2014 Tundra Looks to Top Detroit's Trucks

Good news for Detroit: Full-size truck sales are up 23% in the first quarter and are approaching levels not seen since the recession tanked U.S. vehicle sales. Detroit's Big Three automakers -- Ford (NYSE: F  ) , General Motors (NYSE: GM  ) and Chrysler -- completely dominate this market and have accounted for 93% of full-size truck sales this year through March. And Detroit wants to keep it this way, since the majority of its profits come from this segment.

They'll have to keep an eye on Toyota (NYSE: TM  ) , which is trying to make a push with its 2014 Tundra to increase its 5.4% market share. In the past, Toyota has had very little success taking share away from Detroit, but this year could be different, as the new Tundra rolls out in the fall. Here's what investors need to know.

Source: Toyota.

Abolished tariffs
During the recent Trans-Pacific Partnership trade negotiations, the U.S. government agreed to gradually abolish all tariffs currently in place on Japanese vehicles entering the U.S. market, including the 2.5% tariff on each vehicle brought in and 25% on every truck. In an industry that has margins in the single digits, those tariffs can mean a huge difference in profitability and vehicle pricing.

Devalued yen
There's another recent advantage for Japanese vehicles that adds to Detroit's worries. Over the past few months, the yen has fallen pretty significantly against the U.S. dollar. That means Toyota and Honda have a financial advantage on every vehicle sold in the U.S. market. Toyota exports more than 2 million vehicles a year, and each one becomes more profitable by the day as the yen falls. Morgan Stanley believes the advantage to be equivalent to about $1,500 per car, while Detroit thinks the figure is closer to $5,700 per vehicle. 

Ball in Toyota's court
It's up to Toyota to decide how it wants to use these advantages. It's had such little success breaking into the Detroit-dominated full-size pickup segment that it might opt to use the abolished tariff and devalued yen to drop prices significantly on its new Tundra, giving price-conscious consumers a reason to try it out. The timing couldn't be better for Toyota to make a push for more market share, either: Not only does it have a year before the next-generation Ford F-150 -- the No. 1 selling truck for 36 years -- hits the market, but also the average age of trucks on the road is 13 years, and gas prices are sliding downward. That could be all consumers need to finally bring them into the dealerships.

Detroit's reaction
Detroit is obviously not happy about this development, and it's using all the leverage it can to have the government reconsider its decision to slowly abolish tariffs. So far, the pleas are falling on deaf ears, and that could be the reason GM's 2014 redesigned Chevy Silverado won't see a price increase when it replaces the previous-generation truck -- an unusually aggressive decision.

This is the most important vehicle segment to Detroit's companies, and Toyota has been desperate to claim more of the immense profits. Investors will need to keep an eye on how Toyota plays its cards and how the new Tundra sells this fall when it's released. If Toyota gets aggressive, it could do some damage to Detroit's bottom lines.

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Read/Post Comments (21) | Recommend This Article (6)

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 21, 2013, at 12:25 PM, specstrum wrote:

    sure give away what advantage our co have while those low lifes do't let but a fraction in their countrys and those that do have inflated prices.Way to go ,why not subsidize them also

  • Report this Comment On April 21, 2013, at 12:29 PM, Protondecay123 wrote:

    First, the Tundra is manufactured at Toyota's plant in San Antonio, Texas, not imported from Japan. So Tariff's and the Yen have little affect on it's market placement. A better researched article would be nice.

  • Report this Comment On April 21, 2013, at 12:44 PM, TMFTwoCoins wrote:

    I have plenty of research, down to where engines, transmissions and other parts are created and where it is all assembled. I can tell you the Tundra's 8-cyl engine is produce in the U.S. while the 6-cyl is produced in Japan.

    What I can't explain is why I neglected to finish my argument. In my head the idea was savings from other vehicles on the tariffs would enable more capital to be spent -- advertisements, incentives etc.. -- to help the Tundra in an all in move for market share. I was then to link that + devalued yen. Poor execution on my part.

  • Report this Comment On April 21, 2013, at 12:46 PM, thebar20 wrote:

    The problem Toyota will experience is towing

    capacity. Those of us who pull heavy trailers,

    Livestock- Show Horse Trailers, Require

    the Dually. I run 450---350---Western

    Hauler respectively. Would not be caught

    dead with a dude sissy half ton. Might

    as well use a SUV. Toyota will never have it.

  • Report this Comment On April 21, 2013, at 12:51 PM, TMFTwoCoins wrote:

    @thebar20

    As a Ford and GM investor, that's what I like to hear from consumers.

  • Report this Comment On April 21, 2013, at 1:01 PM, stevema1 wrote:

    Since government motors has yet to finish paying back the American people I will NEVER buy one of them. I will either buy a Toyota or Ford in that order, I used to only buy fords until I got more than lousy service at the dealer and with the Toyota I bought service was beyond what I ever got from Ford.

    gm I did own 1 gm product it was a G30 van when I started my HVAC company and this have to be the biggest piece of crap ever, nothing but problems I actually had to see the dam thing.

  • Report this Comment On April 21, 2013, at 1:01 PM, scottford62 wrote:

    Toyota is just the toilet paper to trucks, it will never ,ever like Taylor Swift song be even close to Ford or Chevy..and even way behind Dodge...its like a match, to lighters...

  • Report this Comment On April 21, 2013, at 1:06 PM, TMFTwoCoins wrote:

    @stevema1

    Interesting point on the service aspect from Ford. I wonder if that's a widespread problem or isolated incident. Something I'll look into.

    @scottford62

    Good! I wish it was the same way with passenger cars.

  • Report this Comment On April 21, 2013, at 1:25 PM, tacot87 wrote:

    i had a99 chevy sold with 326000 miles on same plugs motor trans have 06 with 154000 no problems nuff said

  • Report this Comment On April 21, 2013, at 1:28 PM, ROBERT1HHH wrote:

    Other issues that toyota will have Toyota will have is this is the time of better fuel economy and Toyota is carring over the same drie train, so there will no impovement there and lately that has become a big marketing point for the the Big Three.

    domest brands will as always offer more drive train options and bed and cabin options. Toyota thinks they have chosen the sweet spot of the market and perhap

    they did, problem is the it is a much smaller sweet spot than in the mid sized car line up.

    People like haveing the tallest, widest, longest truck, but they want so much more from a truck than that and toyota is goning for volume on build rather than a more flexible and wider option ranging optiton list.

    No extend bed

    no small cab

    no high milage drive train (when measured by other truck

    no stripped down cheap mode

    l

    no truley over the top equipped model,

    no heavy duty trucks

    No deisel option

    no double axel

    no b

    rand loyalty in the segment.

    Tuck buyers are the most loyal of all auto buyers and they know what they want and no two want the same thing and Detroit know how to deal with that.

  • Report this Comment On April 21, 2013, at 1:43 PM, 18RC wrote:

    There's no such thing as a GM, Ford or Dodge truck 400,000 mile club. They're odometers don't even go that high because they are planned obsolesence vehicles.

  • Report this Comment On April 21, 2013, at 1:50 PM, SpeedyDaddy wrote:

    The Tundra is not a threat to American truck makers, and its not because of issues related to tariffs or fluctuations in the yen. Designed, engineered, and built in the USA for the U.S. market, the tariff issue and the yen issue have zero impact on Tundra's ability to compete.

    Rather, the new 2014 Tundra simply cannot offer the depth and breadth of trim/powertrain/cab/cargo box configurations that the American trucks can. Until Toyota gets serious about spending a ton of cash to make that happen, it will lag behind the leaders.

    Plus, the 2014 Tundra is not new. It is restyled inside and out, based on the exact same frame and mechanicals as the current Tundra. Ram got a substantial mid-cycle update for 2013, Chevy/GMC are all-new for 2014, and a new 2015 Ford F Series is sure to continue dominating the segment. That makes the "new" Tundra "old" before it has a chance to roll down the assembly line.

  • Report this Comment On April 21, 2013, at 2:03 PM, waza30 wrote:

    Only DUMB Americans would by this Toyota instead of a Ford or Gm truck. They(Ford, GM) are the best trucks built bar none. These foreign makers just steal our money and technology, then just laugh and laugh at how dumb we are.

  • Report this Comment On April 21, 2013, at 3:29 PM, DATSUN1967 wrote:

    IF TOYOTA REALLY WANTS TO COMPETE THEY NEED TO BUILD A ONE TON DULLEY

    DIESEL FULL SIZE. I HAVE THREE TOYOTA

    COMPACT TRUCKS WITH ONE TON AXLES IN THEM AND THEY ARE TOYOTA AXLES. TOYOTA BUILT THEM FOR U-HAUL. IVE HAD

    2890LBS ON ONE AND IT DID OK BUT IT WOULD HAVE BEEN BETTER WITH THE TOURQE OF A DIESEL ENGINE. AS FAR AS THE WIEGHT GOES I COULD HAVE GONE

    WITH MORE WIEGHT BECAUSE THEY HAVE THE SPRINGS UNDER THEM TO HANDLE IT.

    BUT I DIDNT HAVE THE ENGINE POWER.

  • Report this Comment On April 21, 2013, at 3:31 PM, TMFTwoCoins wrote:

    @Speedydaddy

    my comment above discusses your first point. Your second point I totally agree with. They need to spend a ton of cash to make it happen, but guess what, with reduced tariffs and devalued yen, that is a much more realistic option for Toyota now. That was the point, although I executed it very poorly.

  • Report this Comment On April 21, 2013, at 5:39 PM, emailnodata wrote:

    Sorry, a tafiff is not really indicative that you have a competitive advantage. A tariff indicates you are either 1) fighting dumping, or 2) you suck but you have govt clout. Anyone comparing American cars to Japanese cars from the 1980's on knew it was 2, American autos sucked.

    Trucks?? Diff story. Not only are tariffs involved, but so are the owner's ideology. The Tundra is viewed at best as a suburbanite's boat hauler, at worst as a "commie import #*@*".

    My view is Toyota is quite happy to stick with the suburban white collar crowd.

  • Report this Comment On April 21, 2013, at 5:54 PM, MadeInAsia wrote:

    Its a business, fool.com knows how to stir your emotions don't they? If you don't like it, don't buy it. I like all car brands. It all depends on what I need it for and not buy it just because I want to out do my friends or neighbors' trucks......

  • Report this Comment On April 21, 2013, at 6:48 PM, cme60 wrote:

    I used to always buy Ford trucks. I own an 08 diesel right now along with a few F700's.

    Just yesterday, on my way back from Louisiana on a business trip, my diesel started to run poorly. I knew it was the fuel filters so I figured I'd find a dealership open on a Saturday and get the filters changed. I figured while there I would get the oil changed as well. This was in Chattanooga, TN. It took them maybe 45-minutes to do the work. They charged me $120.00 for labor and nearly $200 for parts (filters and common 15-40 oil). One of the salemen asked if I was thinking about trading the truck in anytime soon and I said yes but not for a Ford. I will probably look at the Silverado or the Dodge but the Tundra, imo, is not a working mans truck.

  • Report this Comment On April 21, 2013, at 6:50 PM, figures4u2 wrote:

    "As a Ford and GM investor, that's what I like to hear from consumers"

    yea... talk about slanted, bias, and counterproductive... its one thing to compare american trucks and cars to "foreign" trucks and cars but to be completely one sided in the article is pretty ignorant... if a person who talks negatively about something in which theyve never actually had the experience of doing (in this case, driving a "foreign" car or truck) and completely refuse to do so for ones own reasons is a good way for people to completely blow off that persons opinion on the subject. if they havent done it, thats their decision. but to tell others how bad they are when they havent experienced it for themselves is pretty lame. the definition of conflict of interest purely by perspective alone

    be an investor in ford and GM... most people could care less about that (not that it matters one way or the other to most people regardless) because unlike some, there are those who actually do their own research and have their own pros and cons as to whether or not they should own foreign and or domestic vehicles. most of them, unlike the writer apparently, do so because of their experiences with the american auto manufacturers themselves as compared to their experiences with the foreign automakers. those who depend on articles like this from people who

    adamantly refuse to experience it for themselves, regardless of their reason to do so, really shouldnt be taken seriously on such subject matter.

    me and my family have had trucks and cars from each of the big three and not once have they lasted worth a good G D... now every single member of my family, including myself, own Toyotas/Hondas and havent had a single problem one with any of them... some even going over 10 years... which was NEVER seen (and even unheard of) in the entire time anyone in my family had an "american" made car or truck... PERIOD!

  • Report this Comment On April 21, 2013, at 11:10 PM, bugmenot wrote:

    Detroit automakers have been committing suicide for years. Their labor unions cut off the arms and the legs 20 years ago. The good news is that the automakers are beginning to move out of Democrat held terrorism.

  • Report this Comment On April 22, 2013, at 8:49 AM, wings12 wrote:

    My uncle had a Toyota Tundra. The frame rusted out and it nearly broke in half. Toyota did take care of it and later issued a large recall. I see pitcures of others that were not so lucky and their Tundras BROKE IN HALF! Google "Toyota Tundra frame rot" for pictures. He then sold it.

    That is Toyota quality and I will pass.

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