Toyota thrives in the middle
There is a theory in professional baseball that if a team is strong "up the middle" (i.e., in the positions in the middle of the field from catcher through pitcher, second base and shortstop to center field), it will have a competitive advantage. If this theory also holds true for the U.S. automobile business, then Toyota should be in good shape. A look at the product portfolios in the midsize segments from the mainstream non-luxury makes shows Toyota is in a strong position.
Toyota offers seven midsize non-luxury models, two more than its nearest competitors, and this advantage helped Toyota dealers deliver about 80,000 midsize products in August, almost 20,000 more than any competitor. One could make the case that Toyota's wide array of products also has minimal overlap; each vehicle seems to target its own distinct owner group. In fact, several Toyotas target sub-segments not covered by the competition. Specifically, the Venza is as close to a station wagon as one can get without actually being labeled as such, and the FJ Cruiser is a retro-styled off-roader. None of Toyota's competitors address these subsets so directly (with the exception of the Ford Flex).
Moreover, the Camry and Tacoma are segment leaders by comfortable margins and the Highlander, 4Runner and Sienna are among the segment leaders.
Volkwagen lags behind its competitors with just three models and one viable entry, the redesigned and locally-produced Passat. An all-new midsize Volkswagen CUV scheduled to arrive in 2014 will alleviate this situation. Hyundai also offers just three midsize products, a decline after the discontinuation of the Entourage midsize van; the upcoming seven-seat Santa Fe will improve Hyundai's position in the midsize market. Volkswagen and Hyundai, along with Chevrolet, also suffer from lack of a midsize SUV. By contrast, Ford and Toyota benefit from having a competitive combination of both a midsize SUV and CUV.
Going forward, there are not likely to be many more sports car entries given the small size and low customer loyalty of that segment. The midsize pickup segment will be interesting to watch -- if it stabilizes or grows, Ford may be forced to re-enter to avoid ceding substantial volume to Chevrolet and Toyota. The demarcation between the SUV and CUV segments will continue to be blurry; it is already moving in that direction as some traditional SUVs (Pathfinder, Explorer) are now built on car platforms. The midsize van category will also be scrutinized; although it has recently regained some share, this may be merely because of the resurgence of the Honda and Toyota models now that inventories have been replenished. If midsize vans continue to retreat, one or more of the current players may decide to follow GM, Ford, and Hyundai out the door.
Lastly, there will be continued aggressive product replacement cadences across the board (including hybrids and diesels) but perhaps more so in the midsize car segment where the Camry and Accord face numerous challenges.
Posted by Tom Libby, Lead Analyst, North American Forecasting, Polk (09.12.2012)
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