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Toyota Revamps Its Sales Monster: Will the All-New RAV4 Deliver Monster Profit?

By John Rosevear - Mar 28, 2018 at 7:05PM

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Toyota looks to keep its little SUV on top with an edgy new design.

Toyota Motor Corporation ( TM 2.45% ) took the wraps off its 2019 RAV4 in New York on Wednesday. The all-new version of Toyota's huge-selling compact SUV features much more distinctive styling than the outgoing model and an expanded options list.

Toyota hopes the changes will help keep the RAV4 near the top of America's sales charts while giving its profitability a boost. Here's what we know. 

A red 2019 Toyota RAV4, a compact SUV, on a road next to a line of snow-covered trees.

Toyota introduced the all-new 2019 RAV4 at the New York International Auto Show on Wednesday, March 28, 2018. Image source: Toyota.

What's new about the 2019 RAV4?

Just about everything is new, aside from the name. 

For starters, it's the first RAV4 based on Toyota's modular TNGA architecture, which gives it a lower, wider stance than its predecessor and should improve its handling. Like other recent Toyotas, the new RAV4's styling is far edgier than the outgoing model's, in this case suggesting that Toyota has boosted its off-road prowess. 

That suggestion isn't misplaced. The Adventure Grade trim brings all-wheel drive, larger "over-fenders," and other features that ramp up the Jeep-like look. Toyota claims the off-road improvements aren't just cosmetic: Ground clearance has been raised by about half an inch, and the shorter front and rear overhangs enabled by the TNGA architecture will help it on rocky terrain. 

A view of the 2019 RAV4's front seats and dash, showing black leather trim with brushed-metal accents.

Inside, the 2019 RAV4 follows the lead of other recent Toyotas, adding some pleasing form to the usual Toyota functionality. Image source: Toyota.

The new RAV4 will be available with both conventional internal-combustion and gasoline-electric hybrid drivetrains. Both start with a more powerful iteration of Toyota's 2.5-liter four-cylinder engine, mated (in non-hybrid versions) to a new eight-speed automatic transmission. Hybrid versions get a continuously variable transmission (CVT), but while CVTs aren't generally thought of as sporty (to say the least), Toyota insists the hybrid RAV4 wont't be boring: A new XSE Hybrid trim combines the hybrid drivetrain with a stiffened suspension to create the quickest and best-handling RAV4 yet, the company claims.

Non-hybrid versions of the new RAV4 will begin to arrive at U.S. dealers in late 2018; hybrids will follow in early 2019.

Why it's important: Big sales and big profits

It's hugely important. The RAV4 has always been popular, but over the last few years, it has turned into a sales monster.

U.S. sales of the RAV4 have doubled over the last five years, making it the best-seller in the company's lineup here. In 2017, it was the best-selling SUV in America -- in fact, it was the best-selling vehicle in America that wasn't a full-size pickup, a title traditionally held by midsize sedans. (Ford's ( F 1.61% ) all-conquering F-Series remains America's best-selling vehicle overall.) 

A 2019 RAV4 in Adventure trim, with fender-flare accents and roof rails.

A bolder Adventure trim promises improved off-road abilities, and should help boost the RAV4's average transaction price. Image source: Toyota.

But with big sales comes big competition, and the compact-SUV segment has become a brutal one: Nissan ( NSANY -1.34% ) has pushed its rival Rogue ahead of the RAV4 in 2018 with a combination of aggressive marketing and aggressive incentives. Honda's ( HMC 1.96% ) CR-V and the impressive new-last-year Chevrolet Equinox are close behind on this year's sales chart, and Ford has an all-new Escape on the way that will no doubt shake things up further. 

Toyota needs the RAV4 to stay a step ahead of all of those models. I'm sure that CEO Akio Toyoda also wouldn't mind if it delivered fatter profit margins than its predecessor -- and I suspect that the company expects the RAV4's new trims to do exactly that.

Will it succeed?

It's always a bit hard to predict how the market will react to a new version of a huge-selling product in a super-competitive segment. But Toyota's recent track record inspires confidence. 

A dark silver 2019 RAV4 in a rocky field.

Another view of the 2019 Toyota RAV4. Image source: Toyota.

Notably, the new-for-2018 Camry, another TNGA-based model with lower, sportier styling than its predecessor, has been a big hit in a struggling segment. It has soundly outsold the rival Honda Accord, which was also all-new for 2018 (and much-praised by critics). 

I admit that I was surprised by the new RAV4's aggressive styling when Toyota first rolled it out. But having spent some time with the vehicle here at the New York International Auto Show, it's growing on me. My sense is that -- very much like the latest Camry -- the new RAV4 delivers everything that buyers liked about the old one, in a more distinctive-looking (and probably more fun-to-drive) package.

I have a feeling that plenty of buyers will agree. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Toyota Motor Corporation Stock Quote
Toyota Motor Corporation
$182.66 (2.45%) $4.37
Ford Motor Company Stock Quote
Ford Motor Company
$19.89 (1.61%) $0.32
Honda Motor Co., Ltd. Stock Quote
Honda Motor Co., Ltd.
$28.27 (1.96%) $0.54
Nissan Motor Co., Ltd. Stock Quote
Nissan Motor Co., Ltd.
$9.68 (-1.34%) $0.13

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