Toyota Reminds Apple to Think Decades in Future

Apple is reportedly planning an electric, self-driving car. Toyota, well aware of the challenges and opportunities in the global auto industry, warns Apple to "be prepared to deal with customers and various changes for some 40 years." 

In other words, cars are not like computers. Toyota sells tens of millions of cars every year, year after year. One of the world's most successful car manufacturers, Toyota maintains a long-term focus and plans strategy years in advance as it seeks to maintain momentum. Can Apple enter the automotive market and build sales there for the long run?

US Auto Market Share Brawl

If Toyota is correct and the US auto market has peaked, meaning that total sales by all industry participants combined will barely budge in 2017, then market share is the name of the game. The only way for one company or brand to show growth is by taking share away from a different company or brand (including cannibalizing a brand in the parent's portfolio).

This situation will have a major influence on automaker's US marketing plans for the coming 18-24 months. So far, the signs point to a plateau.

For starters, consumers will likely benefit from increased financial incentives (rebates, for instance) as dealers and brands court switchers or try to hold onto usually brand-loyal customers. Dealers are also benefiting from manufacturers' financial incentives, which they may or may not pass along to consumers in the form of reduced effective pricing.

A table on the Wall Street Journal site shows that sales of light trucks are picking up speed vs sales of passenger cars. Gas prices are low, so even though SUVs and pickups don't deliver fuel efficiency equivalent to cars, buyers are returning to their truck-buying habits.

As a result, the market share brawl is not just a matter of, say, GM vs Toyota, but also cars vs SUVs and pickups, plus gas vs hybrids vs electric. How to stand out? For example, for differentiation and to appeal to targeted segments, Volvo is going all electric by 2019. What complicates this brawl is the aggressive entry of Tesla and its popularly-priced electric car (image at top). The market share brawl is underway!

Texas Is Pickup and SUV Country

Bloomberg Businessweek just published this graphic showing where new car sales are strongest--and of course Texas is a hot spot. Yes, North Dakota and Alaska have more registrations, but there's no question that Texas is pickup and SUV country.

The Texas State Fair, which runs for another 12 days, features a dedicated auto show and larger-than-life displays to catch the eye. With 300,000 square feet of auto exhibits, there really is something for everyone. Check out the listings of exhibitors in these photos from the fair's site. Texas-sized marketing!

The state is such an important market that Ford chose it as the location for a media sneak peek of its 2015 F-Series Super-Duty King Ranch Truck. Ford sells a new F-series pickup in Texas every 42 seconds.

GM builds a number of SUVs in Texas, including Chevy Suburban and the Tahoe, among others. Having signed on as the state fair's official sponsor, Chevy gets top billing and some Texas-sized bragging rights.

Toyota is in Texas, too, announcing it produced its 1 millionth truck in its local plant. The new Toyota Tundra comes in a special 1794 edition named for the ranch where the plant is located. But Toyota still has a ways to go to catch up to Ford and GM in the Lone Star State.

Why are SUVs and trucks so important in the marketing scheme of things? They deliver big profits to automakers. So even though fuel-efficient vehicles are increasingly popular, SUVs and trucks boost revenues and profit margins, big-time.

Should You Cannibalize Your Own Products?

Not so long ago, cannibalization was generally a no-no. When planning a new product, you tried not to take sales away from your current products (think of it as "a bird in the hand" marketing).

These days, the mandate to go ahead and cannibalize comes from the top, as a way to preempt competitors from stealing sales away.

• John Donahoe, CEO of eBay, says yes: "In technology, either you cannibalize yourself or someone else is going to do it." So eBay made changes, including pushing into mobile marketing for autos, among other big-ticket items. Today, eBay says it sells 8,000 cars a week via its mobile app. Ka-ching.

• Tim Cook, CEO of Apple, says yes: "I see cannibalization as a huge opportunity for us." Witness the iPad Mini, which is sure to cannibalize some of the iPad's sales. But if the Mini prevents rivals from getting Apple's customers, it's worthwhile to accept lower revenue/margins rather than lose the entire sale. Let's see how Apple reacts to Samsung's strong competition on the smartphone side.

• Toyota's Prius may have cannibalized some of the Camry's sales, yet it also became the frontrunning pioneer (and category prototype) of hybrid gas-electric cars. In fact, the exec who championed the Prius is in line to become Toyota's next CEO.

The equation will be different for every product and company. Look at how cannibalization is likely to impact your product lines, overall sales, customer loyalty, and market share. Sometimes the answer may be in the timing of something new.

Toyota's Domino Effect

Rental-car companies are busy reassuring their customers on safety matters, now that Toyota's recall has been widened and a fix for the accelerator problem is not yet in place.

Avis has removed 20,000 Toyotas from its rental fleet until the repairs can be made; it notified all its customers, via e-mail and its Web site, of this step, to keep them informed and demonstrate its commitment to safety.

Hertz and others have also sidelined their Toyota rentals and communicated with customers that they're waiting for the safety fix; as a result, rental cars may be in short supply in some markets. What other industries will be feeling the domino effect of Toyota's problem?

VW's Drive to Overtake Toyota

Volkswagen's long-term goal is to overtake Toyota as the leading automaker on the planet, by 2018. VW is already #3 worldwide and wants to zoom up to the #2 slot soon--not right now, however, since Toyota's most recent results show it pulling away from the pack, thanks to improved sales in Asia.

In a Financial Post article on Canada.com, the head of Volkswagen Group Canada observes:

“What most people don’t know is that we go quietly along. We sell more Jetta diesels nationwide in a month than Toyota sells Priuses. And yet the Prius gets all the press.”

Stimulus programs have helped VW increase sales in Germany, China, and Brazil, among other markets, and the car company's marketing plans call for more aggressive advertising in the Americas.

VW is revving up its hip factor. When it introduced its 2010 hatchback model recently, the announcement was made not on TV or radio, not in newspapers or magazines, but via a racing game in the form of an iPhone app.

VW's new plant in Tennessee will give it the capacity and the flexibility to produce fuel-efficient cars geared to local driving tastes. The company is also exploring new technology for the car of the future. Can VW get its marketing into overdrive and overtake Toyota by 2018?

Aston Martin's Cygnet

Aston Martin, known for high-end, high-performance cars, is steering toward the super-compact commuter car market with its new Cygnet, due to launch in 2010.

What's especially interesting is that this car will be based on a Toyota small-car platform and feature Aston Martin styling cues.

Can Aston Martin appeal to buyers seeking super-compact cars at a super-compact price (reportedly less than $30,000)? “Small is beautiful these days,” says Aston Martin's CEO. “We have to move on from the preconceived ideas regarding what Aston Martin is about.” But can consumers move on? What will Cygnet mean for the Aston Martin brand (and for Toyota)?

Toyota's 10 Million Car Problem

Toyota has the capacity to crank out 10 million cars a year, even if the global recession has slowed demand. Its Prius is the big winner in hybrids and could lead the way toward an extensive fleet of eco-friendly Toyotas. But Prius sales are a fairly small percentage of Toyota's global sales at this point.

Looking at the road ahead, China could be Toyota's best hope for making the most of its production capacity. According to Forbes, that country's consumers may soon be buying 20 million cars a year. And Akio Toyoda, the new CEO, knows the market well because he's managed some of Toyota's Chinese operations.

Toyota is going to produce its new Crown luxury sedan in China for the local market. It's also stepping up dealership activity in China. All told, the China market moves 11 million new cars every year--no wonder Toyota is steering in this direction.