Toyota is DESPERATE Right Now | Episode 1023

It's noon here in Ventner City, New Jersey, at our nation's capital, Washington, DC, and this is

Car Edge Live for Tuesday, March 3rd with your host, me, Ray here in Ventner, and Zach, feeling

a tad bit under the weather with a cold in his apartment in DC. I'm not going to ask how you

are handsome. I already know the answer to that question. I do hope you feel better soon.

Appreciate it. Welcome, everybody, Tuesday, March 3rd. Thanks for tuning in for another episode

of Car Edge Live. We love seeing everyone here. Thanks so much for being a part of it. Today's

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Now, dad, the big story this morning, Toyota shocking the auto industry with a semblance of

desperation, but not for the reason that many of you might think. Toyota needs another US assembly

plant. Will they pull the trigger? Dad, the desperation at Toyota isn't the fact that

they can't produce enough vehicles. They're capped out at their 10 million vehicle annual

production, and they're looking at investing billions of dollars here in the United States

to increase production with a new manufacturing plant. We're going to break down this article

in just a few moments. Dad, the desperation at Toyota is unlike any other automaker out there.

They're desperate to be able to build more cars. Yeah. I'm like most of the manufacturers,

excuse me, who are desperate to figure out how to sell more cars. Toyota's desperate to try and

figure out how to build more cars. Let's just say this. This is nothing that's written in stone.

This is not coming directly from Toyota. This is a column written by a gentleman who

works for Automotive News, and it is his opinion that Toyota should look at

considering a sixth manufacturing facility for here in the United States so that they could,

well, produce the cars that their customers are demanding in greater quality,

equities, than they're able to do at the moment. I think that's one of the interesting parts that

is Toyota does need to produce more of their vehicles in greater quantities, and opening up a

sixth manufacturing plant here in the United States of America would obviously give them

that latitude to produce more. For context here, Toyota is producing 10 million vehicles

annually nationwide. They're saying they're capped out there. Dad, they can't produce any

more. 10 million is a huge number. I think that's 10 million globally. They would love to be able

to produce 10 million and sell 10 million vehicles here just in the United States, but they can't.

But yeah, I believe they're the largest automotive manufacturer in the world,

and nobody else is coming anywhere close to what they're able to produce. It's not just

what they're able to produce. It's how they have managed to create demand for their products,

because they always seem, at least since the pandemic, they always seem to be in short supply,

and nobody, I mean, they talk about on-time manufacturing, but really, it is on-time

inventory control for their dealerships. They have created a scenario where their most popular

products are typically usually pre-sold before they ever hit a dealership. When your popular

products are in short supply, your dealers have the leverage. What do we mean by that? Well,

it means that they don't have to discount as much because there's the proverbial poop ton of

customers right behind them. If you don't buy it, they will. It would be better for the consumers

if Toyota did build a sixth facility here in the United States, and so that there could be

more availability and then more competition to grab a customer where you might actually have to

discount the vehicle. Now, it's interesting, Dad. There's a little bit of conjecture here as to what

vehicles Toyota would produce here if they did make a sixth manufacturing plant. You can see it

here. Toyota dealers have been clamoring for a compact pickup to rival the Ford Maverick,

and a design based on the Toyota RAV4 is favored. US tariffs, including the decades-old chicken tax

mean it would need to be manufactured in the United States, but there is no factory capacity

available to build it. They'd also like a similar-sized small delivery van as well. So Toyota,

if they want to compete with the Ford Maverick, which has Dad, done incredibly well for Ford,

and Ford can't produce that in high enough quantities, if they want to do that and they want

to avoid the chicken tax, they have to do it here domestically. So there's all sorts of indications

as to why they would pull the trigger on investing the tens of billions of dollars

to open up a new manufacturing plant here in the United States of America. And your point

earlier, 10 million vehicles globally. They sold 2.5 million here domestically in the United States

last year. So they sell a lot of cars here, obviously. Oh, no, they do. There's no doubt about

that. But here's the sad reality. Even if they decide they want to do it, even if they say,

okay, we're going to do it. It's not like the plant can be built overnight. We're looking at

probably three years minimum to get a facility up and running. They have a facility, what is it,

South Carolina or North Carolina, where they're supposed to be building electric batteries.

And the facility is only sitting on half of the ground that Toyota bought for that location.

And I believe only half of the existing structures are being utilized at this point.

So they might be able to do it a tad bit quicker, but we're still looking at, what,

a minimum of two to three years. So it's not like there's anything on the horizon

that's going to ease their inventory situation or that will allow them to produce that small truck

sooner. I mean, their plants in the United States and their plants worldwide, for the most part,

are operating at about 90% of capacity. That's like a magic number, okay? I mean,

most manufacturers would kill to be at 75% or 80%. For these plants to be at 90%,

it doesn't really allow them to look at much in the way of expansion.

But it's not as if it's not needed. They have created this monster when it comes to vehicles

that people want, and they need to feed that monster. That is one way to frame it. We recently

did an experiment. It was a video that went out over on the Car Edge main channel. We reached out

to a hundred different Toyota dealerships for the same 2026 RAV4 Hybrid XSE. We've done this

experiment a handful of times. Most recently, Toyota obviously here, but in the past, we've done it

for Ford F-150s. And this puts into perspective the need that they have to treat customers better.

Hundred dealers contacted only 32 verified out-the-door price quotes that when we contacted

a hundred different dealers nationwide. And some of that has to do with the fact that, quite frankly,

they didn't have inventory. It was pre-sold. There's less incentive for a Toyota dealer

to be a great partner to a customer when they don't have enough cars to sell. And that is really

truthfully the desperation that Toyota right now is they've got too much demand and not enough

supply, which is a privilege problem to have, but it's a problem nonetheless.

Oh, absolutely. And I believe if memory serves, I believe there were three dealers that just

absolutely ignored us and never got back with, never even answered our email inquiries,

whether the email inquiries went to their spam folder or whatever. I mean,

just absolutely ignored us because my suspicion would be is that they were smaller dealers,

that everything they have is pre-sold. They don't really have time to mess with

the tremendous number of internet leads. And so they don't. They concentrate either on the people

that are coming through the door or calling, as opposed to the people who are emailing,

and they want to handle the customers that are there because they have limited inventory

availability. And like I say, with limited inventory, as a customer, you have limited

leverage, unfortunately. And so it would be nice if they do it. And I am sure

there's two sides of the coin for the dealers. And dealers would certainly like to have a little

more inventory of their fastest selling vehicles, Corral is RAV4 Sienas, but they don't want to get

significantly more inventory of those vehicles because they like the fact that they don't have

to discount those vehicles very much because they are in such short supply. And so from just a

greed profit standpoint, they want to see some improvement in inventory, but not dramatic

improvement in inventory because they don't want it to cut into their profit margins.

We are going to keep our hands all over this story. If Toyota ultimately makes that move,

you will be the first to hear it. Dad, let's switch gears. We've got the latest February

new car sales data rolling in and Hyundai and Kia Dad continue to cruise along. Honda actually

showing a year over year slowdown in sales. I'll pull this chart up right here on the screen so

we can all look at it. Acura sales up Dad, significantly 17.3%. Year over year, Honda sales

down a half of a percent year over year. And then look at Hyundai Kia, Dad sales up 5%

year over year. So Hyundai Kia continuing to grow even when we anticipate and expect

February to be a generally down month for the auto industry. Hyundai Kia and also obviously Acura

showing some signs of life here. And what's really interesting is that this is the second

month in a row that Kia has outsold Hyundai. And that has never really happened before. Hyundai

was always the volume leader. Kia was the redheaded stepsister. And now things are turning

around. And what is powering their growth is primarily a hybrid. They've seen a slowdown

in full battery electric vehicle sales. Which makes tons of sense. And to continue with any

of those sales, they have had to really increase incentives on the BEVs, the battery electric

vehicle significantly. In the article stated that there was one deal where I think it was in

Michigan that was offering 24% off of MSRP on Kia EVs. That's a lot off last time I checked.

Because none of them are all that inexpensive. So yeah, they to a certain degree

followed the Toyota Playbook in the sense that they have concentrated a lot of their efforts

into hybrids. They also contributed a lot of their efforts towards battery electric vehicles.

And where I think one of the top players in battery electric vehicles. And even though

they've had issues with their ICE vehicles, they've had some engine issues and some quality issues.

The fact that you don't have an ICE engine in an EV has allowed those two brands, Hyundai and Kia,

to stand out in the EV market. And they have established good reputations as good electric

vehicle manufacturers. Now, dad, we will be getting data from a handful of other manufacturers soon

here today. Toyota, Ford, Honda, obviously we just got that Subaru Mazda. So we got the little

peek under the hood with Honda. That sales actually down Euro for a year. We've talked about that a

bit. And we've had many of our community members expressed to us some of the challenges they've

seen with Honda dealers. But that Toyota sales, we anticipate that'll be up. When I look at Ford,

kind of a crapshoot, Subaru, obviously they've said they need to push volume. So I'll be curious

to see how that worked out for them. Mazda, they're now going back on the volume playbook.

It'll be really interesting to see these numbers when they come out.

I think what's really going to be interesting is we have any number of manufacturers who have

stated that they want to see a 10% to 15% sales increase. They've projected a 10% or 15% sales

increase for 2026. When the industry pundits, either rightly or wrongly, are anticipating

perhaps a two and a half to 3% decline in new car sales in the United States for 2026.

So I get that there's a lot of brands that say, oh yeah, we're expecting a 10% increase.

Well, what's going to drive that 10% increase in a 3% down market? You can't just hope. You

but that's typically not a plan. So if those brands that have stated that they want to see

those type of increases in sales this year, if they are to accomplish that in what is being

projected to be a somewhat down market for the year, how can they do that? And the only thing I

can think of, you will have to dramatically increase your incentives so that they are so much

better than your competitors who you're hoping to finally steal business from again.

Which we have a little bit of an update here on that from JD Power. The average incentive

per new vehicle was on pace to rise drumroll please, $63 from a year ago. Now, obviously,

you can see down there at the bottom some Chevrolet dealerships are offering 20% off sticker price

on 2026 equinox EVs. Kia dealers, you mentioned 124% off on 2025 EV6s, but your year over year,

as measured by JD Power, increase in incentives, which you're saying is the number one lever

that these manufacturers can pull to sell more volume because they're all coming out and saying,

we're going to sell more, we're going to grow in a down market. Well, there you go, Dad,

a $63 increase in incentives year over year, that's not going to move the needle.

Oh, come on, $63, that's more than enough to get somebody to say, yeah, I want to buy that $50,000

vehicle. If I didn't have that extra $63, I'd have to pass. Yeah, it doesn't seem like enough,

but then again, we're talking January and February, we're now into March, the spring

selling season is about to begin. So perhaps we will see a significant increase in incentives

for those brands who have said, we need to increase sales 10%. It's very bold to state that.

When you know that the market is stagnant at best and declining at worst. So

it could bode well for customers. I just don't know that there's enough customers out there

that can, I mean, we talk about it all the time and you see the pundits talking about it,

about affordability. We've been beating that dead horse for five years now.

Most of the pundits have been beating it for about 18 to 24 months. And everybody beats that dead

horse saying, we need to figure out affordability for consumers out there. And yet nobody seems to do

it. I disagree that we started today's show talking about how Toyota, the desperation that

Toyota feels is that they need to be able to produce more of their vehicles. And the expectation,

at least from this article, is that they're thinking about building a manufacturing plant here

in the United States of America so they can compete with Ford, with the Maverick, with a small pickup

truck. So we do have Ford with the Maverick. We do have various other automakers who are trying to

produce Nissan, for example, affordable vehicles. So I don't think you can pay with that as broad

of a paintbrush dab. There are some signs that these automakers are trying to alleviate some of

the affordability crisis. And then again, look at Toyota here, if they end up pulling the trigger

on this plant, it's partly in service of re-anticipate, getting around the chicken tax to be able to

sell a pickup truck here in the United States. But that's still two to three years away.

But, Dad, you can't make cars. You can't snap your fingers and have a car, you know?

Well, maybe you can. The front page of automotive news every day shows what the average asking

prices are. And they're up over $50,000 again, or at least they were this morning when I looked.

Okay, $50,115. That's not moving in an affordable way. That's moving to make it less affordable.

I have said this before, we all talk about the affordability crisis and how we're going to handle

it and what dealers and manufacturers can do. And yet, I still believe that the vast majority of

the manufacturers out there have just said, we're going to talk about it. We're not going to do a

damn thing about it. We're going to talk about it. That's what we're going to do. We're going to say

that we need to find affordable solutions and they are going to continue to sell cars. Excuse you,

they're going to continue to sell cars to the 12 or 13% of the popular. Well,

I thought I was off. I'm so sorry. No, no, we can still hear you just because you're not on screen.

Doesn't mean we can't hear you. Sorry, y'all. My apologies. Off screen, you can be telling me to

f off, but we would hear you. But my point is that I think the manufacturers are perfectly content

to keep the pricing where it is, sell to the 12 to 13, 14% of the population that can afford the buy

and just give lip service to the idea and the concept of affordability and really trying to

address it. They're all making tidy enough profits selling 15.8 million to 16.2 million new cars a

year. Could that number be higher if they really wanted to address the affordability issue? Yeah,

it probably could be. With the rollback of some of the EPA initiatives, could the manufacturers

go back to some older, less expensive technologies to be able to build less expensive, more affordable

cars? They probably could. What's going to be interesting is to see if they actually do it.

And just my guess, they won't. That's just my guess. Did you see, Dad, there was an article in

Carn Driver quoting the Audi CEO talking about gas engines having a future well into the 2030s.

I think this fits into the narrative that you're just sharing a second ago. If these manufacturers

choose to use more tried and tested things, they don't have to underwrite tens of billions of dollars

in electric vehicle investments, maybe we will see vehicles get cheaper. And again, the whole point

of today's show is to talk about how Toyota, obviously, their desperation is around not being

able to produce enough vehicles and needing another US assembly plant. But you can't have that

conversation about talking about all these other pieces, which do frequently tie back

to the affordability crisis. So I am curious, Dad, your thoughts here

on Audi's CEO coming out and saying, we're not anticipating selling as many EVs,

we think ICE engines are going to be the thing of the future.

Well, in 2021, they had expressed the desire to be 100% EV, battery electric vehicle manufacturer,

by 2033. And now they're walking that back. And they're not the first manufacturer to do that.

Oh, no, no, no. They're just joining a long line of manufacturers who are walking it back.

Now, that's not to say that EV sales still aren't doing well in some parts of the world.

They are not doing nearly as well in the United States. EV sales, I think they're expecting

that penetration to drop from 6% in January to 5.6% in February.

All it shows is a continuing decline in the percentage of people who are buying EVs

in the United States. That's not to say that the United States is an island unto itself,

because there is less EV adoption here than in other parts of the world.

I think that there needs to be a greater understanding of what motivates American drivers,

as opposed to what motivates European and Asian drivers. And I think they'll come across a mix

that will work globally. And in the United States, my suspicion is that there will

always continue to be more ICE vehicles made available than in some other parts of the world.

And ICE, for those of you that are unfamiliar, internal combustion engine. We've seen Ram,

for example, Dodge. They let us more broadly walk back a lot of their hybrid and electric vehicle

powertrain ambitions in service of producing more V8 engines, for example. This from Audi's CEO

is actually not that unexpected relative to what we've seen from other automakers recently.

He's looking at it globally, and he realizes that North America is significantly different

than Europe and Asia. But the truth of the matter is Audi's struggling in every one of its markets

at the moment, and is one of the few brands that is actually expecting sales to contract again,

at least in North America in 2026. They actually tried in China with one of their new electric

vehicles there to just brand it as an Audi, spelled out A-U-D-I, as opposed to the four

interlocking rings. Because they thought, by modernizing it, that sales would take off.

And they have not. So I mean, it's a struggle for Audi. It's a struggle for a lot of the

manufacturers globally. And it's going to be a struggle in North America, in particular,

the markets that we're concerned with. Because at this point, car age is not global. Okay, we are

United States based. And so I don't see a stronger push towards battery electric vehicles here,

as I would say in Europe or China. Folks, I'm feeling under the weather. We're going to call

it a show early. And we appreciate you all tuning in. Join us tomorrow for some more Car Edge live,

12 p.m. Eastern, 9 a.m. Pacific. If we can help you out with anything, got an incredible team,

caredge.com. Sorry again about blowing my nose into the mic. I was on mute. We're back tomorrow.

Thanks for everything, Pap. See you then. Yeah, feel better, handsome. I'm sorry you're down,

but not out. But you'll be back up before you know it. Thanks, everybody, for being here. We'll

see you back here again tomorrow. If you liked the show, please take a moment to rate, review,

and subscribe. It really does help the show to grow. Thank you for listening.

Toyota is DESPERATE Right Now | Episode 1023

About this episode

US assembly plant

annual production cap

manufacturing facility

on-time manufacturing

manufacturing plant

Ford Maverick

US tariffs

chicken tax

Toyota RAV4

Toyota RAV4 Hybrid XSE

Ford F150S

out-the-door price

dealer incentives

Toyota Sienna

year over year

Honda

Acura

Hyundai

hybrid

battery electric vehicle

MSRP

Subaru

Mazda

Chevrolet Equinox

Kia EV6

JD Power

EPA initiatives

gas engines

V8 engine

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