TDP means cheaper cars, stronger residuals

Some Toyota buyers might imagine Drive Happy follows a route they’ve already taken, but there are key differences.

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REALIGNED pricing for Toyota cars through a just-enacted brave new sales programme could previously be achieved, the brand says, but the move to a no-haggling formula provides a far superior deal.

Toyota New Zealand insists its radical and potentially unique Toyota Driveway Price (TDP) regime enacted on April 2 provides strong value, not only providing a swath of added benefits at buy-in but also better-protecting residuals come trade-in time.

The Palmerston North-centred franchise has elaborated on its Drive Happy Project now that its revised pricing plan has gone public.

As of Monday, sticker prices on Toyota-badged product dropped from between around $2000 to $10,000. The larger, higher-priced vehicles – the Hilux one-tonne utility and Highlander sports utility vehicles included – receive bigger price drops than the budget-end Yaris and Corolla.

A retail rejig whose first full test came yesterday – with positive outcome, Toyota claiming 20 sales by 3.30pm - also brings in a swathe of other changes, including the renaming of Toyota dealerships as stores and stock being withdrawn from traditional forecourts and mainly held at centralised regional pools in Auckland, Wellington and Christchurch.

However, it will be the bottom line buyers will surely take greatest immediate notice of. TNZ has already seem signs of this occurring on this, the first day of business after a holiday.

Until last week, Toyota NZ stuck to the industry-standard formula of recommended retail pricing, but also allowed flexibility, having accepted that RRPs were often a starting point for discussion with new car buyers.

Thus, beyond those RRPs were RSPs – retail selling prices; a base transaction level at which much less margin applies.

Neeraj Lala, Toyota New Zealand’s General Manager of Product and New Vehicle Sales, says the new TDPs are broadly similar to RSPs.

However, he reminds, TDP is a single national driveway figure and also applies a swath of additional incentives: Registration, a full tank of fuel, floor mats, 1000km of Road User Charges (on diesel vehicles) and the Toyota Care Service Advantage, which caps service pricing (depending on model) and can give customers an extended warranty after three years if they service with an authorised Toyota centre.

All those costs are covered by Toyota New Zealand.

The strength of the TDP will carry through at trade-in time; with TDPs, residual values would improve, he believes.

“Residual values have never been based on RRPs. A TDP, as we’ve positioned in the market, is similar to what we have offered previously as an RSP – our retail sales price, because it’s all based on transaction prices.

“The ‘buy’ price for customers is still competitive. Our RSPs in the first quarter (of this year) were really competitive in terms of their positioning. We weren’t able to call those our new price under Drive Happy, but they would be very similar.

“From that perspective, we don’t imagine it having any impact on residuals at all. If anything, the residuals should improve slightly because of the added value.”

On appealing factor is that capped price servicing and warranty plans are transferable.

“We’ve had a customer today already pre-pay for a first year’s servicing. If that customer sold that car, the next three years of fixed years’ servicing for that car stays with the car, not the customer.”

Lala says Toyota spent much of last year trying to bring private buyers back to its outlets, with considerable success.

“We finished last year ahead in all channels, which was one of our core objectives. Even though fleet is a big part of our business we had a big focus on wanting to improve our private market share and, in the first quarter, that was great – after our February final results we were 43 percent on private sales.”

However, at least 50 percent of Toyota new car volume goes into the fleet and rental markets.

 Those bulk buyers will still be able to buy at sub-TDP prices and the discount structure for fleet customers will continue to base on what type and how many vehicles they buy.

“We are still really proactive in the fleet business. We’ve moved away from a huge discount percentage but 50 percent of our business is handled directly (by Toyota New Zealand) anyway, and those discounts and deals are all transaction price-based.

“How we determine those is by the size and volume of each of those fleets and that will continue (under TDP). We will notify our customers that, if they are a major strategic fleet, that their pricing will remain fairly constant.”

TDP does not apply to accessories – these are highly lucrative to the retail side of the business and sellers will continue to independently set their prices – nor to Lexus cars. Toyota has admitted, though, that its high-brow division might one day be drawn into this new way.

Toyota stores will still have product, Lala enforced, including a wide span of demonstrators for public use. These vehicles are owned by the franchises rather than the distributor and cannot be sold to customers, until the fleets are refreshed four months.

Meantime, TNZ says conjecture within the industry that it has enacted Drive Happy as a riposte to impending changes to commerce rules, enacted under the Commerce Amendment Bill, are wide of the mark.

Ironically, the Drive Happy media briefing occurred on March 28, also the day when a final version of the guidelines was released by Government to accompany changes to the Commerce Act, which came into force in August last year for addressing cartel-like behaviour.

The new regulations give a helping hand to companies wanting to work together but avoid breaking the laws on price-fixing or market controlling behaviour.

Examples of TDP are: A Highlander GX is now $54,990, a reduction of $9900 over the previous RRP. A Hilux 4x4 SR5 double cab has dropped from $62,990 to $53,490. A Corolla Hybrid hatch is $31,990, having previously been $38, 490. A Prius SX goes from $48,790 to $38,990. A RAV4 GX 2WD drops $5000, to $32,990, the Corolla GX falls $5300 to $27,990 and the Yaris SX, previously $25,490, is now $23,990.

The two new models TNZ announced last week, the Camry sedan range and Prius Prime plug-in, have launched with TDP taken into account.