Who's Afraid of Toyota?

[mustang84]

Who's Afraid of Toyota?

The Wall Street Journal

By Holman W. Jenkins, Jr. (Commentary)

Feb. 21, 2007

Edmunds.com for years reviewed the Toyota Echo, the company's entry-level vehicle, by describing it as the cheapest car in America and still overpriced.

Even after the Echo was finally dropped last year from the U.S. market, the authoritative auto site couldn't resist reminding shoppers it had once whispered in their ears, "Friends don't let friends drive Echos." And Edmunds offers only marginally more favorable comment on the Toyota Yaris, the vehicle that took the Echo's place, calling it a "decent subcompact" but advising shoppers to "keep an open mind" about competing vehicles, including the Chevy Aveo.

Or take the Prius, the car that made Toyota a star in certain circles and perhaps even began to redress its reputation for bloodless, uninteresting vehicles. The Prius has hardly been burning up the sales charts lately. With a ridiculous federal tax giveaway expiring, Toyota has been reduced to dangling incentives even in front of California buyers. All this transpires while the EPA is still putting finishing touches on new mileage ratings that will sharply downgrade the Prius's gas performance.

What Toyota really proved with the Prius, ironically, is that Americans have little appetite for high mileage vehicles - in fact, are willing to buy one only when the stars align briefly and inexplicably to turn a car into a Hollywood-accredited emblem of personal enlightenment.

To put it baldly, Toyota got lucky. Any motorist truly intent on burning less gasoline and saving the planet could have found a vehicle that produces mileage as good or better than the Prius's, without paying Toyota a premium for its busy "hybrid" technology. Designing a car that uses less gas, after all, is a snap. In the mid-1980s, Honda marketed a version of its sporty CRX that got an honest 50-plus miles to the gallon. In 1990, GM and Suzuki built the Geo Metro XFi, good for 53 in the city. But customers have to be willing to buy it. Detroit would have been only too glad to soak consumers for a high-tech, fuel-saving vehicle had consumers declared their willingness to be soaked. But apart from a few statesiders who might embrace such a car as a fad, it makes enduring sense only in markets where taxes keep gasoline prices in the stratosphere.

And forget the guff about Toyota investing long-term for the end of oil. Hybrid technology is a mere fuel extender, and a heavy, mechanically complex one for so modest a return in gasoline savings. It shrieks technological dead-end.

We offer these thoughts as corrective to the tendency to slobber over Toyota, on track to become the world's biggest car maker, especially given the rumored unraveling of DaimlerChrysler (though the real culprit there was the German side's consistent knack for screwing up a good thing). Yes, Toyota is an excellent company. Its commitment to disciplined manufacturing explains why in some developing countries the streets are jammed with Toyotas, especially its ubiquitous HiAce minivan. Toyotas often seem the only vehicles on the road - or perhaps the only vehicles still on the road thanks to their sturdiness.

But if being the biggest were such an asset, GM would be a world beater today. In fact, GM is shrinking on purpose, sacrificing market share for profitability, lessening its reliance on sales to rental fleets, which depress the value and image of all GM vehicles. As Edmunds recites in chapter and verse, Toyotas are far from being in a class by themselves in quality or value. A buyer who carefully, unemotionally weighs the trade-offs does not automatically end up owning a Toyota, or even a Japanese car - though shoppers whose perceptions are a lagging indicator still treat Detroit products as automatically inferior.

And Toyota has some disadvantages, while U.S. automakers have advantages. Having tradition and heritage to draw upon is an advantage. Toyota is singularly weak in this regard. Few signature cars come to mind through the decades. That's why Toyota's new FJ Cruiser has earned unprecedented gushing from the automotive press - Toyota ransacked its past for visual cues and, for once, was able to make a customer feel something for one of its vehicles.

Profits are not assured by economies of scale. That's one lesson of the DaimlerChrysler merger, which was supposed to shave a couple nickels off the cost of every component by spreading their development over a larger vehicle output. As important and becoming more important in a crowded marketplace is a knack for turning out cars with ineffable cultural appeal. Toyota's world-wide success so far has come without being strong in this department. And Toyota knows it: Hence its constant invocation of the word "emotion" in how it approaches marketing its important new Tundra pickup.

Cars are transportation: Buyers interested in a low-risk investment in transportation can seldom go wrong by buying Toyota. But car companies are profit-seeking organizations. Though it's popular to sneer at the Big Three, they raked in many billions correctly judging a consumer appetite for large SUVs and pickups, including millions of pickups purchased by cosmetic cowboys who drive them to their office jobs. These were and remain impressive feats in consumer design - as befitting products in which the Big Three were willing to invest precious capital, as distinct from the workaday sedans they churn out just to break even on their UAW labor contracts. And unlike Toyota with its Prius, the Big Three produce and sell their fashion statements at a profit, a goal that still reportedly eludes the Toyota hybrid.

The Big Three are far from incompetent car makers - or incompetent users of capital. Their big problem is that, thanks to their legacy labor issues, the financial markets simply will not afford them the leeway to make large capital investments in sedan styling and technology. These labor legacies are a product of history and a set of political and market arrangements. Fix that problem, and any Detroit car maker that's still around has plenty of potential to compete successfully with Toyota or anyone else.

[aaaantoine]

Someone at one point or another made a comment that Toyota would get all the bad press once it became the largest automaker.

Well. It looks like more and more of the focus is shifting from GM every day.

[mustang84]

Too bad it took nearly killing the American auto industry for the media to have a change of heart...

[loki]

i see a metro XFi about once a week (same one) at first i thought the XFI was XA

rest of the article makes good points

[Sixty8panther]

Excellent article, many good points.

And forget the guff about Toyota investing long-term for the end of oil. Hybrid technology is a mere fuel extender, and a heavy, mechanically complex one for so modest a return in gasoline savings. It shrieks technological dead-end.

And that's my favorite.

[Z-06]

Hybrid was always a technological deadend. Only greenies bitches love it. Prius is a garbage.

[CARBIZ]

Did Hell freeze over and nobody told me? Is this article a mis-print? Did Toyota forget to mail their cheque this month? I am shocked and dismayed that the Wall Street Journal has broken with party line and is printing the truth.

Or were they just getting cocky because Al Gore was out of the country lecturing us Canadians on the Inconvenient Truth?

[sciguy_0504]

It's no surprise the WSJ would be all over hybrids and fuel efficient vehicles while singing the praises of GM and Ford when large SUVs were all the rage. It has to protect the interests of big business oil companies. It's also interesting the paper fails to mention that GM has also boarded the hybrid ship, even going to such lengths as to apparently seriously consider manufacturing a plug-in hybrid. The article points out GM and Ford correctly determined the buying public wanted large trucks and SUVs but fails to discuss how large of a blunder that was. Detroit threw all of its eggs in one basket and has paid for it. It was a bad business decision on many levels.

"These were and remain impressive feats in consumer design - as befitting products in which the Big Three were willing to invest precious capital, as distinct from the workaday sedans they churn out just to break even on their UAW labor contracts."

The same could be said about the Prius. Toyota correctly timed the market and gave the public what it wanted. Unfortunately, Toyota does not feel the need to invest precious capital into one vehicle market and ignore the others, designing a singular vehicle as distinct from the workaday sedans it churns out just to break even on its nonexistant labor contracts.

[enzl]

Media Bias! Media Bias!

Ooops....sorry, just a C&G knee-jerk reaction....

Edited February 23, 2007 by enzl

[balthazar]

sciguy_0504 :>>"The article points out GM and Ford correctly determined the buying public wanted large trucks and SUVs but fails to discuss how large of a blunder that was. Detroit threw all of its eggs in one basket and has paid for it. It was a bad business decision on many levels."<<

Uhh, GM and Ford saw the potential for trucks to reach 54% of the new vehicle market, and now they own 90% of that market- the highest profit margin segment going. Sure was a bad decision to sell a million of just pickups per year.

>>"The same could be said about the Prius. Toyota correctly timed the market and gave the public what it wanted."<<

The public wanted free money- and the tax incentive has been reported to have been a major factor in the 'success' of the prius. Combine the fickle nature of fads in this country and the impending elimination of federal incentives, and the prius sales chart will be very interesting indeed.

>>" Unfortunately, Toyota does not feel the need to invest precious capital into one vehicle market and ignore the others, designing a singular vehicle as distinct from the workaday sedans it churns out just to break even on its nonexistant labor contracts."<<

toyota chose to ignore the lucrative truck market for 15 years to focus on a shrinking sedan market. Now they play catch up in product, image and sales.... just as the truck market begins to contract. Well done.

Edited February 23, 2007 by balthazar

[Drew Dowdell]

It's also interesting the paper fails to mention that GM has also boarded the hybrid ship, even going to such lengths as to apparently seriously consider manufacturing a plug-in hybrid.

GM's hybrid is 50% cheaper, simpler and provides 90% of the benefits. The other 10% is made up for by not looking like a pregnant shoebox.

[CARBIZ]

As has been pointed out here (but not in the media, naturally) many times, the hybrid buses that GM has shipped out do far more for the environment than all the Priuses sold, but the media has virtually ignored that reality. Still, it is to Toyota's credit and GM's shame that Toyota won the PR battle on this one. GM took the high road by actually DOING the right thing while Toyota APPEARED to be doing the right thing and GM got their ass kicked. Such is the fickleness of the media.

Besides, most of what the tree-hugging-brocolli-eating-save-the-whale types are doing is about LOOKING like they are doing someting, without much substance. GM should have figured that out earlier.

[regfootball]

or like my brother in law said yesterday, the actors that get out of the prius and go into their energy wasting 15,000 square foot hollywood mansion.

i think the general public has discovered the hypocrisy of your average prius banger. they want to make a 'statement' of saving mother earth, but chances are there is a tax break involved or they in some way live in excess otherwise.

but there is a lot of hypocrites around in many ways. Regardless if they bang toyota or not.

the best point in the article was how a car like a CRX was just as good at fuel efficiency. Well, with a caveat, it did not have to lug around 500 extra pounds of airbags, electrical wiring and five star crash structure.

I HAVE NO IDEA why Honda does not offer a CRX today. Its one of the few Hondas I think was the neatest thing. I also like VW diesels, and why is there no 'Chevette Scooter diesel'?

End point, is the fully complex hybrid a necessity for a 'green car' image. Um, no, Scott. Technologies like the Vue Green Line with BAS (refined to a higher level) make all the right sense to implement.

GM will trump toyota with their hybrid kicks when they get the full hybrids going in the big trucks. We will see real society benefit when those go up for sale. Improve the mpg of the biggest offenders. that is real progress. Most of Toyota's hybrid models are Leuxs cars. this enables toyota to charge much higher prices, not put more green cars on the road. A Lexus GS hybrid was not created for fuel savings as much as it was to add performance.

Wow, more and more we see press taking aim at Hoyotha. nice to see them getting fiarly abused like everyone else finally. Well deserved, too.

[BrewSwillis]

I called the media backlash against hybrids over a year ago.......and I also said that the backlash would come just as the Big 3 came out with the mainstream hybrids they were SHAMED into creating. The Big 3 will never win in the media. It's too late.

[pow]

GM's hybrid is 50% cheaper, simpler and provides 90% of the benefits. The other 10% is made up for by not looking like a pregnant shoebox.

No, GM's hybrid is 1.6% more expensive and provides 43% of the benefits.

full-hybrid '08 Escape: $25,075 - $2600 = $22,475

light-hybrid '07 VUE: $23,495 - $650 = $22,845

Escape Hybrid EPA MPA improvement over non-hybrid = 53%

VUE Green Line EPA MPG improvement over non-hybrid = 20%

I'm okay with affordable, widespread usage of BAS, but currently GM has it on one car, the VUE Green Line, which is more expensive than the V6 version. The upcoming AURA Green Line ($23,000-$650 and 28/35 vs. $24,400-$2,350 and 42/36) is similarly hopeless.

And because the BAS system has a lower capacity than a full-hybrid system, the real-world MPG deviations (from current EPA procedures) would be even greater.

Edited February 24, 2007 by empowah

[siegen]

the best point in the article was how a car like a CRX was just as good at fuel efficiency. Well, with a caveat, it did not have to lug around 500 extra pounds of airbags, electrical wiring and five star crash structure.

I HAVE NO IDEA why Honda does not offer a CRX today. Its one of the few Hondas I think was the neatest thing.

Well you can get an Insight. With manual transmission, they aren't slow, and over 60 mpg is very realistic.

Honda's IMA is much more simple than Toyota's Synergy too.

[Z-06]

Weight has been a main reason for the loss of efficiency. Infact in Car and Driver Csaba Csere had given that point. Increased weight means increased drag force to overcome and desptie of the engine technology progressing, the weight has practically counterbalanced the gains in fuel economy.

Main weight cuprits are the airbags, bigger tires, electronics (a manual window is less heavier than one touch up and down window) plus cars are tending to grow bigger.

If you look at the 1990 Accord EX for e.g. it weighed about 2900 lbs or roughly 300 pounds less than the 2007 Accord, about 150 lbs more than 2007 Civic. It gave 24/30 mpg compared to that 2007 Accord which gives 26/34. If you saddle up the current technology with that body weight I am sure it will end up being 30/40 or equivalent to 2007 civic which does give 30/38. Comparing 1990 Accord with 2007 Accord is like apples with oranges. Instead if you compare it with 2007 Civic, the dimensions and power to weight ratio are almost within each other. Thus there has been about a 20 percent gain fuel efficiency based on the advancement of technology, not bad. The only thing is if you want the efficiency you only have to lower your standards and go for a smaller car, which is dimensionally as big as the older "bigger" car, as my example shows.

I love the ideas of ABS stability control, etc. But I have always argued the idea of Airbags, especially a bunch of them.

[regfootball]

Well you can get an Insight. With manual transmission, they aren't slow, and over 60 mpg is very realistic.

Honda's IMA is much more simple than Toyota's Synergy too.

the Insight looks like a big green turd and is too un-commodious and I wouldn't want a light hybrid like that.

The CRX was a simple, real, car. A nice 2 seater with a big trunk, and sporty looks and driving. The insight is more light duty and is intended for greenies. There is nothing sporty or youthful or substantial looking about the Insight. In its own arena of ecoweenie cars, the Insight is pretty nice....but that's only compared to a prius.

Edited February 24, 2007 by regfootball

[regfootball]

a 2500 pound diesel CRX, now THAT would interest me.

[pow]

a 2500 pound diesel CRX, now THAT would interest me.

+ IMA or BAS

There's no reason why a car should have to idle for minutes in traffic or at red lights, regardless of how efficient the engine is.

[pow]

GM will trump toyota with their hybrid kicks when they get the full hybrids going in the big trucks. We will see real society benefit when those go up for sale. Improve the mpg of the biggest offenders. that is real progress.

Real society drives $50K full-size SUVs?

What's even more important is making small cars compelling enough for people to downsize. How many families really need a Suburban when a minivan or Lambda will do?

[Croc]

Real society drives $50K full-size SUVs?

What's even more important is making small cars compelling enough for people to downsize. How many families really need a Suburban when a minivan or Lambda will do?

Lambda isn't exactly downsizing. Europeans only drive their tiny cars as a result of high gas prices. Small cars will never take hold in America unless gas prices go up a ridiculous amount. Americans don't like compromise, and when you go small you may still be able to fit 5 people, but the comfort level is low and the cargo-carrying ability becomes nonexistant. Now, the classic counter to that is "but when do you need to carry all that stuff?" and the answer is not that often, but when you need to it really sucks that you cannot. I think the Lambdas are perfect for Americans, but then again their fuel efficiency isn't what the greenies would like it to be.

[gm4life]

The Toyota Prius I thought was so hott! Around here there are step discounts on two 2006's the dealer promised he would sell by October and look he is stil sitting on 'em. The Prius is junk get a Civic Hybrid if you want one.

'

[pow]

Lambda isn't exactly downsizing. Europeans only drive their tiny cars as a result of high gas prices. Small cars will never take hold in America unless gas prices go up a ridiculous amount. Americans don't like compromise, and when you go small you may still be able to fit 5 people, but the comfort level is low and the cargo-carrying ability becomes nonexistant. Now, the classic counter to that is "but when do you need to carry all that stuff?" and the answer is not that often, but when you need to it really sucks that you cannot. I think the Lambdas are perfect for Americans, but then again their fuel efficiency isn't what the greenies would like it to be.

Make a small car "cool" like the MINI or Prius, and you'll find people buying them regardless of size. Why else would so many Priuses (notice, not Corollas) share garage space with Suburbans and S-classes?

[Flybrian]

The Prius isn't 'cool'; its powertrain and image is 'cool.' The car itself is poorly-designed and - compared to other Toyotas - shoddily-constructed. You stick Prius running gear into a car with comperable size and it would sell regardless of design.

Also, note that size does make a difference. How many 1st-gen Priuses do you see?

[Satty]

Fly, the one person who really should fear Toyotas.

[pow]

The Prius isn't 'cool'; its powertrain and image is 'cool.' The car itself is poorly-designed and - compared to other Toyotas - shoddily-constructed. You stick Prius running gear into a car with comperable size and it would sell regardless of design.

Also, note that size does make a difference. How many 1st-gen Priuses do you see?

Design makes the difference. The first Prius had the dumpy proportions of an Echo; a Corolla with Prius running gear wouldn't have the right image. The current one, however, looks flamboyantly spaceship-ish, which some people consider to be "cool." But, you're right; its image is cooler than the car itself, IMO.

[turbo200]

Design makes the difference. The first Prius had the dumpy proportions of an Echo; a Corolla with Prius running gear wouldn't have the right image. The current one, however, looks flamboyantly spaceship-ish, which some people consider to be "cool." But, you're right; its image is cooler than the car itself, IMO.

the current one is instantly recognizable. the last one sold well though, never had incentives like the current one does now [the old one never sold at an annualized rate of 160k units, more like 80k, also due to factory constraint]. They also sell because the name Prius, and Toyotas, are now associated with hybrids. The Prius is the "hybrid". Whenever any hybrid is mentioned, the Prius instantly clicks in buyers' minds. Hollywood helped do that, the media, word of mouth during the gas crunch, and toyota's own super pr. Edited February 25, 2007 by turbo200