TOYOTA Dealers Have a MAJOR PROBLEM | Episode 906

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It's noon here in Ventner City, New Jersey,

and our nation's capital, Washington, D.C.,

and this is Carage Live for Tuesday,

August 19th with your host, me, Ray, here in Ventner,

where no swimming's allowed because of Hurricane Urine,

and well, Zach sport in his Dodgers, Jersey,

in Washington, D.C.

What can I say, ladies and gentlemen?

Zach, how are you doing today?

I'm doing fantastic.

Happy Tuesday, everyone.

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Now, dad, today's show, Toyota dealers

have a major problem,

and I wanna walk you through this major problem

because I think is going to cause a lot of frustration

for potential Toyota customers.

We are going to look at all of the consolidated data

we have on the fastest and slowest selling vehicles.

Now, we do these videos over on the caredge

main channel pretty often,

and I know a lot of folks find them valuable,

but we're gonna focus today just on what's happening

for our friends over at Toyota,

and we are not going to be looking

at the slowest selling cars, pops.

We're going to be looking at the fastest selling cars.

And when we look at this, not only by vehicle,

but also by truck, or not only by like overall cars,

but trucks and SUVs,

you will quickly see why Toyota dealers

have a major problem.

They cannot keep up with consumer demand,

and I wanna talk about that.

Let's start here though, pops,

the fastest selling cars in the United States,

the number one fastest seller Toyota Corolla Cross,

Lexus RX Hybrid, Toyota Sequoia,

Toyota Sienna, Lexus NX Hybrid, Toyota Highlander,

and even the Toyota BZ4X.

You have over 50% of the fastest selling cars

in the United States right now,

are Toyotas, pops.

What's that do for those dealers?

Why is that potentially a problem for them?

I'm trying to think.

Why is that potentially a problem?

Well, I guess the problem would be that

if you have more customers than you have cars,

and in some cases you're gonna charge

some of those customers more than perhaps you should

because, well, you have more customers

than you have cars.

There will be a percentage of what would have been

or could have been Toyota customers

that will end up becoming raving fans

of whatever other brand they end up buying

because they can't get the Toyota that they want

or they can't get what they perceive to be

a fair deal for the Toyota that they want.

So the major problem would be is that you're,

you are losing some potential customers

because your inventory levels are just too tight.

Fastest selling SUVs.

Let's go over here.

Maybe Toyotas doing a little bit better on the SUV side.

They have enough inventory to meet demand.

Maybe, but probably not.

The fastest selling SUV for the month of August

in the United States, the Corolla Cross.

The next fastest, the Sienna.

The next fastest, the Sequoia.

Yeah, the average transaction prices on these vehicles

are some around $30, $50,000 and $80,000 respectively.

And then obviously the next one's Alexis

and the next one's a Highlander.

So like Toyota is struggling across the board

in terms of being able to actually support their dealers

with enough inventory.

Look at that, that the first six fastest selling SUVs

in the United States right now are all Toyota or Lexus products.

And so I agree with you

and I even posted over on TikTok just the other day

and it's gone a little bit viral dad,

a video talking about the Mazda CX-90

and talking about how it now competes

directly with the Toyota Grand Highlander.

And there are 10, I think 100,000 plus people

have watched this video with 364 comments.

There's a lot of comments on here dad

talking about people actually going with the Mazda

because you can see it right there.

I'm sorry, but the Grand Highlander

is not worth $60,000 either.

To your point, Toyota is missing out on some customers

because they don't have enough inventory.

They have so much pricing power.

It's creating that opportunity for other brands.

But the first six fastest selling SUVs in the US

are all Toyotas.

So I guess the major problem for these Toyota and Lexus dealers

is where do we hide the profits that we're making

so that we don't have to pay quite as much in tax?

That's the major problem.

Where do we put all this money that we're making?

And my guess, this is just a guess from somebody

that spent 43 years in retail out of motive.

My guess is that, well, most Toyota dealers

don't really see this as a problem.

And they'll figure out ways to hide whatever they need to hide

so they don't have to pay as much in the way of taxes.

And they're going to live happily ever after.

Dad, let's look at trucks.

I'm just thinking, yeah.

Let's look at trucks because I don't know.

Toyota, they had the major recall

on one of their trucks earlier this year.

That's got to hurt things over there.

It's not even close, Dad.

The Tundra is the fastest selling pickup truck

in the United States.

Number two is the Tacoma.

And again, not even close.

Then it's the Silverado with an 80 days supply of inventory.

Then the Maverick.

Then the Sierra.

Like, Toyota is at the top of every single fastest selling

vehicle list, which at the end of the day

does for those who cannot afford

to pay up for potentially additional dealer markups

or wait months on end for allocation.

And you can see here, we even had the comment from David.

Went to my local Toyota dealer last Saturday.

It was standing room only on the sales floor.

People all over the lot.

You and I talk about this all the time.

It's supply and demand.

And ultimately, I think the challenge

that these Toyota dealers have is they do not have enough

supply and they have too much demand, which will create

the opportunity for brands like Mazda.

Again, that video I posted pops over 100,000 views.

Lots of people in there.

Trust me, lots of Toyota fanboys and girls saying,

hey, Toyota is the best brand.

Do not even consider a Mazda.

But a lot of people, I was actually surprised

at how many people said, no, I'm taking the Mazda

with this $10,000 lease cash incentive because you know what?

That's a great deal.

And it's a comparable vehicle.

So even looking at pickup trucks where we think Toyota

doesn't perform particularly well, they're winning,

which means they're struggling.

Yeah, but here's the other thing

to take into consideration.

That $10,000 for the lease cash,

that didn't include any discount from the dealer off of MSRP.

You would think that-

We have the data, Dad.

You're getting $3,000 to $5,000 as a dealer discount

on the CX-90.

Exactly.

So I was going to say on that $60,000 vehicle,

you're probably looking at a cap cost

after rebates and dealer discounts somewhere

around $45,000 to $47,000.

Suddenly, that makes that a very viable product

or vehicle for people to consider

who are considering leasing.

If Mazda does it well and it proves out

that that CX-90 is a quality vehicle

and that's yet to be determined

of course, it's only been around for a couple of years,

but let's assume for a second that it does,

those are customers that would have been

or possibly could have been Toyota customers

that will remain Mazda customers in the future.

And that's what happens when you develop a product line

that is so popular, you can't produce enough of it

to satisfy or satiate the customer's appetites

out there for that product.

And that's where I think the crux of this is that

for Toyota dealers, to be clear,

they are printing press right now.

They are as profitable as a bank.

I mean, they are just printing money left and right.

Yes.

But from Igor here, 10% off MSRP plus a $10,000 rebate

plus an additional $1,000 if you're a loyal Mazda buyer.

That's the opportunity cost.

If I'm a customer,

do I go with a Grand Highlander at MSRP

and Toyota is notorious for port installed accessories,

which is essentially because of the historical

distribution method they use.

They have Gulf States Toyota distributors.

They have Southeast Toyota distributors.

There are distributors that then are owned

by F and I product companies that add products

to boost their profits that jack up the price even more.

If I'm a shopper and I'm looking at that's option A,

but option B as I go to Mazda,

I get 10% off MSRP, $10,000 rebate

and to your point, Dad,

can then be into the brand for the future.

Like that's the crux for Toyota,

which if I'm not mistaken was exactly how they broke

into the United States back in 1957 or whatever it was.

They were the cheaper alternative that was durable.

It's a huge opportunity for other brands.

I think what you just described,

just described and this will be the perfect segue

for you is between option A and option B,

you're going to believe option A

because it's just too damn expensive

because there's an under supply of product

and an oversupply of customers.

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Yes.

Dad, a couple of comments here in the chat.

I wanna spend some time on this.

We've got here from turbodiesel.

The Toyota that Zach described is gone

and is now a bloated pig.

And I think to a degree, orange rubber ducky as well,

they forgot that Toyota was supposed to be cheap

and Lexus was supposed to be the expensive choice.

Dad, when we look here at the fastest selling SUVs

in the United States and we pull it back up

on the screen for a moment,

I wanna scroll down for a second here.

We have the actual data.

Look at the average selling price of the Sienna

and the Sequoia.

I mean, we're talking about a Sequoia

transacting at over $83,000.

The Sienna at $51,000.

Obviously, the Corolla Cross at $31,000.

That's where the sweet spot is,

but I think there's some efficacy

to these notes from our community, Dad.

Like Toyota is kind of going through

that phase of company building

where they're like maximizing profits now.

Doing a great job,

but wasn't it like Jeff Bezos,

like your margin is my opportunity

or something like that?

Like they're creating an opportunity

for other automakers and dealers to step up.

It is, when you look at some

of those average transaction prices,

it is absolutely inconceivable to me

that there are so many people out there

willing to spend nearly $85,000

for one of those Sequoias.

And they're rushing to do it.

And it's like, you know, in old movies,

there were times where somebody

would go off on something

and then one of the other characters

would slap them across the face,

you know, to snap them back into reality.

It's like, and then the other character will,

thank you for doing that.

It is like, these people need to be slapped

across the face and snapped back into reality.

There is something unbelievable to me

when Toyota and Nissan and Honda

first came into this country

and they were inexpensive vehicles, okay?

That was their calling card.

They weren't quite as up to snuff

at that time as the domestic vehicles were,

but they were much, much less expensive.

Today, they are equal to

or exceeding the domestic manufacturers in pricing.

And it's just, there's this level of insanity

that we have to rush out to spend $85,000

is just staggering to me.

It really is, Dad.

And I think it's exemplified by the strategy

that actually Toyota used to come

and break into this market.

I've got here, Dad, the average price

or the starting price, excuse me,

of the first car Toyota sold in the United States

was the Toyo Pet Crown.

Yeah, the Crown Toyo Pet.

I don't know if I'm getting that backwards for it.

Toyo Pet Crown.

What do you think the price was?

And we can do inflation adjusted.

So like, give me a second here, inflation calculator.

Let me plug some numbers in really quickly.

But what do you think the price was

for the starting price, for the Toyo Pet Crown,

the first vehicle that allowed Toyota

to break into the United States way back when,

what do you think that price was in today's dollars?

In today's dollars?

Yeah.

Not dollars at that time?

You can give me dollars in that time

and we're going to inflation adjusted today as well.

My guess is that the first,

if I'm guessing it's a small vehicle,

it was probably somewhere around $1,500, $1,600.

Back then, and inflation adjusted.

Today, it would be like,

okay, that'll be a billion dollars, please.

Give me a second here.

I want to show you a photo of the vehicle

that Toyota came to the United States with

that got them on the map that ultimately

allowed them to undercut the domestic automakers

on price and on reliability.

It was this vehicle, the Toyo Pet Crown.

You can see it right there.

Not a big car.

Here we go.

This is a good looking one.

Boom, that was it right there.

Inflation adjusted that.

Yeah.

That vehicle cost $24,700.

Wow.

So it was $2,187 brand new?

Yeah.

Okay.

Well.

And now look where we are.

We've got Toyotas flying off the shelves at what?

$83,000.

This is what's so confounding about today's auto market.

Like Mitsubishi, for example,

had the opportunity to run the Toyota Playbook

and be able to capture market share,

but actually they're cutting production

and ending the production of the Mirage.

The vehicle that's even at a lower price point

than this one with the Versa, for example.

But there is something,

there's just something here to the fact

that this is how Toyota broke into the U.S. market.

But ultimately now they're in the phase

of company building where they're just

maximizing profit, creating that opportunity for others.

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And we're watching it happen again in real time

with Korean car companies.

True.

Because I remember when Hyundai first came to the United States

and it was like, okay, this is like when the Asian brands,

when Toyota, Honda and Nissan first came to the United States,

they were cheaper, they weren't quite as good.

And then all of a sudden, now we've got the Korean brands,

we had Kia and we had Hyundai come to the United States

and it was like they were repeating

the Japanese brands playbook.

We're gonna come in, we're gonna be lower priced,

we're not gonna be right up there quality-wise

with the Japanese brands,

but close enough that at our price points,

people will sacrifice some of that quality

because they're saving so much money.

And when you look today at what Hyundai and Kia are doing,

they are moving their entire product line upmarket.

They're not fearful of it at all.

They are, we are watching them implement

Toyota's playbook in real time.

Yeah, we are.

And they're not necessarily able to do it as effectively

as Toyota's doing it, which I think to a degree, Dad,

we know Mazda wanted to follow the Toyota playbook,

go upmarket, increase prices, increase profit margin.

These OEMs, the manufacturers make more money

when they sell the more expensive vehicles,

higher content vehicles.

Yeah, however, look at what's happening.

They're not selling as effectively as Toyotas are,

which is then making them readjust their strategy

and say, okay, here $10,000 in a lease cash incentive

or for other automakers, big incentives as well.

Dad, back to the chat here for a moment,

and then we can switch gears.

Joe's saying open up the Spigot Toyota.

I think that is actually at its core.

If they could produce more vehicles,

which I'm not trying to trivialize that,

that sounds very difficult,

but if they could produce more vehicles,

that would do wonders for them.

Well, I think when all things are said and done this year,

they will have produced pretty close

to 12 million new vehicles.

That's a million new vehicles a month.

And at a million new vehicles a month

or pretty damn close to a million new vehicles a month,

they can't keep up.

They can't produce enough.

They produce more in one month

than many manufacturers produce in a year, okay?

And it's like, I don't know how they can,

I mean, how much more can they build?

I guess at a certain point,

they're gonna have to figure out

how to get that number up to 13 million or 14 million.

They're gonna have to add capacity,

but do they really wanna rush in to adding capacity

when they're able to sell everything they build

at a premium price

because there always seem to be in short supply.

We've got here from Anthony.

I'm currently in the market for a 2025 Camry XSE

but can't get a good deal.

Boom, this is the reality

and the challenge that Toyota dealers face.

They have customers who may be shopping on price

because as we always talk about here,

even though we encourage you to shop out the door price,

not monthly price, at the end of the day,

there are some really good incentives

from Toyota's competitors that are going to beat out

the perceived value that you would get

by paying MSRP on a Toyota

or getting obviously a deal on a Toyota just harder,

which also reinforces the services that we offer

and why people come to Car Edge for help.

They want the Toyota, they want the good deal.

Obviously, we put in the energy and effort

to make that happen, but it's not as easy

as just going down to your local Nissan dealership,

getting the manufacturer incentive,

getting the dealer discount or Mazda.

So again, this is the crux for Toyota,

Toyota dealers and the opportunity

for the broader auto industry.

Yeah, they're major problems.

They haven't figured out how to be able to max out

total production any further than they already have.

And so that's their real problem.

We can't build enough to be able

to satisfy the appetite of all our customers out there.

Which makes them tongue-in-cheek,

but like this is a legitimate opportunity

and then challenge Toyota an opportunity

for other manufacturers.

Yeah, I am saying it tongue-in-cheek,

you know, because they're taking this problem

all the way to the bank.

And ultimately, will it cost them?

It can, yes, they will lose some customers

that they will never ever be able to get back.

That's the risk you run when you can't produce

enough of something and you've created

such a strong demand for it.

So yeah, kudos to them.

You know, and if I was a Toyota or an electric dealer,

you know, I'm like on my knees thanking God every day

that I was smart enough to buy one of these franchises

so that I could be in this position.

I mean, you can either be the guy

that bought the Toyota dealership

or the guy that said,

no, I can't quite afford the Toyota dealership,

I'll do the Nissan dealership.

Or I'll do the Mitsubishi dealership.

You know, so it's, yeah, I would be on my knees every day

praying and thanking God.

From Gabriel, Toyota is overrated and overpriced.

Comments like this, I don't think, I mean,

obviously every brand's gonna have kind of, you know,

haters and evangelists, but you know,

I think we're seeing, again, the TikTok I created, Dad,

that was about Mazda offering the $10,000 lease cash.

Like I was very surprised to see how many people

were anti-Toyota in there and pro Mazda instead.

So I think we are starting to see a little bit

of a turning of the tide to a degree.

And it's hard not to when the prices are going up

as much as they are.

Even if that were true, okay,

even if they're overrated and overpriced,

they still have more customers

than they know what to do with.

I mean, you know, let me localize this for you.

Man, wouldn't we hate to be in that position at CarEdge

to have more customers than we knew what to do with?

And let's get them all and we'll try

and figure it out moving forward.

I would rather be overrated and overpriced

and inundated with customers

than underrated and underpriced,

wondering is somebody gonna open the door

and come in and maybe buy something today?

Completely agree.

Two different problems to say the least.

One of them puts money in your bank account.

The other does not.

From Igor, Lexis dealership I'm at right now

got less than 30 days of inventory.

They sell more in one week

than they get every two weeks of allocations.

They get supplies getting smaller weekly.

So there's some insight.

You know, these Lexis dealers just like Toyota dealers

don't get enough new vehicles to satisfy the demand.

And then dad, if we'll switch gears here for a second,

just help Alan in general,

should I wait until December to get a car?

If you're in the new car market,

the end of the year is always the best time.

There's the most pressure, there's the most incentives.

So if you can wait, yeah, sure.

Used cars, I don't think that advice

really holds true, correct?

Not necessarily, but yeah, on a new car.

And then the other thing is

it depends on the new car you're looking at

and what brand it is.

And how many there are.

So, but typically,

typically the best time of the year

to buy a new car is the last month of the year.

And if you can time it perfectly,

the last week of the year.

It's just, it's always been the case.

My suspicion is it will continue to remain that way

for quite some time.

There's just this pressure at the end of the year

to hit annual sales objectives,

whether it be on a dealership level,

a manufacturer level,

or an individual sales person level.

So, there are,

there is no other time of the year

where it's like the convergence of a perfect storm

in order to be able to get the best possible savings.

So, yes, if, yes, it's real simple.

Yes, the end of the year.

From Eric, how far can I get a Ram dealer off MSRP right now?

This is also going to be model specific,

so it depends, you know, which model.

But that being said, Eric,

I recommend you use some of the resources

back on caredge.com, many of them free.

For example, go to caredge.com, click on research,

and then click on see what others pay.

That'll then take you to this page

and choose the brand Ram.

You can then see what discounts

and savings our concierge team

have been able to secure for our customers

for various vehicles.

You can also then, and I encourage everyone to do this,

use our AI negotiator.

Give that a try to reach out to dealers on your behalf

and see what types of offers the AI agent

can get an Eric scout caredge insight.

So, there you go, Eric.

You already have a lot of the data in your hands.

It's going to help you figure that out.

There's obviously the target discount as well.

So, I would say if it's an aged unit Ram 1500,

there are dealers that are going to be doing

10, 15% off of MSRP easy

just to try and move the metal, if not more.

So, yeah, Eric, you're on the right type of vehicle

to get the biggest discount.

There's a reason it's getting the discount.

It's not selling, but go Eric, make it happen.

Yes, absolutely.

You know, I was thinking,

and I try not to do that often

because, you know, at my age, it's not good for it.

But I was thinking that perhaps with what we're doing

and not the pet ourselves on the back, but damn it, why not?

It's our company.

Fair it.

I was thinking that perhaps, really,

the future of car buying is here now with our AI agent.

Because, you know, how is car buying going to change

in the future?

Well, wouldn't one of the most positive changes

be that a customer doesn't have to do it?

Yeah.

Doesn't have to worry about getting taken advantage of.

Doesn't have to worry about older paying.

Yeah.

So, yeah, I was thinking, you know, like maybe the headline

on our website should be the future of car buying is here now.

You know, what would be the future?

Our county air service has been doing this for years.

It's just the challenges.

We've got an incredibly talented team.

We have to pay that team so that they are

incentivized and excited to do the work.

And kudos to them.

They deserve to get paid.

But that's why, you know, we charge a high price there.

How do we make that accessible to everyone?

And then the county air service, obviously,

accessible to those who still want that white glove experience.

I agree with you, Dad.

I think there's a breakthrough happening here

where just get rid of, like, am I getting screwed?

Which again, we've been doing that for years

for thousands of people.

It's just expensive.

And with very good reason why it's expensive.

Yeah, no, absolutely.

So yeah, that's what I was thinking this morning.

And then I figured I'd stop thinking.

That's just the kind of guy I am.

Enough thinking, enough thinking.

Dad, here's an example of an automaker

that's having to really step up to try and make sure they

can continue to move the metal.

Lucid.

They've actually stepped up already

because all they seem to be able to do over at Lucid

is just burn money, light it on fire.

They are going to continue to offer a $7,500

discount on their gravity vehicle

in Q4 even though there is not going

to be a manufacturer incentive.

I find this fascinating.

Also, I don't really understand how they can afford it,

but I find it fascinating.

Well, it's easy as to how they can afford it.

If you're losing a quarter of a million dollars

on every vehicle that you sell,

what the hell is another $7,500?

It's like, come on, guys, we can almost afford that.

But they realize that they're not going to.

And I believe through the first portion of this year,

there's been nine gravities registered to buyers, nine.

So if they've only sold nine when

there is a government tax credit,

yeah, they've got to be looking at it and go,

well, there's no way we're going to sell any if that goes away.

So we're just going to have to eat it.

And that's what's happening.

We're forcing manufacturers to make decisions

as to how it's going to impact their profit margins now.

And in Lucid's case, they don't have a profit margin.

They have a negative profit margin because I believe

the number is somewhere around $200 or $250,000

that it costs them for everyone that they've sold,

that that's how much they're losing per sale.

I want to get into that business somehow.

I want to be compensated like an auto executive

but figure out how to lose $200K every transaction.

It was like when one of the owners I worked for said to me,

he said, well, I don't think we should discount our vehicles.

And I looked at him and I said, well,

our competitors think that we should because they do.

And unless you come up with a pay plan

that rewards me for saying no to a customer,

I'm telling you right now,

I'm going to do whatever the hell it takes to sell them

because that's the only way I'm going to get paid.

Yeah, but I wish I could have figured out that pay plan.

Yeah, you're telling me to add your team.

The more you say no to a customer,

the more you're going to make.

Okay.

Folks, don't say no to CarEdge, check out caredge.com.

We've got all sorts of resources for you back on the website.

You can shop for new cars, use cars, research vehicles.

Please be doing that.

Track your vehicle's value.

Get some money saved on your auto insurance

or get a comparable quote on a warranty

and see if you can save money there as well.

So please, folks, check it out back at caredge.com

every day doing the best we can to help folks

with all things auto.

Now, let's call it a show for today.

We'll be back tomorrow with more CarEdge Live.

Appreciate you tuning in with us, folks.

And also, we both went the white shirt route today.

It's always interesting to see when you and I matched

to a degree.

Well, and especially considering the fact

that I hadn't had any communication with you

this morning at all.

No, it's our first time talking today right now.

Yes, and you first appeared on my screen here

with 27 seconds before we were going on air.

So yeah, no, I had no idea that today was white shirt Tuesday.

But I'm thankful that it is.

And for those of you who can't get enough of me

and you'll hear me say this every week,

I don't know how that could be.

But if you're out there, I will be on with my friend Brandon

from CarQuestions answered on CarSense today at, well,

1.30 we're doing a show.

And I think the title of the show or something about the show

is My 14 Years in the Car Business.

And I asked him, I said, well, was that my first 14,

my middle 14, or my last 14?

He said, no, we're talking about his 14.

OK, got it.

OK, OK, OK.

Well, definitely tune in for that, folks.

CarSense, just search that here on YouTube.

Dad, I love you.

Enjoy your time with Brandon today.

I'm going to get some food in me and get back to work.

That's what I'm about to do is

to eat some lunch before I go on with Brandon.

So yes, we'll see everybody back here tomorrow.

And for those of you who tuned in today, thank you so much.

Have a great rest of your day.

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TOYOTA Dealers Have a MAJOR PROBLEM | Episode 906

Toyota Corolla Cross

Toyota Highlander

Lexus Nx

Toyota bZ4X

Mazda Cx90

Toyota Grand Highlander

Toyota Tacoma

Chevrolet Silverado

Ford Maverick

Toyota Crown

Toyota Camry

About this episode

Original notes