Toyota Accelerates Toward a Market Share Recovery

Toyota (TM) will reportedly announce Friday that by September, it expects to have all of its North American plants back to their normal production levels. Then, it can begin attempting to recoup the U.S. market share it lost due to shortages related to the Japan earthquake and tsunami, as well as a slew of recalls.

It would be a mistake to count the company out. Toyota's slowing global sales have pushed it back into the No. 2. worldwide sales position behind perennial leader GM (GM). But GM's advantage is tiny based on unit sales.

Toyota's U.S. market share for the first five months of the year was 13.3% down from 15.2% in the same period in 2010. In May, thanks to earthquake-related inventory shortages, that figure fell to 10.2%, behind struggling U.S. car company Chrysler. Not so long ago, there was a time when Toyota's share was 18%, and it often beat Ford (F) in monthly American sales.

Toyota will benefit from pent up demand in the last quarter of this year. Some buyers will move to other manufacturers, but cars like the Prius are still the preferred product in their categories. Many experts expect that the scarcity of some Toyota models will allow it to raise prices. That may help the company's bottom line, but Toyota will have to decide whether the move will curtail unit sales.

Toyota's reputation has proved remarkably resilient since huge global recalls in 2010. That will almost certainly help its rebound. In the JD Power 2011 Vehicle Dependability Study, Toyota received four stars out of a maximum of five, and its Lexus luxury brand received five stars. Toyota's rating matched that of Mercedes, and beat Ford and Chevrolet, the two-top selling American brands.

Toyota seems to have benefited from brand equity, a repository of positive reactions to the brand built up over decades of producing high-quality cars and offering good customers service. This has almost certainly been aided by the fact that a number of the defects that caused recalls were actually due to human errorand not mechanical trouble with its vehicles.

Toyota still has one of the strongest balance sheets among worldwide manufacturers, so it can afford to ramp up marketing programs in the U.S. It can also afford to give customers incentives to lure them back to dealerships. Its Prius, Camry and Corolla remain among the best-selling vehicles in the country, and its Highlander and 4Runner remain among the best-selling SUVs.

Back in the 1970s, Toyota's market share in the U.S. was negligible, but the company's ability to supply what the nation's consumers desired made it the second-largest car company in the country by the early 2000s. It still has one of the strongest dealership networks in the U.S. Once manufacturing recovers, Toyota will have all the pieces in place for a comeback.


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