Toyota, Nissan shift gears and boost incentives

A day after announcing that its North American factories would be cranking up production sooner than expected, Toyota Motor Sales U.S.A. unveiled a series of regional cash, interest-rate, and lease incentives on most of its vehicles. Nissan Motor Co. is following suit, with an expected big Memorial Day push.

The new round of incentives also follows preliminary results, shared with Automotive News on Thursday, showing that sales at Toyota and Honda dropped sharply in early May. Sales also were weaker at Nissan during the first 10 days of the month.

At the beginning of May, Toyota's budget for incentives was barren because the automaker assumed damage from the March earthquake in Japan would continue to ravage its supply line and inventories.

But recent efforts to repair its supply chain will let Toyota regain nearly full production capacity over the next month. As a result, it is cranking up incentive spending.

Nissan's Japanese factories also will be back to near-full capacity in June, with North American factories following shortly thereafter. Nissan also is responding to a rise in U.S. inventories by raising discounts.

"Nissan is in a much healthier position than either of our two main Japanese competitors," Al Castignetti, Nissan Division general manager, wrote to dealers in a memo on Thursday.

As a result, dealers have been instructed to "'rev the Nissan engine' and grow market share," by way of a Memorial Day tent sale and the best-ever lease deals on Altima and Maxima.

Through April, Toyota's U.S. sales were up 9 percent this year, in an overall market that has climbed 20 percent, reflecting dwindling supplies of Toyota and Lexus models following the quake.

Through April, Nissan's U.S. sales were up 22 percent, with the Nissan brand up 23 percent and Infiniti up 12 percent.

But during the first 10 days of May, Toyota and Honda Motor Co. posted sharply lower sales compared with the same period a year ago and last month, according to internal and preliminary sales reports obtained by Automotive News.

Sales were off 56 percent at the Toyota Division, down 45 percent at Lexus, down 41 percent at the Honda Division, and off 46 percent at Acura.

The sales decline at Nissan and Infiniti--12 percent--was not as severe, but sales at Hyundai surged 37 percent, according to the documents.

Toyota declined to comment on the confidential sales reports that show demand for some of its top-selling models fell more than 50 percent in early May.

"We can say that our supply outlook has improved significantly with this week's production announcements. As a result, based on our assessment of the market environment, we'll be offering enhanced incentives on a number of core models, including Camry, Corolla, Highlander, Avalon, Venza and Sienna," Toyota spokesman Steve Curtis said in a statement. "We believe these programs, which will be effective immediately and will vary from region to region, will keep us competitive."

Honda declined to comment on the latest 10-day sales figures.

"It's no secret that our factories have been operating at a reduced capacity for the past few weeks and the next few months will be challenging from a production perspective," Honda spokesman Chris Martin said. "We are going to face an inventory challenge going forward."

Jeff Schuster, executive director of global forecasting at J.D. Power and Associates, said Thursday there was a significant pullback in industry-wide sales during the first five days of May compared to April.

He blamed rising gas prices, lower industry rebates, and inventory shortages, especially among smaller vehicles, for the drop.

U.S. light vehicle sales rose 18 percent in April from a year-ago.

At the beginning of May, Toyota had almost no incentives. The Toyota Navigator, the monthly bulletin that Toyota distributes to dealers about incentive programs, was only two lines long. It's normally a full page.

That has changed with a new round of incentives that vary market to market.

For instance, in Los Angeles, the Camry has a 0 percent interest-rate deal for 36 months, a 1.9 percent interest-rate deal for 60 months, or a lease deal for $219 per month with a $1,999 drive-off payment.

Some markets won't get the same incentives. Los Angeles and the Gulf States have $309-per-month lease deals on Prius, but parts of the Midwest do not.

Similarly, Los Angeles has a 1.9 percent interest-rate deal for 60 months or $1,000 cash back on the Tundra. In Texas, there is $3,000 in package savings, a lease deal for $299 a month or $1,000 cash back on the Tundra; while Omaha has $1,000 cash back and 1.9 percent financing.

Meanwhile, Southeast Toyota is adding its own incentives to Toyota Motor Sales' contribution. The Southeast Toyota lease deal on Camry is $10 less per month than the Toyota offer, the Corolla is $22 less, Sienna is $30 less and the Venza is $60 less per month.

Ryan Beene and David Phillips contributed to this report.

By Mark Rechtin- Automotive News