, and our suppliers—they're all NASCAR fans…we wanted to give them something to cheer about."

That's a nice, altruistic corporate-speak statement, but Farley didn't become head of Toyota's marketing with self-serving, soft-sell programs. He did it with innovative ideas, concepts, and programs—first with the launch of the Scion brand—that went beyond traditional advertising and emphasized new media: Internet-search marketing, consumer-event marketing, and cross-promotions to name just a few.

Similar plans, cross-promotions, and programs are being used to add value to the tremendous investment Toyota made just to get ready for the first green flag to drop at a raceway. For instance there's a tie-in with United Parcel Service (UPS), a car sponsor that gives Toyota access to almost every business in the U.S. Similarly, the Cat, or Caterpillar car, adds value during state fairs and farming events. Farmers do still buy trucks.

Merchandising programs such as these, Farley hopes, will convert the brand-loyal fans of NASCAR to the Toyota teams and drivers, and help move the new Tundra into, at a minimum, the pickup-buying consideration column.

Not Just the Money

While NASCAR race cars run on special fuel, the business of NASCAR Nextel Cup Racing runs on money. Millions and millions and some say billions of pure, unaltered, nonsynthetic, nonfungible dollars. And Toyota, the newcomer to NASCAR and the most profitable automotive company in the world, has invested huge amounts of money in its new baby, the Tundra truck.

Not just millions in engineering and research and design dollars, but more than $1 billion to build a new assembly plant in Texas exclusively for the Tundra. The marketing and advertising budget is over $100 million in 2007, and Toyota's dealers, in an expenditure of support, have invested $3 billion to improve facilities for the new truck. In total, these are big-buck expenditures and major investments, and by comparison, the amount spent just to get Toyota into NASCAR is corporate chump change.

Many, many millions (Toyota refused comment on how much) have been spent, and it has caused some rancor, given the finances of the Detroit Three. Racing is an expensive undertaking for the race teams, but new research to develop—in NASCAR terminology—the Car of Tomorrow (COT for short), increased travel and expenses have increased. For Toyota and the three other car sponsors, GM, Ford, and Dodge, the NASCAR return on investment in marketing terms is monumental.

Does Winning Sell Cars?

The symbiotic relationship and history of NASCAR and Toyota is about to enter a new phase even as the automotive marketplace is evolving into a new era.

Toyota entered the full-size truck business—an extremely competitive category—to be successful. The $100 million being spent in marketing for the Tundra will not succeed just because of the NASCAR racing teams, but it will have an impact on the 75 million NASCAR fans. And that's a lot of truck buyers.

There's an axiom in the car business that was used to justify auto racing expenses decades ago: "What wins on Sunday, sells on Monday." I don't think it was true then, and it's not true now, but starting Sunday, Toyota hopes full-size pickup history is going to be made the following Monday and every day in the weeks that lie ahead. And if Toyota just happens to sell a few more cars, well, that's O.K., too.


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