Can Toyota's New Tundra Challenge the Ford F-150 and Chevy Silverado?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Back in February, Toyota Motor (NYSE: TM  ) unveiled the third generation of its Tundra full-size pickup, which will make its debut in September for the 2014 model year. Let's take a look at how it might stack up against similar offerings from the big names in Detroit.

While Toyota has become a force to be reckoned with in the U.S. car market over the past few decades, it's had much more trouble breaking into the full-size pickup segment. Ford (NYSE: F  ) has been the segment leader for a long time with its F-150 pickup, and General Motors (NYSE: GM  ) is a strong second with its Chevy Silverado. (If you include the Silverado's twin, the GMC Sierra, GM's total market share in the segment is similar to Ford's.) Chrysler Group lags well behind Ford and GM in terms of market share, but its Ram pickups still have the No. 3 market share spot locked up.

The new Tundra makes some modest performance improvements over the previous version, but the interior redesign is far more impressive. However, truck owners are known for being very loyal to their favorite brands, so Toyota faces an uphill battle to grow its market share. Nevertheless, I believe Toyota may offer significant discounts to drive higher volume. In today's price-conscious world, this strategy could be successful and drive a significant market-share increase for Toyota, at the expense of the Detroit Three.

Tundra's long road
The full-size pickup segment offers very high margins compared with the auto industry as a whole, which explains why Japanese automakers have tried to break into this business. Toyota opened a new manufacturing plant in San Antonio to produce the second-generation Tundra back in 2007 and hoped to sell 200,000 per year. It was favorably reviewed, won the Motor Trend "Truck of the Year" award, and nearly met its sales goal in 2007. However, the collapse of the housing market shortly thereafter drastically reduced sales; last year, Toyota sold barely 100,000 Tundras. By contrast, Ford sold more than 645,000 F-Series trucks in 2012.

Clearly, the loyalty of longtime Ford, Chevy/GMC, and Dodge/Ram truck owners puts a limit on the Tundra's market share. Still, Toyota did gain substantial market share back in 2007 when the last-generation Tundra hit the market. Furthermore, while Toyota hasn't provided a specific sales goal, executives have said they expect the Tundra's sales growth to outpace overall segment growth this year, even though the new Tundra won't hit the market until the fall.

Going for luxury
The main area where Toyota has made significant improvements over the previous generation is in the luxury pickup segment. Toyota is offering many more upscale options on the 2014 Tundra, including two different premium grades -- the Platinum and 1794 edition. The fastest-growing segment of the pickup market has been for luxury trucks retailing for $40,000 or more, but Toyota hasn't previously offered that level of luxury. With the new high-end Tundra models, Toyota is using high-quality leather and other features drawn from its Lexus vehicles.

The 2014 Toyota Tundra 1794 Edition. Source; Toyota.

The 2014 Tundra will also include backup cameras as a standard feature, with a blind spot monitoring system as an additional option. Early reviewers have stated that these enhancements make the 2014 Tundra better equipped to challenge the segment leaders. Even if Tundra doesn't make much of a dent in Detroit Three pickup volumes, it could still cause them major headaches if it takes a disproportionate share of the high-margin luxury market.

The biggest threat to Detroit
As big an upgrade as the new Tundra is over the second-generation models currently on dealer lots, that alone won't make it a success in the U.S. market. Even U.S. truck owners who like the Tundra aren't willing to switch unless Toyota offers a clear value proposition vis-a-vis the Detroit Three. However, the yen's precipitous decline in the past six months may allow Toyota to do just that.

While Tundra is assembled in the U.S. and uses primarily domestic parts, U.S. sales are still much more profitable for Toyota today than they were six months ago. The more favorable exchange rate means that repatriated dollar profits are worth 30% more in yen than they were last year. Toyota thus has strong reasons to chase sales in the U.S. through heavier use of incentives, particularly in the ultra-profitable pickup market.

If the yen-dollar exchange rate remains where it is today (or the yen weakens even further), I expect Toyota to ramp up incentive spending for the new Tundra to drive big volume increases. Toyota's ability to increase incentive spending without compromising profitability is its biggest weapon in the pickup market. Favorable pricing is one way Toyota could differentiate Tundra from the other very worthy pickup models on the market today, and potentially eat into Ford and GM's segment-leading market shares.

Foolish bottom line
Toyota's new Tundra looks as if it will provide some much-needed improvements over the previous generation. Improving sales, particularly in the high-margin luxury segment, could give Toyota's profitability a nice boost beginning in the fall. Ford and GM shareholders should keep an eye out for how Toyota prices the new Tundra. The strong loyalty of most pickup owners should keep the threat to Ford and GM relatively modest, but a Toyota-instigated price war could nevertheless cause problems for the current pickup segment leaders.

Toyota has rebounded nicely from the troubles of recent years, but is the stock still a buy at current prices? The Motley Fool's automotive expert, John Rosevear, and industrials bureau chief Isaac Pino have collaborated to create some of the most in-depth Toyota research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.

Read/Post Comments (29) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 14, 2013, at 2:42 PM, tumloveu wrote:

    Of course not. It is so ugly.

  • Report this Comment On April 15, 2013, at 1:17 PM, garnman wrote:

    After the absolutely dismal service problems with the 2008 Tundra that I bought brand new I will never buy another one. The service history report is now over 4 pages in length and while most of the issues were covered under various warranty programs, the multiple failure of the same parts is inexcusable. Water pumps (4), rear differential complete (1), Exhaust valve and emissions control (2), power window control assembly (1), recalls (5), oil leak (1), etc etc.

  • Report this Comment On April 15, 2013, at 1:31 PM, autoenthusiast wrote:

    The Tundra is easily the best 1/2 ton truck in the market (always a top scorer in quality and resale value) but it won't top the F150 in sales (for many reasons including loyalty, HUGE incentives by Ford, etc. etc.)

    No doubt though that dollar for dollar there's no better 1/2 ton turck than the Tundra.

  • Report this Comment On April 15, 2013, at 1:34 PM, 18RC wrote:

    In the mid-late 2000's management problems at Toyota caused a slip in quality which severely impacted Tundra sales and reputation.

    Toyota has fixed those quality problems so the 2014 Tundra will be a great vehicle. BUT, sales potential of the 2014 Tundra will be hampered because of the mediocre reliability reputation of the late 2000's Tundras.

  • Report this Comment On April 15, 2013, at 1:47 PM, wings12 wrote:

    In 2012, Kelley Blue Book has the F-150 Super Duty as the winner of the best resale vale! Not the Toyota Tundra. The Toyota Tundra also falls behind the Ford F150, Chevy Silverado, and Ram for maximum towing capacity!

  • Report this Comment On April 15, 2013, at 1:48 PM, wings12 wrote:

    It wasn't long ago that the Toyota Tundra had problems with the frame rusting out and then the entire truck would break in half!

    Google "Toyota Tundra frame rot" for pictures...

  • Report this Comment On April 15, 2013, at 2:01 PM, HugeDick wrote:

    Toyota has past Ford several years ago in sales and has now past General Motors as the top selling car maker. It is only a matter of time before people get fed up with the quality problems of both Ford and GM and Toyota will eventually overtake them both in full size truck sales (and also in NASCAR). It may take a few years, but it will happen. Time and quality are on thier side.

  • Report this Comment On April 15, 2013, at 2:03 PM, karon67 wrote:

    I just leased my third F150. It's the STX 4x4, there are some things I woud have liked to have on it like the XLT's,,but I really don't

    need a truck, but I like sitting up high and being able to see what;s ahead of you. I'am a 71 yr. old grandma, and the payment was great.

  • Report this Comment On April 15, 2013, at 2:12 PM, wings12 wrote:

    HD - Nice try. Toyota was the #1 in worldwide sales in 2012. GM was #1 in worldwide sales in 2011. Toyota has NEVER been #1 in sales in the USA. GM is #1 in sales in the USA, Ford is #2, and Toyota is #3.

    For top selling vehicles in the USA, the Ford F-150 is #1, the Chevy Silverado is #2 (this does not include the GMC version) and the Toyota Tundra is not even in the top 25!

    The top selling car in 2012 in the WORLD was the FORD FOCUS. The Toyota Corolla was #2.

    Toyota has led the USA in recalls in 3 of the past 4 years. Toyota was #2 in 2011 behind Honda. Toyota leads 2013 with vehicles recalled at around 2 million!

  • Report this Comment On April 15, 2013, at 2:40 PM, ponchoman49 wrote:

    How is the Tundra with basically a carry over exterior sans grille and back end treatment and a revised interior and a few new electronic do dads going to challenge the segment leaders? Even the engines/transmission are carryover with segment worst fuel economy in the gas swilling 5.7 which can only muster 17 on the highway compared to Ford with it's Ecoboost which gets 21 and GM's new 2014 5.3 which is rated for 22. Yes folks that's 5 less for the ugly Tundra. I also wonder if Toyota has fixed the abysmal quality control, paint peel issue, frame rot and tail gate buckling plus the wimpy C-frame which sees the entire tailgate flop around going over any road disturbances.

  • Report this Comment On April 15, 2013, at 3:09 PM, aerogent wrote:

    My 2003 F-150 4x4 has 170,000 miles and is running strong. 'Nuff said.

  • Report this Comment On April 15, 2013, at 3:39 PM, TMFGemHunter wrote:

    I agree that Tundra had a number of quality issues, but Toyota has put a lot of effort into rebuilding its quality reputation in the past year or two. Ford had its share of recalls last year with the new Escape and Fusion. To some extent, it's an inevitable part of introducing new models to the market.

    I don't think Toyota will ever rival Ford or GM for pickup sales. But with aggressive pricing, I could see Tundra going from 100,000 units per year recently to 200,000 or even 300,000 by 2015. It just depends on what Toyota's strategy is for the full-size truck market.

  • Report this Comment On April 15, 2013, at 3:44 PM, Kay10 wrote:

    Can't they do something with the looks ?

  • Report this Comment On April 15, 2013, at 3:53 PM, TMFGemHunter wrote:

    They did; they went for more masculine. I'm not a huge fan, but I guess Toyota's market research pointed them in that direction.


  • Report this Comment On April 15, 2013, at 4:28 PM, mrdrysdale64 wrote:

    I have a 2000 Tundra with 157000 miles. The only repair I have had is a water pump replacement. It is on it's third set of tires and fourth battery. Runs like a dream still. Paint is faded. It has been an incredible truck. It is going to be driven by my 16 year old daughter now. Last month I bought a 2013 Tundra Crewmax. I love the new truck and I hope I get the same reliability I got from the 2000 model. I like the 2014. I have owned both Ford and Chevrolet trucks in the past and I will never go back!

  • Report this Comment On April 15, 2013, at 4:54 PM, nukypuke wrote:

    My 2002 Ram 1500 has 205,000 miles on it. Tundra can't even come close. Ram is the #7 selling vehicle in the USA, and has increased sales by over 25%. My neighbor bought a Tundra and put a plow on it. The frame cracked during his first plow job. The new RAM gets 25 mpg.

  • Report this Comment On April 15, 2013, at 4:55 PM, mad97611 wrote:

    Owned a 2001 first gen Tundra, 2004 second gen, and now on my third, a 2010. over 100k on the first, 165k on the second, and just hit 50k on the 2010. Never had a single problem. Tires, brakes, a battery and a couple bulbs is it. I could never say that about the previous GM or Dodge trucks I owned (failed tranny and engines gone at 90k.) Plus, I got top dollar on the resales. Ok, the Ford tows another 500lbs, but really, who tows over 10,000 lbs with a 1/2 ton truck. Best trucks all around. And I get a steady 20mpg on the road with the 5.7L.

  • Report this Comment On April 15, 2013, at 4:59 PM, rebel9999 wrote:

    Do onto others as they do onto you. That is advice that ALL of you better think about next time you buy a vehicle or anything else. We are greatly adding to our trade deficits every time we buy a foreign vehicle or anything else made abroad. The Japanese, Koreans and EUROPEANS have NEVER bought our cars in meaningful numbers. They never have and never will. SO WHY ARE WE BUYING THEIRS!!!!!!! JUST WHOSE COUNTRY DO YOU SUPPORT ANYWAY? THEIRS OR OURS!!! DON'T BE AN ECONOMIC BENEDICT ARNOLD!!! SUPPORT YOUR COUNTRY, NOT THEIRS!!!! BUY AMERICAN VEHICLES AND PRODUCTS!!!!!

  • Report this Comment On April 15, 2013, at 5:09 PM, mad97611 wrote:

    yep, buy american! Toyotas, Honda, Nissan, and BWM to name a few. They build them here, American workers with American parts. Do some research and see where all those GMs, Fords and Dodges are really built. Mexico, New Zealand, South America, and parts from all over. They are all international companies, and there is no such thing as a true American build car, or truck.

  • Report this Comment On April 15, 2013, at 5:35 PM, abintlfoto wrote:

    With "NO" available Diesel engine option, the Toyota will be #5 in sales.

  • Report this Comment On April 15, 2013, at 6:35 PM, glou9dude wrote:

    Remember Pearl Harbor- Buy American!!!!

  • Report this Comment On April 15, 2013, at 7:00 PM, akston4burgers wrote:

    I followed your advice glou9dude. We were going to buy a Chevy Cruze and looked at the statement of origin. It was around 50% Asian parts.

    Instead we got a Toyota Camry, which is over 90% US parts and labor.

  • Report this Comment On April 15, 2013, at 8:30 PM, blueredstar wrote:

    Unable to change the spark plugs in new Fords!!

    I loved my 1956 F100 V8 but somewhere Ford engineers got lost!

    Tundras are great and made here in the USA

  • Report this Comment On April 15, 2013, at 8:33 PM, TMFGemHunter wrote:

    It's interesting that many of the "foreign" automakers are using more American content in their cars than the Detroit Three. I wonder if it has something to do with the fact that GM, Ford, Chrysler and a lot of their suppliers are heavily unionized. This could potentially push more work out of the U.S.


  • Report this Comment On April 16, 2013, at 7:31 AM, HugeDick wrote:

    With all due respect wings12, nice try on trying to fool me and other readers here. I remember a few years back where Fords slipped out of park and rolled away and where they had problems with thier frames bending because they were built too light. The only reason Toyota lost the sales lead was because of a bad earthquake in Japan. The steamroller is comming. It already squished Ford and it's getting ready to do the same to GM. Let's stop going back and forth because I can come up with a lot more quality issues with GM and Ford. Needless to say, I'm going to change my mind and you aren't going to look at current automotive trends. Have a nice day. (:

  • Report this Comment On April 16, 2013, at 9:33 AM, SP9983 wrote:


  • Report this Comment On April 25, 2013, at 11:48 AM, etrillion wrote:

    haha,no Toyota will never ever sell trucks in the amounts of Ford or Chevy...or GMC and Ram (its not Dodge anymore) for that matter

  • Report this Comment On April 25, 2013, at 11:55 AM, etrillion wrote:

    ^^^ that comment above is not me dissing the build quality or capabalities of the Toyota,Im just stating the truth,people are loyal to their brands especially when it comes to trucks...but the Toyota in the looks department is not easy on the eyes,and that will not help its case for sells

  • Report this Comment On October 29, 2013, at 2:08 PM, nemo100 wrote:

    I am looking at Tundra for my next pick up. I had a 90 F150. bought it used in 97 and had it till 95. Great truck. Then I bought a used 2001 F150 in 2005. Wish I had known then about the problem with the blown spark plugs. Blown spark plug cost $3000 to repair after it blew into engine. And I have had at least 5 of the assemblies go before actually blowing out and that is about $400 a repair each. But Ford denies responsibility for a design flaw. But clearly there is something wrong with this engine for certain years. I never had a blown out spark plug on any vehicle before tho I know other vehicles can have it. And I have never had to replace a spark plug assembly in a vehicle much less 4 of them plus blowing another one into the engine. Now, if FORD had accepted their responsibility in this design flaw and paid for repairs, I would have considered another F150 in the future as this design flaw has been fixed in later models. But due them just brushing it off at great expense to me, I will never buy another F150 again.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2362355, ~/Articles/ArticleHandler.aspx, 9/25/2016 3:39:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:02 PM
TM $117.66 Down -3.14 -2.60%
Toyota Motor CAPS Rating: ***
F $12.17 Down -0.01 -0.08%
Ford CAPS Rating: ****
GM $32.12 Down -0.27 -0.83%
General Motors CAPS Rating: ***