For Toyota and its Lexus brand, this December could be one to remember — for all the wrong reasons.
Ongoing microchip and other supply chain shortages caused by the pandemic have forced Toyota Motor Corp. to continue to cut its global production. Meanwhile, U.S. retail demand for new vehicles has slowed, but not yet enough to repopulate empty dealership lots.
That’s left Toyota Motor North America executives with a conundrum: Do they still hold their traditional end-of-year sell-offs — and spend the requisite marketing money — if their dealers don’t have any inventory to sell off?
The answer is probably, but top leaders at the company admit that they are couching that answer in a prayer that their production woes will begin to get better soon.
“I’m optimistic the inventory situation will start to change for the better,” said Jack Hollis, senior vice president for automotive operations at Toyota Motor North America. “With a little luck, December will be the turning point, and while we don’t want to over-promise, it may allow us to carry forward much of our marketing and creative as planned.”
For decades, Lexus and Toyota have finished their calendar years with big sales events to clear away the last model-year inventory. December to Remember and Toyotathon have become so ingrained in popular culture that outside companies now sell Lexus’ big red bows, and the promotion was skewered by “Saturday Night Live” in 2020.
“I think we’re still going to do it, I just think what we do [this year] will be less,” Andrew Gilleland, head of the Lexus Division, told Automotive News last week. “We’re still going to have cars available, it’s just not going to be our typical 15 to 30 days’ supply; it might be more 10 to 12 days’.”
Vinay Shahani, who heads Lexus marketing, said the annual December to Remember sale is too important to the brand’s DNA not to do it, despite a lack of inventory.
“I’ve had dealers tell me that their sales reps plan their vacations around December to Remember,” Shahani said.
Gilleland said the luxury brand will alter its marketing spend and its message somewhat, focusing on the redesigned Lexus NX instead of selling off outgoing model-year vehicles. “The message will still have that look and feel, but certainly I think we’d be irresponsible to go out and spend at the same level as if we had a 30-day supply and a 17 million” seasonally adjusted annualized sales rate.
While Toyotathon may not have the same cultural cachet as Lexus’ big red bows, it is still an important event for dealers, Toyota Division head Dave Christ said.
He said last week that a final “go/no-go” decision on the promotion is still being debated internally, and with the launch of the redesigned Tundra coming at the end of the year, it’s important to boost traffic in showrooms.
“Toyotathon is an important part of our history, and the dealers still have cars to sell, even if it’s a lower number of them, so we want to support them with advertising,” Christ said.
“That decision is going to get made when we’re a little closer — we have a little better view of what the production and inventory environment looks like.”
Christ noted that Toyota still held its annual August sales event — which took place largely before the company launched its most severe production cuts — and modified its messaging somewhat. He said dealers have “done a good job communicating” the reasons for reduced inventory to customers, so complaints have been few.
Lisa Materazzo, who heads marketing for the Toyota Division, said Toyotathon “is still a good opportunity for the brand, with or without inventory, to keep Toyota top of mind.”
“It’s a chance to engage with the customer,” one the brand is not willing to surrender just because inventory is low, Materazzo said. “If we don’t have the inventory, and they’re willing to wait, we can ultimately meet the customer’s needs within a short period of time — we can take the order, lock in the specs, get the process going.”