Successful incentive plan is a welcomed change for Toyota

Toyota recently posted strong sales numbers in March that increased 35% over the previous year, besting both Ford and GM for that time period.  Wait, wasn’t there something in the news recently about Toyota vehicle recalls north of 2 million, government testimonies, and a collapse in public faith over the Japanese automaker that used to always finish first in brand loyalty polls? 

Well, yeah, there was that.  And U.S. regulators fined Toyota $16 million for knowingly hiding these defects and keeping them from the public at first.  The law states that automakers must notify the government within five days of determining a safety issue exists in one of its vehicles.  The $16 million fine was the maximum penalty under current U.S. law and the largest ever levied against an automaker (previously the largest amount was $1 million against GM in 2004).

During this crisis, Toyota’s sale figures did indeed drop in January and February.  If you happened to drive by a New York or Newark new Toyota dealer you might have thought the blizzards covering the Northeast this year were the reason the showrooms were so empty.  But, as the auto industry is not the type of sector that passively waits out storms, literal or figurative, to rectify the situation and put drivers back in their showrooms, Toyota launched a strong incentive program for March.  They offered zero percent financing, subsidized leases, and two years free maintenance.  And according to those March sales, it seems to be working.  So well, in fact, that the incentives program was extended through April.

This is surely one of the first bits of good news for Toyota this year, but with almost everything there’s a catch.  And for Toyota, according to CNBC figures, the true cost of this incentives program was $2,256 for March (up from $1,565 in March ‘09).  Some industry experts say Toyota will have a difficult time cutting back the incentives but also a difficult time extending them.  So, in the future when Toyota has to  scale back incentives, will they have sufficiently recaptured their target consumer base, or will, a Newark used Toyota dealer find the lot piling up this summer with no storm left to blame?  Stay tuned.