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Toyota Warns of Summer Sales Slowdown

May 3, 2011
3 min to read


LOS ANGELES - Toyota executives expect U.S. sales to trail 2010 levels in the coming months as earthquake-related production cuts take a toll on the automaker's vehicle supplies.


The automaker has been forced to slash vehicle output in North America and in Japan after the March 11 Japanese earthquake and tsunami ravaged its supplier network. Toyota plans to operate its North American factories at about 30 percent of normal levels through at least June 3. Plants in Japan will produce vehicles at about half their normal rates, reported Automotive News.

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"It's safe to say as we experience another month of limited production in the month of May that clearly our sales will be impacted," Randy Pflughaupt, Toyota group vice president of sales administration, said in a conference call today after the automaker posted the industry's smallest U.S. sales increase.


Toyota executives declined to forecast the extent of any sales declines.


"What's unknown is what level of production we'll be seeing following June 3 and that will then drive more of the balance of the summer's potential volumes," Pflughaupt said.


Toyota Motor Sales USA Inc. recorded a 1.3 percent sales gain over April 2010 in a market that advanced 18 percent. Last year, Toyota sales were hobbled by a recall crisis, finishing the year flat while the industry climbed 10 percent.


Toyota Division General Manager Bob Carter said overall inventory levels are now "surprisingly good" considering the production cuts. He said Toyota had a 47-day supply, or about 340,000 vehicles, entering May.

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Production is expected to ramp up this summer and hit normal levels, both in North America and in Japan, before year-end, Carter said.


"We're very hopeful that some of these plants will reach normal levels before then," he said.


But production cuts in May will erode vehicle stocks during the key summer sales months.


"This month, next month, as we get into the summer, we'll certainly be seeing inventories declining," Pflughaupt said.


Key vehicles are already in short supply, especially hybrids. Toyota has a 10-day supply of the Prius hybrid, roughly half of what was in stock at the beginning of April. The Lexus division's CT, HS and RX hybrids combined have less than a 10-days supply, Lexus Division General Manager Mark Templin said in the conference call.

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Toyota is helping dealers boost inventories of certified used cars to compensate for new-car shortages, Carter said. Toyota Financial is also allowing lease customers to extend leases that are nearing maturity until new vehicles become more widely available, he said.


Toyota will cut overall incentive spending in May, focusing spiffs on vehicles with the largest stocks, namely the Camry sedan and Tundra pickup, Carter said.


The automaker has also stopped taking new orders from fleet customers, Pflughaupt said. Sales to fleet customers accounted for less than 10 percent of Toyota's overall sales last month. Fleet sales will be "very limited" this month, he said. The only sales going to fleets in May will be for orders that were already placed prior to the March 11 earthquake.


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