Many Sizes Fit All

Automotive Industries,  Feb, 2001  by Andrew Cummins

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Toyota aims to dominate the U.S light truck market with an SUV for every segment

It is with careful calculations that Toyota has launched a direct attack at the last bastion of U.S. supremacy in the North American automotive market: light trucks. The stake that Toyota has made in this large and growing segment indicates that they intend to capture a significant portion of this market and hang onto it.

With a new full-size pickup already handled, its five entries in the booming SUV market prove a serious, long-term commitment to the fastest growing segment in the light vehicle marketplace. This intensive line-up of SUVs gives Toyota the broadest offering in the segment It has strategically interspersed its two new offerings, Highlander and Sequoia, amongst its already strong contenders RAV4, 4 Runner and Land Cruiser.

Toyota has clearly identified the lucrative SIN market as a segment it not only wishes to capture a share of, but also intends to dominate. Typical of Toyota strategy, it did not feel the need to be the first; it did feel the need to be the best.

With that goal, Toyota has introduced a line-up of veincles that virtually fills every hole in the light truck and SUV market. From RAV4 to the all-new entry level SUV to the large Land Cruiser, Toyota has an offering for every need and every pocket book.

According to Paul Williamson, curriculum development manager at the University of Toyota. "The SUV segment continues to grow because it attracts traditional car buyers to the light truck market for the first time. These buyers are accustomed to the ride quality, the handling and the overall level of refinement of a compact or mid-size sedan. For many, the move into a traditional truck-based SUV is a big leap. Often, it involves more trade-offs than they are willing to make."

The U.S. Big 3 won't sit still as the newcomers move on their truck profits. When asked to respond to Toyota's new line-up, Al Giombetti, Ford Truck Group marketing manager, sald, "As the segment continues to grow, we are positioned to meet any competitior head on."

With the success of the RAV4, Toyota recognized that a larger, roomier and more refined SUV was necessary, but critical to the concept was price.

Not only do many first-time buyers find traditional mid-size SUVs too truck-like, they often find them too expensively priced. Equipped with the comfort and convenience features they have become accustomed to, these buyers have found that many midsize models are often priced close to large SUVs, with median prices in the low- to mid-$30,000.

The 2001 Highlander was built to fill the bill on all accounts. It is an important new product and a key strategic element in Toyota's plan to take a leadership role in the North American light-truck market.

A snapshot of the SUV market for 2000 shows a segment that is about 3.4 million units strong and expected to grow to around 3.5 million units this year. The mid-size segment accounts for roughly 55 percent of the total. And domestic nameplates account for 76 percent of mid-size SUV registrations, led by Ford's Explorer and the Jeep Cherokee.

Inflow into the mid-size SUV segment is predominately from current SUV and high-end mid-size sedan owners, such as Toyota Camry and Honda Accord. About 32 percent of the inflow comes from large SUV owners with high-end mid-size sedans accounting for nearly 11 percent.

Toyota believes a strong opportunity exists to capture market-share based on three classic Toyota attributes: quality, reliability and durability.

The Sequoia, Toyota's new full-size SUV, targets a different segment. It was developed to deliver strong off-road capability and roominess at a significantly lower price than current offerings in the segment. And all to meet the specific needs of the North American buyer.

According to Kaoru Hosokawa, Sequoia chief engineer, Product Planning Div., "Expedition was targeted as the vehicle most suited for the market. Suburban was much larger, and really a different segment. Tahoe was close, but a bit smaller, at the time, it did not offer a third seat. Expedition was the best seller because it hit the target so accurately."

Although all of Toyota's new entries are feature- and technology-rich, the real story is in segment penetration.

Automotive analyst and enthusiast Joe Phillippi, managing director of PaineWebber in New York, wonders "just how far they can stretch the rubber band." According to Phillippi, the proliferation of car- and truck-based all-wheel-drive and four-wheel-drive vehicles in the North American market will soon be at the saturation point.

SUVs may be the current wave, but we've seen the rise and fall of the passenger car, the minivan and the pickup truck. How long before this wave crests and breaks on the shore of the next generation of hot vehicles? This impressive line-up represents a huge investment for Toyota and a large stake in the North American market.

Market rise has been driven by lifestyle changes among Baby Boomers and Generation Xers. What about Echo Boomers? Will they have the lifestyle requirements and interests to maintain the growth pace in this segment? Toyota certainly hopes so.