Toyota (TM 0.55%) said on Thursday that its U.S. sales fell 5% in August, as good sales of key SUV models weren't enough to offset steep declines in sales of Toyota's bread-and-butter sedans.
Big sales declines for some of Toyota's best-selling and most-loved models
Sales at the mass-market Toyota brand fell 4.6%. A 6.2% increase in Toyota-brand SUV sales wasn't nearly enough to overcome a 10.5% year-over-year drop in sales of Toyota and Scion car models.
One of the biggest stories in the auto business over the last few years has been the strong and sustained shift in buyer preferences away from sedans and toward SUVs, particularly car-based "crossover" SUVs.
Toyota had been bumping up against supply limitations on some of its crossovers, but those seem to have been alleviated: Toyota's biggest-selling SUV and crossover models all posted solid sales gains in August. The compact RAV4, now Toyota's biggest-selling model in the U.S., gained 8.6%, while the midsize Highlander crossover (up 12.2%) and the truck-based 4Runner (up 15.7%) also posted strong results.
That strong demand was good news for Toyota and its dealers. But Toyota built its reputation in the U.S. on the strength of its sedan models, which have been among America's best-sellers for many years. But every Toyota sedan lost ground last month: The Yaris (down 48.7%), Corolla (down 3.1%), Prius (down 27%), Camry (down 12.6%), and Avalon (down 25%) all declined year over year.
"Coming off the strongest SAAR of the year at 17.9M units in July, the industry took a bit of a step back in August," said Toyota's U.S. brand chief, Bill Fay, in a statement. He said that Toyota's truck and SUV sales are "on track for another record year."
Lexus is faring even worse, but more SUVs are on the way
The trend away from sedans was even more pronounced at Toyota's luxury brand, Lexus. Overall Lexus sales fell 7.6% in August, and again it was good news for SUVs and bad news for car models.
Lexus's SUVs as a group gained 9.1% over year-ago sales totals. The best-selling RX was up just 1%, but the small NX (up 21.6%) and bigger GX (up 12.2%) models helped the group to a solid gain.
But that gain was more than offset by a 24% drop in sales of Lexus cars. Every single Lexus car model posted a double-digit percentage sales decline in August.
Not surprisingly, Lexus U.S. brand chief Jeff Bracken is looking to build on what's working. In a statement, he said that he expects better supplies of Lexus's SUV models in the coming months and is "looking for a strong close to 2016."
Toyota's pricing stayed strong and incentives remained modest
Analysts at TrueCar estimate that Toyota's average transaction price rose 2.9% from a year ago to $31,318 in August. (That includes the Toyota, Scion, and Lexus brands.) It estimates that Toyota's per-vehicle spending on incentives as a percentage of average transaction price rose to 7.6% from 7.3% a year ago -- but that's still well below the industry average of 10.3%.
The upshot for Toyota: Tough sailing in a choppy market
Like other automakers, Toyota is probably happy to sell SUVs instead of sedans, as SUVs typically have somewhat fatter profit margins. The challenge for Toyota has been to have enough of its SUVs to sell: While American rivals have long had strong SUV lineups, Toyota until recently still put most of its focus on its perennially popular sedan lineup.
Recent moves to boost supplies of Toyota-brand SUVs (particularly the RAV4) seem to be paying off. More Lexus SUVs will also help -- but in general, despite the market's slump in August, Toyota seems to be doing well enough to bring home a solid profit in North America in the third quarter.