Toyota, battling plateauing demand in its biggest market, is reviewing its entire U.S. lineup and could dump nameplates or models that are falling out of favor.
“We are taking a hard look at all of the segments that we compete in to make sure we are competing in profitable segments and that products we sell have strategic value,” Jim Lentz, the company’s North America CEO, said here after the automaker reported a rise in quarterly profits Tuesday.
Toyota joins automakers including Ford Motor Co. and Fiat Chrysler Automobiles in rethinking product portfolios in a market that is becoming increasingly dominated by light trucks. Lentz said his company will not abandon passenger cars but it is scrutinizing offerings in some areas, such as convertibles or coupes.
Profits rise
Toyota Motor Corp.’s operating profit increased 11 percent in the latest quarter as Japan’s biggest automaker tapped growing demand for light trucks and cranked up cost cutting.
Operating profit rose to 579.1 billion yen ($5.09 billion) in the automaker’s fiscal second quarter ended Sept. 30, while net income grew 28 percent to 585 billion yen ($5.15 billion).
Revenue increased 2.3 percent to 7.31 trillion yen ($64.3 billion).
Global retail sales edged ahead 1.9 percent to 2.68 million vehicles in the July-September period, including results from its Daihatsu small-car subsidiary and truck-making affiliate Hino.
Worldwide wholesale volume added just 0.4 percent to 2.18 million.
In announcing the earnings results on Tuesday, Senior Managing Director Masayoshi Shirayanagi partly credited big gains from a richer mix of more profitable models as Toyota concentrates on the booming global demand for crossovers, SUVs and other light trucks.
Profits also ticked higher as the maker of the Camry sedan and RAV4 compact crossover reigned in incentives and lifted pricing power thanks to a new round of vehicles riding on the company’s modular platform, dubbed the Toyota New Global Architecture.
The updrafts offset a 20 billion yen ($175.9 million) hit from foreign exchange rates.
U.S. incentives
Toyota has also refined its incentive strategy for a more tailored approach, he said. The Toyota brand’s average U.S. outlays are down $145 per vehicle this year and are about $1,200 below the industry average, he said. Lexus spiffs are flat, even as the segment’s average increases.
“We’re putting dollars where we’re going to get the most bang for our buck,” Lentz said. “Most importantly today is incentivizing vehicles that are much more profitable.”
While the Toyota brand’s incentives on passenger cars fell 16 percent through September, for instance, spending on light trucks increased 8 percent, according to Autodata.
North American wholesale deliveries dipped 1 percent to 665,000 vehicles in July-September. But regional operating profit rose 12 percent to 58.9 billion yen ($518.1 million).
In Europe, wholesale volume increased 4.8 percent to 240,000 vehicles in the quarter. European regional operating profit more than doubled to 38.7 billion yen ($340.4 million).
Brighter outlook
Citing the improved sales footing and a forecast for more cooperative in foreign exchange rates, Toyota lifted its earnings outlooks for the current fiscal year ending March 31, 2019.
Toyota now expects operating profit to essentially break even from last year. It had earlier predicted a 4.2 percent decline in full-year operating profit. In net income, Toyota now sees a 7.8 percent decline, a less severe decrease than the 15 percent drop it had originally forecast.
Naoto Okamura contributed to this report.
The article “Toyota takes ‘hard look’ at trimming U.S. lineup as profits rise” originally appeared on autonews.com