Toyota's Double Life

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Words: Arnold Difflock
7 Feb 2019

Toyotas are everywhere. About one out of every five cars you see on the road is a Toyota. You could be excused for thinking that Toyota is the new car of choice for about a fifth of New Zealand motorists, but in that you would be wrong.

Yes, Toyota has registered about twice as many new cars in the last two years as any other manufacturer, but it’s not quite what it seems. The reality is that almost half the new cars that Toyota sells are sold to rental companies, so there’s about a 50 per cent chance that any NZ-new Toyota you see on the road is either a rental car or it started its life as one.

The numbers, particularly recently, are quite staggering. In October 2018, Toyota delivered 3875 new cars, of which 3026 (78.1 per cent) were rentals. Of the 1744 new Corollas sold, a massive 1539 (88.2 per cent) were rentals. Don’t forget that this is an all-new model, which would normally be expected to attract the attention of lots of private buyers.

The rental percentage was similar for RAV4 (81.7 per cent), Highlander (81.4) and Prado (74.8). To be fair, October is a traditionally huge month for rental deliveries as the rental companies gear up for the summer demand, but even the year-to-date figures are very meaningful. For the first ten months of the year, 46.3 per cent of new Toyotas sold were rentals. The percentages going to rental companies were 63.5 for Corolla, 53.9 for RAV4, 56.2 for Highlander and 31.4 for Yaris.

In October, helped by these huge rental numbers, Toyota achieved 32.9 per cent of the new car market. If they hadn’t sold any rentals and other makers had sold them instead, their October share would have been 7.2 per cent and Corolla would have been in 14th place in individual model sales instead of a dominant first. Let’s not forget that Toyota also has a big share of the traditional fleet market – large corporates, government departments, SOEs, taxis etc.

By the time these numbers come out of what’s left after the rental companys’ numbers are tallied, it’s pretty clear that Toyota no longer has a dominant share of the private market – the segment where buyers make their own decisions about which car they’re going to buy. This may well be due to Toyota’s previous strategy under which pretty much anyone could get a discount, and the discount percentage tended to vary according to how good a negotiator you were.

Fleet customers got an even bigger discount and rental companies more still. Toyota changed this earlier in 2018, rolling out a ‘no discount, fixed price’ policy for private buyers and smaller business customers. They were responding to customer confusion as to what the price actually was, and the perceived unfairness to customers who weren’t skilled negotiators.

Although retail prices under the new policy are significantly lower than before, Toyota’s private market has not exactly rocketed away and the company is even more dependent on rental car sales to keep the market share stats ticking over. To their credit, they don’t trumpet their market dominance from the rooftops, knowing that it’s achieved by doing irresistible deals with three or four rental companies and a number of big fleets rather than appealing on merit to thousands of private car buyers.

Yes, the rentals and the bigger fleet deals are done at Head Office, so the dealers/agents don’t see anything other than a modest ‘delivery allowance’, but it all balances out in the end. You see, Toyota didn’t get to be as big and profitable as they are by making stupid decisions, and taking the rental car route obviously works well for both themselves and their customers. Selling so many rental cars liberates a huge number of late model used Toyotas onto the market.

At less than 12 months old and with about 40,000 kms on the clock they sell for about two-thirds of the price of a new one. They are well maintained, fully refurbished and, being Toyotas, the extra 40,000 kms of hot running makes hardly any difference to the way they drive or their longer term durability. These cars arrive on the market at a much more favourable price point than their new equivalents and provide Toyota dealers with far more volume potential than they could obtain from new car sales.

Back in the old days ex-rental cars were to be avoided like the plague but times have changed. Toyota has embraced them as the main platform of their overall marketing strategy, putting thousands more of their cars into the vehicle fleet than would otherwise be the case and guaranteeing their ongoing parts and service business. But don’t let anyone tell you that Toyota is the favourite of private new car buyers.

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