Toyota (NYSE:TM) took the wraps off of the U.S. version of its all-new C-HR this past week. The 2018 Toyota C-HR is a new small SUV with dramatic styling that Toyota hopes will help it return to growth in the United States.
What it is: a small crossover with a big mission
The C-HR (for "coupe high-rider," Toyota says) is a subcompact crossover SUV. It's about the same size as Honda's (NYSE:HMC) HR-V and Fiat Chrysler Automobiles' (NYSE:FCAU) Jeep Renegade -- two of the vehicles the C-HR will be expected to compete with around the world.
The C-HR has more dramatic styling than is typical of Toyotas, something the brand hopes will attract younger buyers. Inside, it's typical Toyota -- controls laid out simply and sensibly -- with a bit of what Toyota says is "sports car influence" in the design.
While the C-HR will be available in hybrid and manual-transmission versions elsewhere in the world, U.S. buyers will have just one powertrain choice, a 2.0 liter four-cylinder with a new continuously variable transmission.
Like the new-for-2016 Toyota Prius, the C-HR is based on Toyota's New Global Architecture, or TNGA. TNGA allows Toyotas of different sizes and shapes to share some common underpinnings, reducing costs and engineering time. That should help make it a profitable product.
Why it's important: Toyota's U.S. sales have slumped
Toyota has had a strong presence in the U.S. for decades, and its customers are fiercely loyal. But Toyota's U.S. sales have declined this year, down about 3% through October. That has led to thinner profits than Toyota and its shareholders would like.
It's not that Toyota has somehow lost that customer loyalty, or misplaced its product mojo. Rather, as CFO Takahiko Ijichi explained during Toyota's most recent earnings presentation, the Japanese giant missed an opportunity. Buyer preferences in the U.S. have shifted dramatically toward crossover SUVs and away from the sedans that have been Toyota's longtime bread and butter here, and Toyota wasn't quick enough to shift its production to meet demand.
Toyota has a couple of very competitive crossover SUVs. Its Highlander and RAV4 have both sold well this year. But because Toyota didn't shift production to make more of them, supplies haven't kept up with demand. The result is that Toyota has missed out on some potential sales growth.
It has also missed out because it hasn't had a product in the fast-growing subcompact SUV segment. Sales of subcompact crossovers have boomed in 2016:
That's where the C-HR comes in: Toyota hopes that it will help the company capture a larger share of those crossover-minded buyers, while making it a player in the booming market for subcompact crossover SUVs.
What's next: The C-HR will arrive in the spring
The 2018 Toyota C-HR will begin arriving at U.S dealers in the spring of 2017. Pricing wasn't announced, but Toyota executives said they are aiming for a starting price a bit above $20,000.