It looks like
) intends to become more American. The automaker plans to raise the
production of the Corolla in the U.S. so that the model can be
exported to Latin America and the Caribbean. The move is aimed to
protect the automaker from yen fluctuations. Although the
recent devaluation should have only made exports from Japan more
attractive, the automaker has to incur high transportation
expenses- in dollars, which means more yen at today's exchange
The stakes are high are for Corolla and therefore Toyota can't
afford to take any risk. In 2012, the automaker sold about 1.2
million units or approximately ~13% of its total vehicles. With an
average sticker price of about $20,000, the car adds a staggering
$25 billion (or maybe more, if you add the auto parts and
maintenance services) to Toyota's top line.
See our complete analysis for Toyota
Toyota has done well this year in the U.S. Its total sales are
up 9.6% through August. However, the world's largest automaker sees
some upside in the light truck segment, a category that has
traditionally been dominated by American car manufacturers. The
light truck category consists of pickup trucks, SUVs and
crossovers. Pickups are an lucrative segment for any automaker
since they typically have higher margins compared to mainstream
The automaker recently released the 2014 version of the Tundra
pickup. The refreshed model is more muscular and spacious giving it
a distinct American look. A model upgrade was long due since the
vehicle hadn't been refreshed in seven years. The current version
of Tundra does not even feature in the top 20 vehicles sold in the
U.S. Although toppling either the F-Series or the Silverado looks
highly unlikely, the Tundra does offer a good alternative.
Grabbing a foothold of the light truck segment is more of a long
term project for Toyota, something similar to how American
manufacturers have made their presence felt in the small car and
mid-sedan segments over the years.
On a cautious note, the recently introduced Tundra 2014 could
provide some upside to Toyota, but since it such a small player in
the pickup segment, even an aggressive sales gain wouldn't have a
significant impact on the income statement.
Near Term Challenges
Toyota's big challenge, however, will be to maintain the
leadership of its Camry mid-sedan. The Camry has been the top
selling car in the U.S. for 15 times in the last 16 years. There
was a time when there were pretty much only two options in this
category - the Accord or the Camry. However, others have joined the
fray now and with plenty of good cars in this segment, Camry's
position is under threat. Camry's sales have been flat this year in
the U.S. On the other hand, sales of Accord, Altima and Fusion are
up 17.5%, 8.9% and 13.4% respectively.
Toyota's North American operations, which subsume U.S. sales,
account for about 30% of the company's sales.
a $120 price estimate for Toyota
, which is about 10% lower than the current market price.
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