What Happened to the Tundra?

By Chris Haak

Way back in the 2007 model year, you may recall that things looked quite different in the auto industry. Neither GM nor Chrysler had declared bankruptcy; GM was still the world’s largest automaker. Ford had just bet the company that its latest restructuring would fix their problem once and for all. Toyota was on a seemingly unstoppable roll, with month upon month of increasing sales (often at a clip of 10 percent over the year-earlier period).

There were certainly storm clouds on the horizon for the Detroit Three. GM, Ford, and Chrysler were losing money, the credit markets were drying up, and there was a major threat brewing against the last bastion of US automakers: the full-size pickup.

Toyota had dipped its toe into the market long enough with its flaccid T-100 more than a decade earlier, and its first-generation Tundra was closer to the successful formula employed by GM, Ford, and Chrysler. But the new-for-2007 Tundra was different. It was as big as the domestic offerings, and offered the same half-ton capabilities in towing and payload. It was coming from a company that could seemingly do no wrong in the US, and it was to be built in a brand new factory in San Antonio, Texas, right in the heart of truck country. Between the San Antonio plant and Toyota’s then-existing Tundra plant in Princeton, Indiana, Toyota had the capacity to produce nearly 400,000 Tundras per year. That would be some serious volume, approaching the levels of GMC or Ram sales.

So, the Tundra launched, and it was taken seriously by both competitors and consumers. First-year sales were a respectable 196,555 trucks.  Still not F-Series volume, but approaching GMC Sierra levels, including outselling the GMC some months during the 2007 model year. GM pulled the launch date forward for its GMT-900 full-sizers to better take on the Tundra (and to generate more cash quickly as the company entered what would be its final descent into bankruptcy), and Ford and Dodge were rolling out trucks due for a refresh.

Then a funny thing happened. Not only did Tundra sales slow, but they slowed so much that Toyota’s two-plant strategy for Tundra production became unnecessary.  Where at one time it appeared that Toyota might need to build 300,000 or 400,000 Tundras, the 200,000 capacity at the Tundra’s then-new San Antonio plant became sufficient to meet demand.  Second-year sales, amidst the highest gasoline prices in US history and a collapsing economy (not to mention desperate competitors not afraid to knock $10,000 off the price of their trucks) fell 30 percent to 137,249.

Toyota responded to the drop in demand by re-configuring its production allocations.  The Princeton, Indiana plant that had been the original US Tundra plant kicked the Tundra to the curb, with Tundra production going to only San Antonio, while Princeton picked up Highlander production.  That was probably a wise move, since in 2009, Tundra sales fell further, with Toyota moving just 79,385 Tundras in the depths of the recession.

Sales rebounded somewhat in 2010, with 93,309 trucks finding buyers, but that’s still less than half of the capacity at the San Antonio plant.  Then with GM (or rather, Motors Liquidation Corporation) exiting the NUMMI joint venture with Toyota, Toyota sold the plant to Tesla and shifted Tacoma pickup production to San Antonio.  Voila: better capacity utilization at the company’s newest operating plant.

Now that the auto market has recovered somewhat, the Tundra’s seemingly-inevitable dominance simply has not come to pass.  Toyota still sells far more Tundras than Nissan does copies of its aging Titan, but that’s still a fraction of what Toyota was hoping for when investing a billion dollars (US) in the new assembly plant in San Antonio.

All of the key players’ sales are way down from 2007 levels – arguably the last “normal” ones in the full-size market (yet still hundreds of thousands of units from their peak “cheap gas” years).  However, look at the top of the chart, where we calculated the percent of 2007 sales that the final 2010 sales represented.  It’s clear that Ford has pulled away from the pack in this regard; though still down almost 25 percent from its 2007 levels, Ford has held onto the greatest percentage of its 2007 sales among its peers, with 76.5 percent of them.

The other domestic brands retained between 55.7 percent (Ram) and 62.3 percent (Sierra) of their customers, which is between 14.2 and 20.8 percentage points below Ford’s retention rate.  Then there are the Japanese brands.

By sellng just 23,416 Titans in 2010, Nissan is officially a bit player in this high volume segment, holding just 1.7 percent of the full-size truck market.  Nissan’s troubles with the Titan should not be hard to discern.  The truck has been on the market relatively unchanged since the 2004 model year.  It had numerous quality problems at launch, and is available in only a very limited number of different configurations.  For instance, the only engine choice is the thirsty 5.6 liter V8 (13 MPG city/18 MPG highway) and only king cab and crew cab configurations are offered.  The crew cab can be had with a long bed, but the king cab can’t.  There’s no $20,000 price leader to bring in sales on the lower end; the Titan starts at $27,410.  Nissan was hoping that it would be selling the next-generation Titan by now (based on the Ram), but that deal fell through, so they were behind the ball, and the new Titan won’t come for another couple of model years.

The Tundra represented nothing short of a full-out attack of the market when the then-new Tundra made its debut for the 2007 model year.  Larger, more powerful, and more capable than any other Japanese-brand pickup truck, and even topping several of the domestic competitors in key metrics.  Yet the Tundra’s market share, which at 9.2 percent in 2007 was on the cusp of double digits, has fallen to 6.9 percent.  Through the first five months of 2011 (though admittedly, Tundra production was impacted by the Japanese earthquake), the Tundra is holding just a 6 percent share in the market.  Tundra sales in 2010 are but a shadow of their former levels, with the company selling just 47.5 percent as many trucks that it sold in the current Tundra’s first year of 2007.  That’s the poorest showing of the big six trucks with the exception of sad-sack Nissan.  Even Chrysler, which ran through bankruptcy and a brutal dealer cull, and whose viability was called into question by the President himself, was still selling 55.7 percent of its 2007 truck volume in 2010.

The Tundra has several problems.  First, for all the bravado at its launch, it’s not really offering anything special or new that its competitors aren’t doing.  Its engine and transmission choices are competitive, but not obviously superior.  Its interior is not really any better than the plastic-heavy interiors of its competition.  It’s had a few quality snafus with its camshafts, tailgates, and bedsides.

Second, it’s not available in any heavy-duty variants the way GM, Ford, and Ram are.  Though the less expensive half ton trucks sell in greater numbers, the HDs have greater profit margins and, perhaps more importantly, look similar to their light-duty counterparts.  If you want to buy a pickup partially because of the way they look, and subscribe to a “bigger is better” mentality, would you pick one that might be confused for an HD version (GM, Ford, Ram) or would neverbe confused for an HD (Toyota), since Toyota doesn’t make HDs?

The Tundra is also no doubt suffering somewhat from the Toyota unintended acceleration crisis of 2010.  The company’s formerly sterling reputation for quality and safety was tarnished, perhaps permanently, but certainly seriously as a result of the crisis and its response to it.

Accompanying the question of what happened to the Tundra is “what happened to the F-Series?”  Ford’s bread-and-butter is gobbling market share left and right.  Ford has the newest full-size truck (like the Ram, new for 2009, while the GMs and Toyota were new for 2007 and the Titan was new in 2004 when George W. Bush was still in his first term) and more importantly, Ford has the newest engine lineup and superior in-cabin technology.  Ford also has the dual benefit of being a company that is 1) not foreign-owned, and 2) not a bailout recipient.  No doubt each of those items is a big deal for some buyers.

All of the Tundra’s and Titan’s problems, plus all of the advantages in the F-Series’ corner, have taken market share directly out of Toyota’s hands.  Had the Tundra managed to maintain its 2007 market share percentage in 2010, it would have sold about 30,000 more copies.  Assuming $30,000 per truck in revenue, that’s more than $900 million USD in lost revenue.  Meanwhile, Ford’s market share gains mean that it is now selling 94,000 more trucks than it would be if it had the same 32.3 percent share as it had in 2007, rather than the larger 39.3 percent share it has today.  Basically, Ford is doing to its competitors in the full-size truck market what they did to the Detroit Three in the 1980s and 1990s in the car market.

There are probably other factors at play in the struggles of the Tundra that I couldn’t hope to understand, some of which might likewise explain the F-Series’ success over the past four model years.  We’ve looked at several factors; are there any that we’re missing?  We’d love to hear from you.