Toyota dealers are happy but want more trucks

Toyota dealers’ message to the factory is short and to the point: More trucks, please.

Mickey Anderson, 47, president of Baxter Auto Group in Omaha, Neb., and chairman of the National Toyota Dealers’ Advisory Council, said Toyota Motor Sales U.S.A. is working hard to grant that wish.

Toyota’s plant in San Antonio that builds the full-size Tundra and the compact Tacoma, is running full Saturday production to generate greater pickup availability, Anderson said. And the company is putting things in place to ramp up production in Mexico for the Tacoma.

Dealers also expect to get 30,000 more Highlander crossovers out of the company’s Indiana plant.

“So these are all actions that have been taken that will benefit Toyota dealers in 2016 and that will make a big difference for us,” said Anderson, whose Baxter Toyota Lincoln in Lincoln, Neb., Baxter Toyota La Vista in La Vista, Neb., and Legends Toyota in Kansas City, Kan., are among his company’s 21 dealerships.

Anderson, in his second year heading the Toyota dealer council, shares his views about pickups and the relationship between Toyota and its dealers with Staff Reporter Arlena Sawyers.

Q: How was 2015 for Toyota dealers?

A: It was a great year; it was a record year. We were so pleased that Camry finished as the No. 1 passenger car; Corolla was No. 2 and we had record light-truck sales for the year. Sales were up another 5 percent over 2014. We’re the No.1 retail brand — again. Dealers posted record profits. It was as good a year as we could have ever hoped for.

What major issues do Toyota dealers face this year?

The biggest issue we faced in 2015 continues to carry into 2016. For Toyota dealers it’s pretty clear; we have consensus across the country that we need more trucks. Clearly, American consumers prefer more trucks. We are registering record light-truck sales. With all that said, we have great demand that exceeds our production particularly with our two pickup trucks, Tundra and Tacoma.

Any indication that dealers will get the trucks on their wish list?

There is. One thing about the dealer council is that we talk about what can be done to alleviate these things in the short term. Increasing production in a short period of time is probably the biggest challenge the factory has. But I know in Texas they are running full Saturday production, which will generate greater truck availability. I believe we’re [getting ready to ramp up production] in Mexico for Tacoma.

On top of the production that we get out of Texas and the Tacoma plant, we also are going to get another 30,000 Highlanders out of our Indiana plant. So these are all actions that have been taken that will benefit Toyota dealers in 2016. That will make a big difference for us.

In the fourth quarter, some dealers reported squeezed new-car margins and growing new- and used-vehicle inventories. What are Toyota dealers seeing in 2016 and how are they responding?

We saw a record January, so 2016 is starting on a good path. We were the No. 1 retail brand in January — again. I think in the fourth quarter, because of weather, we always start to see a bit of an increase in days’ supply and as we’re clearing out the outgoing model year we see some decrease in margins, but I would say Toyota dealers enjoyed a record year in profits. New-car sales are strong. When you take a look at the year that was and take a look at the year to come, we know there’ll be a lot of consumers out there buying new cars and we know that they continue to prefer Toyota over every other brand.

Should Toyota step up incentives in some form — say, sweeter lease deals or more cash on the hood — to keep sales growing even more?

Toyota has maintained their leadership in the industry because they make great products customers want to buy. But I will also tell you that they monitor the market very closely.

They are always seeking feedback from us, wanting to know what we’re seeing on the show floor and I think that they have been very quick to respond to regional differences in different segments, be it small cars or small SUVs. I suspect that will continue. The biggest challenge right now is this truck production we are facing. It comes down more to production than incentives.

But I can promise you they will continue to make sure that their products represent the very best value. Not only just nationally, but locally and regionally.

What do you hope to accomplish as chairman of the dealer council?

Before I was chairman, I was a member of the national dealer council and I can tell you that Toyota’s dealer council process is the best in the industry; it’s truly unprecedented. [I want] to make sure dealers are bringing their concerns and what they see in their markets are brought to Toyota.

Toyota wants to hear from dealers and they respond. As I look at 2016, my job is to make sure that dialogue continues. Whatever comes in 2016, we’ll do everything we can to protect that special relationship between Toyota and its dealers.

I was really impressed when I first joined the dealer council with the high level of communication and the partnership between Toyota and its dealers. Toyota has about 1,200 dealers and those 1,200 really have a voice with the manufacturer.

As dealer council chair, I don’t have any particular wisdom in terms of pushing one item or another. The role is to ensure that the dialogue continues so that Toyota and its dealers can have the best relationship in the industry.

Were Toyota dealers told that Scion was being discontinued?

We were. That was a decision that was made over a long period of time. We were told in advance of the public announcement that the decision had been made. Scion was such a grand experiment that started back in 2003, I think, and it really was designed to act as a laboratory where Toyota could maybe work with innovative products, with innovative processes.

They used it to connect with a younger buyer. I think dealers across the country recognize the success Scion has had. We all recognize that it’s made us a better company. We all look forward to taking the spirit of Scion and infusing it in the entire Toyota lineup.

We have great products in Scion — the iM, the iA, and the FR-S is a really exciting sports car. Next year we get the C-HR, which is going to be a great player in the compact SUV space. Those cars are going to attract millennials; they’re going to attract folks who are new to the Toyota brand. They perform that role as Scions and they are going to perform that role really well as Toyotas and they’re going to help make the brand even stronger.

“More trucks. If you sat in on a dealer council meeting, that is what you’d hear. The dealers with one voice just want more truck production. We’ve got the best products. We don’t see a hole in our product line in terms of a product missing.”What’s missing in the product lineup?

So Scion was not a failure?

Oh goodness no. I think I speak for the dealers and I think it was a great success. This is really a natural progression for Scion and Toyota.

I give them credit. With the benefit of hindsight, Toyota recognized, over a decade ago, there would be a new generation and that this generation would want to be interacted with differently. They have different values and relate to companies in a different way. I think everyone has come to that recognition.

Millennials are talked about, every brand, every meeting, an awful lot. Toyota first identified that 10 years ago. They are a large part of our buyers. They are no longer an emerging demographic. It makes all the sense in the world that instead of this being a Toyota subbrand, take all the lessons we learned from Scion and integrate them into our Toyota showroom.

Toyota has had a robust certified used-vehicle program for years. Will the dealers sell more certified vehicles this year?

I think so. If you take a look at the sales in 2008, ’09, ’10 [and] ’11 … we had a shortage of new cars and that translated into a shortage of used cars. Toyota has a strong commitment to CPO and dealers have enjoyed strong CPO sales. We see that growing in ’16 as the number of available vehicles grows.

Analysts have said that some manufacturers may have more off-lease vehicles coming back in the market this year and the next few years than their dealers can comfortably handle. Will Toyota dealers have too many off-lease vehicles?

Coming out of 2015 there is great demand for these vehicles. It was challenging in some months, particularly the summer months, to stock the number of cars to meet consumer demand. We dealers benefit when there is an abundance of used cars. It drives the cost down. Unfortunately, I don’t see that happening this year as it relates to Toyotas.

The demand for used Toyotas has been high and it’s going to remain high. And while we’ll have more supply, we’ll be lucky to have enough supply to meet demand. I don’t see us having more supply than demand.

What share of Toyota dealers are unprofitable?

I don’t have those numbers. As a whole the dealers enjoyed record profits. I’m sure there could be different circumstances around the country where a dealer could have had a difficult year last year but that would be a rare instance.

Service business should be up. What should Toyota do to help dealers handle an increase?

Service business is very good. The one thing we had hoped to get was ToyotaCare, and we’ve had it [since 2010]. It’s been a huge benefit for us since its inception. We have 2 years/25,000 miles of free maintenance on all of our new vehicles. I believe our service visits were up year over year ’14 to ’15. ToyotaCare is driving a lot of that.

Dealers have to do their part. We’ve invested in facilities; we’ve invested in location; that’s what we need to do. As a manufacturer, having that complimentary maintenance is probably the single biggest thing they could have done to make the customer feel very connected to us dealers. We’re grateful for that and we’re seeing the fruits of that investment.

Whose idea was ToyotaCare?

ToyotaCare is something the dealers always desired and it is a very big investment for the manufacturer. We know and Toyota certainly knows that if the customer comes back to us for service, the likelihood that they come back to us to buy a new car increases dramatically. While there are many things we dealers can do to make the service experience better for the customer and earn their return business, the single thing that the manufacturer could do is make that service complimentary.

It’s a huge investment by Toyota — very, very, expensive, but we are seeing the payback. We are seeing our business go up and we know that will drive repurchase. It brings them back to buy a new car.

With interest rates rising, are Toyota dealers looking for floorplanning help?

It [rising rates] is something we’re all keeping our eye on. Right now, you have a combination of still historically low rates and very low days’ supply. We’ve not heard that yet, but when you look at clouds on the horizon that is one of them.

Toyota has a great program and Toyota Financial Services provides us great rates. It’s not an issue for Toyota dealers currently.

How best could Toyota help dealers sell more vehicles?

More trucks. We make the No. 1 and No. 2 selling passenger cars. We are seeing record sales in light trucks. When you take a look at the compact [crossover] segment we have arguably the best offering in that space. We have a full lineup of vehicles where we offer everything from trucks to hybrids and even a hydrogen powered vehicle. Toyota gives us an incredible inventory of products.

The only thing we can ask for is as the customers start shifting from one segment to another we have great offerings in every segment. It’s now more, hurry up and get us more trucks.

We thank Toyota for its leadership in quality, dependability and reliability. We know our customers choose Toyota because it is a smart purchase. And we always make every effort to ask Toyota to continue to lead in those categories. That’s the most important thing they can do and that is what they’ve done.

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