Competitors Dumping on Toyota

Those black clouds hanging over Toyota after the company recalled more than 4.2 million vehicles and stopped the sale of eight popular models are hiding some silver linings for the Japanese car maker’s competitors. As Toyota sales fell 16% in January from the same period last year, sales of other car makers rose slightly, even when faced with a lack of consumer demand. Both GM and Ford reported increased year-over-year sales last month January, helped along by a huge jump in fleet sales for both car makers.

Worried Toyota owners may also find themselves targeted by rival car dealers who are offering them rebates when they trade in their Toyotas. Both GM and Ford are offering $1,000 rebates on all their 2009 and 2010 models to Toyota owners. Chrysler wants to give $1,000 to Toyota owners with expiring leases who switch to a Chrysler product. Chrysler is also targeting SUV and truck owners, giving an additional $1,000 to customers who trade in a Toyota Tundra. Tacoma, or Sienna for a new Jeep, Chrysler, Dodge car, or Ram truck.

These targeted cash incentives run counter to an effort by many car makers to wean potential customers away from cash rebates. While many industry experts believe that low-interest-rate and 0% financing deals will be around for some time, cash rebates, which in March of last year averaged almost $3,200 per vehicle sold, may be hard to come by this year. Much will depend, they say, on whether car makers can successfully adjust production to consumer demand. Fewer cars would mean that prices won’t be as negotiable. Overbuilding, on the other hand, could lead to the return of cash incentives.