Interesting thoughts from Toyota regarding the 250 in this week’s Automotive News

[Phillyd2]

It's dynamic. You're focusing on one sale. I'm looking at a series of sales over time. Two different concepts that are not necessarily scalable.

I focused only on what you posted. Sales is only one part of any manufacturing industry and alone says very little about anything without factoring in costs and profits. History is full of high sales companies that died off for lack of profit and / or out of control costs.

For Toyota specifically, the sales numbers that really matter are what they “sold” to dealers at their invoice price as that’s what they would report on their balance sheet. It the only real money they can use to buy supplies, pay workers, shareholders, invest in new plants, etc.

If Joe Schmo Dealership ‘buys’ from Toyota a new 4R for 35K Invoice but then sells it to me for 100K, that only benefits Mr. & Mrs. Schmo and whoever they decide to spend the extra 65K on. Toyota can only put on their books revenue of 35K.

 

[desmocruiser]

In your mind is reducing a discount different in effect from raising the price?

Raising the price has further downstream effects, too many to discuss on this thread. If you want to learn more, start with researching how the ALG guide is calculated and you will understand a bit more.

I just provided the general information to help understand the industry and to dispel some of the myths, misconceptions, or misunderstandings as to why profit margins are temporarily where they stand, just trying to be helpful, not here for a debate.

 

[Jetboy]

I focused only on what you posted. Sales is only one part of any manufacturing industry and alone says very little about anything without factoring in costs and profits. History is full of high sales companies that died off for lack of profit and / or out of control costs.

For Toyota specifically, the sales numbers that really matter are what they “sold” to dealers at their invoice price as that’s what they would report on their balance sheet. It the only real money they can use to buy supplies, pay workers, shareholders, invest in new plants, etc.

If Joe Schmo Dealership ‘buys’ from Toyota a new 4R for 35K Invoice but then sells it to me for 100K, that only benefits Mr. & Mrs. Schmo and whoever they decide to spend the extra 65K on. Toyota can only put on their books revenue of 35K.

The only scenario where Toyota can't quickly adjust the effective wholesale price is when the invoice price is too low. The invoice price sets an effective cap on net price. Anytime the invoice price is higher than the net price Toyota wants to set it can effectively adjust net price to any level it chooses via the various incentives. And Toyota sets the base price periodically. Over time this captures the revenue as I described.

Using your example, after Toyota sees 100k transaction prices, they increase the price to 95k. The schmo family gets $65k on a few cars. Toyota gets $95k on the next 1,000 units. The single transaction split doesn't scale up because Toyota changes the split as the market changes. Toyota also controls supply. So it has power to constrain supply and raise margins until competition limits the ability to seek excessive progress.

Raising the price has further downstream effects, too many to discuss on this thread. If you want to learn more, start with researching how the ALG guide is calculated and you will understand a bit more.

I just provided the general information to help understand the industry and to dispel some of the myths, misconceptions, or misunderstandings as to why profit margins are temporarily where they stand, just trying to be helpful, not here for a debate.

Toyota is raising prices. A lot. If Toyota production came back to historic output and dealers had comparable inventory and delivery timelines as pre COVID, those price increases wouldn't be possible. They'd be dropping back down as they are at the brands with better inventory.

Toyota is making record profits during a period of limited supply. You don't dispute that do you?

 

[Phillyd2]

The only scenario where Toyota can't quickly adjust the effective wholesale price is when the invoice price is too low. The invoice price sets an effective cap on net price. Anytime the invoice price is higher than the net price Toyota wants to set it can effectively adjust net price to any level it chooses via the various incentives. And Toyota sets the base price periodically. Over time this captures the revenue as I described.

Using your example, after Toyota sees 100k transaction prices, they increase the price to 95k. The schmo family gets $65k on a few cars. Toyota gets $95k on the next 1,000 units. The single transaction split doesn't scale up because Toyota changes the split as the market changes. Toyota also controls supply. So it has power to constrain supply and raise margins until competition limits the ability to seek excessive progress.




Toyota is raising prices. A lot. If Toyota production came back to historic output and dealers had comparable inventory and delivery timelines as pre COVID, those price increases wouldn't be possible. They'd be dropping back down as they are at the brands with better inventory.

Toyota is making record profits during a period of limited supply. You don't dispute that do you?

If their invoice or selling price to the dealer is too low then Toyota loses money. Unless you can show how Toyota sees a dime from the extra 65K in my example, I have no clue what you are talking about here.

Toyota can set their Invoice price whenever they want. They can also release their suggestion in the form of MSRP but that doesn't add anything to the their bottom line without also increasing their Invoice price (Toyota Corp’s real selling price). What you and I pay to the Dealer is irrelevant to their profits.

Edit to address your edit – well, of course Toyota can see that the market is willing to pay more and decide that they will take advantage of it but they must also take into consideration that it’s a very unique temporary situation and what their competitors are doing. Believe it or not, ‘Seeing What We Can Get Away With In The Short Term’ is not the usual pricing policy of any serious company – despite it being a great conspiracy theory to explain higher prices. Much MUCH more than greed enters into it with greed being the very last consideration.

 

[Jetboy]

. Believe it or not, ‘Seeing What We Can Get Away With In The Short Term’ is not the usual pricing policy of any serious company – despite it being a great conspiracy theory to explain higher prices. Much MUCH more than greed enters into it with greed being the very last consideration.

That's precisely what they do. It's not a conspiracy. It's an economic evaluation. (Edit: first you hire a consulting firm to do some math theater to justify doing what you're already going to do. Gotta buy the risk transfer first.)

 

[Phillyd2]

Even the nuttiest conspiracy theories contain some breadcrumbs from reality to hang its head one.

 

[Jetboy]

Behavior matching incentives and corporate duties is a conspiracy? If companies doing exactly what companies are expected to do is a conspiracy I guess we've changed the meaning of conspiracy.

 

[Phillyd2]

Behavior matching incentives and corporate duties is a conspiracy? If companies doing exactly what companies are expected to do is a conspiracy I guess we've changed the meaning of conspiracy.

Looking for sinister motives to explain what THEY must be doing usually leads nicely to conspiracy theories.

My only issue was trying to understand what you were going on about – now that I do I have zero interest in changing anyone’s feelings so if that works for you and it explains higher prices during inflation, supply issues, coming out of a world-wide pandemic, etc. then rock on with that!

 

[M1911]

I know people always look back with rose colored glasses, but the 1996-2004 tacoma was the best ever. no new tacoma with screens, turbos, battery packs, 75 ECUs, sensors on top of sensors, no manual, a body styled by a blind kid can be proven to be 'better'

sure, a few MPGs here and there is OK, but won't stand the test of time

Excepting, of course, for the frames that quickly rotted to oblivion. There is also the fact that in a side-impact collision you were toast. And, of course, the extended cab was sized for midgets.

But beyond that, they were perfect!

 

[Hiluxforever]

Excepting, of course, for the frames that quickly rotted to oblivion. There is also the fact that in a side-impact collision you were toast. And, of course, the extended cab was sized for midgets.

But beyond that, they were perfect!

I drove 2 different 5 lug Tacomas, that frame isn't any better or worse than the one under the GX.

Also miss getting 27/28 mpg on the highway with the 2RZ 5 speed combo.

I know the sales weren't there for the 5 lugs but half the reason was they basically didn't develop it beyond throwing VVTi on a 3RZ. That's why I didn't buy another one. They took a mileage hit when they went from the Pickup to the Tacoma and then again on the second gen Tacoma with almost no advantages, except for people who should probably have just bought a sedan.

 

[Jetboy]

Looking for sinister motives to explain what THEY must be doing usually leads nicely to conspiracy theories.

My only issue was trying to understand what you were going on about – now that I do I have zero interest in changing anyone’s feelings so if that works for you and it explains higher prices during inflation, supply issues, coming out of a world-wide pandemic, etc. then rock on with that!

I don't think choosing to make more money is sinister. It's the purpose of the business. Balancing supply and demand to maximize profits is what they're always doing.

 

[Phillyd2]

I don't think choosing to make more money is sinister. It's the purpose of the business. Balancing supply and demand to maximize profits is what they're always doing.

LOL, ok. Thanks for the business lesson.

 

[jayp2]

Imagine what an affordable 250 would look like without the electronic/luxury/lexus bloat?

solid front axle/2 spd diff, pt 4WD sans electronic living room bull.....

It would be an affordable vehicle in the low 30's/high 20's that appealed to a huge swath of global population like the first 20-30 years of LC's did

 

[Phillyd2]

Imagine what an affordable 250 would look like without the electronic/luxury/lexus bloat?

solid front axle/2 spd diff, pt 4WD sans electronic living room bull.....

It would be an affordable vehicle in the low 30's/high 20's that appealed to a huge swath of global population like the first 20-30 years of LC's did

Something like a jeep or bronco maybe? I hear they sell lots of them a year.

 

[Jetboy]

LOL, ok. Thanks for the business lesson.

You're welcome. Seems you were struggling to sort that out.

 

[onemanarmy]

Bronco is IFS and turbo and an underhood nightmare

Jeeps have very questionable reliability

Toyota had a PERFECT chance to keep the 4runner (being redesigned itself)for the millions of mall crawlers and then offer a cheaper, no frills, 100% focus on reliability/dependability ACTUAL cruiser

 

[Phillyd2]

You're welcome. Seems you were struggling to sort that out.

Thanks too for staying vigilant for all of us.

 

[Phillyd2]

Bronco is IFS and turbo and an underhood nightmare

Jeeps have very questionable reliability

Toyota had a PERFECT chance to keep the 4runner (being redesigned itself)for the millions of mall crawlers and then offer a cheaper, no frills, 100% focus on reliability/dependability ACTUAL cruiser

It was just some good natured teasing.

 

[Hulsty]

Imagine what an affordable 250 would look like without the electronic/luxury/lexus bloat?

solid front axle/2 spd diff, pt 4WD sans electronic living room bull.....

It would be an affordable vehicle in the low 30's/high 20's that appealed to a huge swath of global population like the first 20-30 years of LC's did

That would be 70 series, 53k for the wagon with V8, GXL spec.

 

[jayp2]

Something like a jeep or bronco maybe? I hear they sell lots of them a year.

You can always tell who's owned 40's/60's and who hasnt......