Toyota To Keep Camry Prices Steady In Face Of Ford’s Increased Fusion Production

Toyota, which faces increased competition for its midsize Camry in the heart of the U.S. car market, says that it will try to hold the line on prices and incentives while still trying to keep bragging rights as the best selling car in America. At the same time, Ford is ramping up production of the Fusion, which is in short supply, and will be trying to keep transaction prices high as it increases supply. The Camry was outsold by the Honda Accord and the Nissan Altima in March. Both of them are newer models than the Camry.Camry sales only rebounded when Toyota started offering incentives that were four time those offered by Honda on the Accord. Toyota insists that those incentives are not inordinate. "For incentives, we don't think that our current level is necessarily high, but traditionally, we try not to be too dependent on them," Nobuyori Kodaira, Toyota executive VP, said. "I can't really comment on our future plans, but our plan for now is to stick to that as much as possible." Besides incentives, to boost short term results Toyota can add content, like new technology features. Long term, Toyota has the option of speeding up the development cycle for the next generation Camry In addition to competition from other Japanese brands, Toyota has watched all three U.S. based car companies gain market share in those companies' home market. As other manufacturers offer truly competitive products and have significantly narrowed quality differences, Toyota can no longer rely on reflexive customer loyalty. "It is true that rival carmakers have come out with very competitive models in the segment, and that competition in the U.S. midsize sedan segment is becoming fiercer," said Kodaira. "What we need to do is to come out with even more competitive models." In June, Camry inventories exceeded their usual levels by about half a month. Kodaira declined to say whether Toyota will come out with a redesigned Camry to compete with refreshed products from Honda, Nissan and Ford. Toyota expects to sell at least 400,000 Camrys in the U.S. this year. In July, incentives on the Camry averaged $2,581 per car compared to $627 for the Accord. Bill Fay, Toyota group VP for U.S. sales, echoed Kodaira's remarks about incentives not being too high. Meanwhile, Ford is adding a shift of 1,400 workers at their Flat Rock Michigan plant so that facility can join Hermosillo, Mexico in building the Fusion. Flat Rock currently builds the Ford Mustang. That shift at Flat Rock will add about 100,000 Fusions to Ford's annual capacity for their well-received midsizer. Ford now has the capacity to build about 450,000 Fusions a year, about equal to Honda's capacity for building Accords in the U.S. and about 25,000 units shy of to Toyota's U.S. capacity for the Camry. Without the additional capacity, there was no way Ford could hope to challenge Toyota or Honda for the best selling sedan in the States but Ford seems more focused on selling more of the profitable Fusion than winning bragging rights. Another challenge Ford faces is trying to keep its transaction prices high as it increases supply, something that normally creates downward pressure on prices. Currently Fusions are selling for about $2,400 more than Camrys. Analysts say that popularity of the Fusion means that Ford will not have to lower prices by much. "Ford has managed to be a volume player competitive with the Toyota Camry and the Honda Accord while still maintaining a far more competitive price point," Kelley Blue Book's Alec Gutierrez told Bloomberg. "You might see prices come down a few hundred dollars, but I don't think they face any significant risk of serious price degradation. They're going to hold their premium spot in the segment." Fusion sales are up 13% this year and the midsize Ford has taken about 25% out of Camry's sales lead. The average price that the Fusion has sold for this year through July went up 5.8 percent to $26,343, led only by Volkswagen's Passat in the mid-size car segment, according to Kelley Blue Book. Fusions are selling at $1,176 more than the segment average and $2,378 more than Camrys. Analysts attribute the Fusion's success to a variety of factors including distinctive styling, fuel economy and a wide selection of conventional, hybrid and plug in hybrid drivetrains. Ford is even seeing sales growth in California, a market that hasn't been very receptive to domestic brands for years, with strong sales of the C-Max and Fusion hybrid. Ford car and light truck sales in the Golden State are up 18% for the first half of the year, compared to 2012, putting Ford in a virtual tie with Honda for market share there. While Ford has a 40 day supply of Fusions nationally (a 60 day supply is considered normal), in the Los Angeles and San Francisco markets the supply is down to 30 days. It isn't just the law of supply and demand that will mean lower prices on Fusions as production grows. When Ford launched the Fusion, many of the early production models were highly optioned, with corresponding sticker prices. Now that lower content cars are a greater percentage of the mix, transaction prices should drop a bit. from The Truth About Cars http://www.thetruthaboutcars.com

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