Originally Posted by WFAA TV

Small-town Texas, with its dusty cowboy and pickup truck culture, beckons Toyota Motor Co.

The Japanese juggernaut, best-known for its refined urban sedans and hybrid vehicles, is opening two small dealerships in East and Central Texas this year, as well as a larger dealership in Athens, east of Dallas – all of them unlikely locations for Toyota.

Toyota may need them, despite the fact that the hard-charging automaker is within 20,000 sales of catching up to the Chrysler Group (327,565 vs. 345,832 through February).

"We are a very mature company," said Mike Bevan, corporate manager of market representation for Toyota Motor Sales USA Inc. "Certainly, we want the big points in metropolitan areas, but we also are looking for other opportunities in perimeter markets."

Much of the company's growth in the last decade has come from new vehicles such as the RAV4, Highlander, Matrix, Tundra and Sequoia. Moreover, Toyota is conservative about adding dealerships in traditional markets, which further limits potential sales growth.

Now that the company has a full line of vehicles, some analysts predict that its growth will slow to about half what it was in the first half of this decade.

Toyota's small-town plan is "a smart move on their part," said Mike Dawson, manager of global forecasting analysis at J.D. Power and Associates. "As you get out in the next few years, it's hard to see them growing in double-digit numbers. It will level off toward the end of the decade."

Between 2000 and 2005, Toyota Motor Co.'s total sales – including the Lexus and Scion divisions – grew 27.2 percent, or 5.4 percent a year, according to statistics compiled by Automotive News. Last year alone, they increased nearly 10 percent. But J.D. Power predicts that Toyota's sales will grow about 14 percent between now and 2010, Mr. Dawson said, or 2.8 percent a year.

Toyota believes that it can do better than that, sustaining its current growth by constantly improving its vehicles. And Texas dealers expect the new full-size Tundra pickup to pump their growth even higher than overall national sales, which company officials predict will increase 5 percent to 10 percent this year.

Whatever the growth rate, some analysts say, Toyota will have to work harder for it.

"They are losing places where they can pull buyers from," said Wes Brown, an analyst with industry consultant Iceology in Los Angeles. "Right now, their momentum is strong enough to keep them at 5 to 8 percent [annual growth] for the next couple of years. After that, I think it will be in the 1 to 2 percent range."

Unlike the domestics, Toyota limits its number of franchised dealerships. Since the mid-1980s, Toyota has averaged two new dealerships a year in the U.S., Mr. Bevan said.

The company has 1,215 dealerships. The Chrysler Group, in contrast, has about 8,600, Ford Motor Co. has about 7,200 and General Motors Corp. about 15,400.

"Our strategy is fewer dealers with larger volumes and hopefully more profit," Mr. Bevan said.


Reading the ROMs

A third of Toyota's U.S. dealers have expanded or improved their growth-strained facilities. In the meantime, the company is also pursuing its small-town opportunities.

Inside Toyota, the new Texas dealerships in Mount Pleasant and Madisonville are called ROMs – "rural opportunity markets." At 18,000 to 20,000 square feet, the facilities will be half to two-thirds as big as a typical city dealership.

The Athens dealership is a conventional new store. A dealer has not yet been named.

Toyota dealers in nearby larger markets will own the two ROM facilities, said J.C. Fassino, vice president for marketing and market representation at Gulf States Toyota Inc., Toyota's distributor in this area.

Car dealerships are low-profit enterprises – typically netting about 2 percent in a good year – so Toyota hopes the dealers will earn a decent return from the smaller stores. The paired city and town dealerships will share some administrative and advertising expenses and will be overseen by one general manager.

The smaller stores will be complete operations, with sales, service, parts and finance departments, and will probably sell fewer than 1,000 new vehicles a year, Mr. Fassino said.

Toyota plans to open three more ROM dealerships, with one possible in the North Texas area.

"This is kind of a new franchise for us," Mr. Fassino said. "We intend to test the concept. We'll assess the ROMs we've got before we decide to proceed."


Truck sales

Sales may not be Toyota's only motivation, some say. The company's new and much larger Tundra pickup arrives at dealerships early next year, and Toyota wants to compete with the Big Three for buyers in one of the domestics' traditional strongholds – rural areas.

Toyota is completing an $850 million truck plant in San Antonio that will allow the company to more than double its current Tundra sales.

"We think that some of these rural points will sell more trucks than cars," Mr. Fassino said. "When you're going to be selling a new truck, obviously the rural markets become more important. We need to reach those customers."


'Trying to catch up'

Texas will account for about 70 percent of Tundra sales in Gulf States' five-state region, which includes New Mexico, Oklahoma, Arkansas and Louisiana. Mr. Fassino predicts that the rural dealerships could ultimately push up Toyota's sales in Texas by 10 percent to 15 percent.

"We are trying to catch up," he said. "Ford and Chevy have a real advantage, though I don't know that our game plan is to try to equal them in dealers."

Initially, the smaller dealerships won't be as lucrative as a major-market Toyota dealership, said Paul Taylor, chief economist at the National Automobile Dealers Association. But as sales grow, the small dealerships with their relatively low overheads may become more profitable per square foot than the big dealerships, Mr. Taylor said.

However, money and sales may only be part of the small-town picture.

"I think they would like to say that Toyota trucks have been accepted in rural Texas, which would have a lot of image value," Mr. Taylor said.

Originally Posted by hotactionkaty

hmm sounds right up my alley. i live in west texas and drive one of only 5 tC's in my town. ha.

Originally Posted by Killa

I was in San Antonio Thursday-Sunday... unless you were driving in circles around my hotel and the area I was in, there are a lot more than 5 scions in SA.

I currently live and work about 30 miles from Athens, TX.... I wonder if my bosses know about the coming competition... and I wonder if our new dealership we're building is included in the "New" dealerships they were talking about.

Originally Posted by Killa

San Angelo, not San Antonio...I wish I lived in San Antonio!!