Toyota is reviewing its US vehicle lineups despite rising profits compared with last year.
It seems that everyone is taking a good, long, hard look at sedans and coupes. Light trucks, SUVs, and crossovers are just way more profitable than regular cars, and every automaker is wondering why they’re bothering to make low-profit vehicles.
Ford was first to get out of the car market, announcing earlier this year that they would not renew any of their North American compact, mid-size, and full-size sedans in favor of a fleet lineup that contained only SUVs, trucks, and Mustangs. Fiat Chrysler is also looking at their car lineup, and while it seems unlikely for them to ditch anything from Dodge or Jeep, we might soon see the end of the small cars like the Fiat 500.
Now a new report from Automotive News is stating that Toyota could be next to ax the humble car from their North American lineup. Or at least, a few of them.
"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," said Toyota North America CEO Jim Lentz to Automotive News.
While Toyota won’t abandon the passenger car market, they may end up cutting some underperforming models such as convertibles and coupes.
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Toyota’s profits increased 11% last quarter mostly on growth from SUVs, crossovers, and the Tacoma light truck. With a greater mix of more profitable vehicles sold, it would make sense for any automaker to allocate more resources to vehicles that provide the most bang for your buck.
However, if the global economy were to shift and gas prices were to rise, we could see a similar swing back to small cars as we saw during the 2008 economic downturn. With fewer small cars being made, a sudden shift such as this would catch companies like Ford flat-footed, while small car makers such as Hyundai and Toyota (for now) would reap windfalls.
Toyota also credits a more targeted incentive approach with their rising profits. The Japanese carmaker offers incentives per vehicle $1,200 below the US average thanks to geographic cash-back rewards.