2 Reasons the 2014 Tundra Doesn't Stand a Chance
Feb 6th 2013 10:31PM
Updated Feb 7th 2013 7:00AM
About a decade ago, Detroit's big three, Ford , General Motors , and Chrysler, were in bad shape. Even while their business models where shaky, one thing was set in stone: Detroit owned the truck market. Not until 2006-2007, when Detroit's profits were non-existent, did Toyota see an opportunity to swoop in and get its foot in the door of the immensely profitable U.S. truck market.
Toyota's attempt would have had a chance to succeed had Detroit not been able to press the "reset" button to restructure with huge loans and government bailouts. Detroit's second life, however, doesn't mean Toyota has surrendered, as it prepares to unveil the new look Tundra at this week's Chicago Auto Show. But just because Toyota hasn't given up doesn't mean it's making any progress.
Let's take a look at historic sales trends, how January shaped up, and what the future holds for the most profitable vehicle segment in modern history.
Now, one thing you see is that the Detroit automakers started to decline in 2006-2007 while the Tundra nearly doubled its sales. Then the financial crisis hit and everything was thrown out the window. Since the recession and the following resurgence of the U.S. auto market, Detroit's Big Three took a sharp turn upward while Tundra sales have remained flat. When the dust settled after the recession, the Big Three emerged refocused and arguably in the best shape in over a decade.
Here's how January sales wrapped up and two reasons why Detroit dominates the U.S. market and will continue to do so.
|Jan '13 Unit Sales||%Chg from Jan '12||Rank in Top 20 Vehicle Sales|
Ford still ranks as the top-selling vehicle in January. However when combining the Silverado and Sierra, GM barely tops Ford in January sales. Chrysler's Ram pickup is gaining some momentum and holds its spot in the top 10. Toyota boasted impressive percentage increases in its conference call, but couldn't break into the top 20 in vehicle sales. Let's face it: The barrier to the U.S. truck market isn't easily breached. It takes an immense amount of consumer knowledge and loyalty, which Detroit has on lockdown. Let's take a better look at those two factors.
Knowledge is power
Consider this; Detroit has been making trucks since the 1930s. While Toyota had been in the U.S. market for some time, it didn't branch out and make a full-size truck until the 1990s. That's a huge gap of time where Detroit had figured out how generations of consumers used their vehicles and what they needed. It's a priceless wealth of information, which will provide a competitive advantage for quite some time.
Detroit's Big Three know they have targets on their backs in the U.S. truck market, because of its high margins and because they practically control all of it. After the recession, it seems Detroit is more determined and confident than ever. "There are some things that are endemic to the American carmakers; this is one of them," said Chrysler CEO Sergio Marchionne. "All three of us will defend the area tooth-and-nail. It's our business, period."
As I said, Toyota isn't giving up just yet. However, due to its late entry into the U.S. truck market, it's way behind in producing a vehicle that matches consumers' needs. With that late entry comes much less, if any, consumer loyalty.
Loyalty trumps all
When I met my girlfriend's father for the first time, the first question out of his mouth was "Ford or Chevy?" He didn't care about religion or sports teams. It was all about the truck brand. That isn't an unusual event. There's a solid line in the sand, and you're either a Ford or a Chevy guy -- and that's that. With loyalty that intense, it's going to take a long time for Toyota to break into that circle.
Consider this: Of all Silverado buyers in 2012, 39% were repeat customers. Ford F-150 buyers came in at a close second at 36%, followed by Ram at 27%. There isn't a lot of switching going on among truck owners. According to Edmunds, Chevy and Ford pickups top even the most loyal sedan buyers on the market. That high percentage of repeat customers exemplifies the knowledge Detroit has in producing the vehicle consumers want and need.
Sales of U.S. trucks are expected to top 1.7 million units in 2013, a favorable sight after the low numbers that followed the recession. Detroit is hopeful that sales could again reach highs of 2.5 million seen in 2005. For the Big Three, it's a virtuous cycle of consumer knowledge and loyalty, an advantage that began as far back as 1930. For Toyota to make some noise and gain market share, it's going to take a drastic change in knowledge, strategy, and a lot of time. Toyota will unveil the 2014 model Tundra tomorrow, and we'll have a better idea of the impact it could have on its Detroit competitors. With the new Silverado, Sierra on the way this year, and F-150 following a year later, don't expect the Tundra to take any market share. Not yet, and not for a while. The U.S. truck market is Detroit's, and that's a fact.
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The article 2 Reasons the 2014 Tundra Doesn't Stand a Chance originally appeared on Fool.com.Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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