Americans have a soft corner for cars. This is why the industry started recovering at a much faster pace post the 2008 recession compared to other sectors. The revival of the housing and construction sector proved extremely useful for ailing domestic auto majors General Motors (GM, Financial), Ford (F, Financial), and Chryslers as they saw tremendous demand for their pickups and trucks. The industry momentum is expected to stay, although 2014 sales gains are estimated to be flatter.
While Detroit players remain unmatched in the pickups and trucks segment, world’s lead automaker Toyota (TM, Financial) dominated the retail segment last year. But things seem to be changing in favor of the second largest U.S. automaker.
Changing fortune
Ford is making solid gains in retail sales at the expense of Toyota, thanks to its Fusion sedan and Escape crossover SUV. These models are pouring in solid cash into the company’s chest. The two models saw staggering sales in 2013 and are expected to sell massively in the current year as well.
2014 Ford Fusion Hybrid. Source: Ford
In contrast Toyota is overcoming one mishap only to realize that the next one’s on the way. It started all in 2011 with the Tsunami in Japan, followed by the Thailand flood that disrupted production in the company’s manufacturing hub. When this was almost done, the next one waiting was the 2012 political dispute over a group of islands, which made the Chinese population shun Japanese products including cars. Finally, recalls have been an all time troublemaker for this carmaker.
Ford’s on a Roll
While Toyota was settling these, Ford moved on with its One Ford strategy to consolidate its processes, improve efficiency, standardize systems, produce fresh models at faster rates, gain from cost advantages, and improve company profitability. In fact, the American automaker’s One Ford strategy is largely attributable to the success that it’s lately witnessing.
This is surely not good news for the Japanese automaker that is massively depending on weaker yen and heavy incentives to clear stock and report profits. An IHS Automotive analyst told Bloomberg, “Before 2010, Toyota’s image was bulletproof, and while it is still strong, it’s not rock solid and as perfect as it was before”. The company’s market share reduced to 13.5% in 2013 from 16.3% in 2008.
The loss in market share is attributable to Ford’s rising popularity and acceptance by the American audience. While Camry still remains the best-selling car, its kingdom has been shaken by Ford Fusion, Hyundai (HYMTF, Financial) Sonata, and Subaru’s Legacy.
Toyota Camry. Source: Toyota
Despite all the setbacks, one cannot disregard the way Toyota has dealt with every challenge it faced. It’s indeed remarkable. Recalls, natural disasters, political turmoil couldn’t stop Toyota. Although competition is stiffening, Camry is still the best-seller as per 2013 records. Toyota maintained its global lead last year. Moreover, the company is undertaking several initiatives to overhaul its boring image and add more style and seasoning to its cars. To fight competition, the auto major is planning to unveil the revamped versions of its top selling Camry and Prius during the year. Additionally, the company is also increasing its focus in its luxury brand Lexus, lured by the profit margins that premium cars give to the automakers.
Ford too is pretty confident with the kind of reception its hybrids have received in the coastal regions that are typically dominated by Asian counterparts. The Detroit automaker’s retails sales gained 14% last year.
Food for thought
Both Toyota and Ford are charged up. But the kind of effort Toyota is investing in rebuilding its image, I believe it’s not going to remain that easy for Ford. The company increased its American sales by more than half a million in the past couple of years. In addition, the facelift of its RAV 4, Corolla, and Highlander should have a positive impact on the sales figure. Toyota’s hard work would surely bear fruits for the company.
