Toyota to Build More SUVs as U.S. Demand Rises

Toyota Motor Corp. will build more sport-utility vehicles this year at factories in Japan and Canada to meet rising U.S. demand, the carmaker’s top North American executive said.

Expanding output of models such as the Toyota RAV4 and Lexus RX will be a test of President Akio Toyoda’s plan to squeeze more vehicles out of existing factories before building new plants. That strategy remains in place, said Jim Lentz, chief executive officer of Toyota’s North American operations.

“The freeze is still in place until the end of March of 2016,” Lentz said in an interview at the North American International Auto Show in Detroit. “That hasn’t changed. All indications are that it will lift, but right now it has not lifted.”

Toyota will keep making more SUVs after its combined sales of such models climbed 16 percent last year to a record. Even before gasoline prices started their descent toward $2 a gallon, Americans were shifting from passenger cars and buying more SUVs, now built to offer relative roominess with little compromise on fuel economy.

Strong U.S. sales, led by SUVs, have helped Toyota stay ahead of Volkswagen AG to remain the world’s largest automaker. The VW brand sells just two SUVs in the country -- the compact Tiguan and upscale Touareg -- while Toyota fields five. The Japanese automaker is now considering smaller SUVs for further growth, Lentz said.

“We’re going to have to look at how the market under RAV4 develops,” Lentz said. “There’s no question that it’s going to. That’s going to be the next growth spurt.”

Lexus NX

Toyota can raise production of the RAV4 and RX in Japan and Canada this year, Lentz said. Lexus will also have its first full year of producing the smaller NX SUV, which outsold competing models from Bayerische Motoren Werke AG and Daimler AG’s Mercedes-Benz last month in the U.S.

Toyota has the opportunity to sell 300,000 RAV4s annually in the U.S., although it may not cross that threshold this year, Bill Fay, a Toyota division group vice president, said in an interview. The company delivered 267,698 RAV4s in the U.S. last year.

Lexus has already increased production of the NX beyond the original plan since the vehicle went on sale in the third quarter of last year, Executive Vice President Mark Templin said in an interview.

“If it shows that it has more legs, then we’ll have to address it again,” he said, declining to give specific production figures.

Toyota hasn’t said whether fourth-quarter sales kept the company ahead of Volkswagen, which said this week it delivered more than 10 million vehicles for the first time in 2014. The German carmaker trailed Toyota by about 72,000 vehicles in the first nine months of the year.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE