Toyota's Sales Are Clobbered as Buyers Turn Away From Sedans

By Markets Fool.com

The Toyota Camry has been a best-seller in the U.S. for many years. But lately, more buyers are looking elsewhere: Sales fell 16% last month. Image source: Toyota.

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Toyota said on Wednesday that its U.S. sales dropped 9.6% in May, on steep declines in demand for its Toyota-brand and Lexus car models.

What hurt Toyota's sales in May

Like nearly all of its rivals', Toyota's May sales result suffered from an unfavorable year-over-year comparison, thanks to a quirk of the calendar. While the month of May always has 31 days, May of 2015 had one more weekend than May of 2016, or two more "selling days" in the industry's lingo. That matters more than you might think: Many new vehicles are sold on weekends, when buyers who work on weekdays have time to visit dealers and take test drives. Analysts hadwarned that most automakers would post sales declines as a result, and those warnings proved accurate.

Toyota is also being hurt by an industrywide shift in buyers' preferences away from sedan models and toward SUVs and trucks. For some Toyota rivals, like SUV-heavy Fiat Chrysler Automobiles , that has been a boon. But Toyota's traditional strength has been sedan models like its Camry and Corolla, and sales of those cars have suffered, hurting the company's overall result.

As a group, sales of Toyota-brand cars fell 15% in May, while sales of its Lexus-brand cars fell 16.5% from a year ago.

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The U.S. market for pickup trucks has been strong, but Toyota's pickups didn't help its results in May. Rivals Ford and General Motors posted solid sales gains for their highly profitable full-size pickups, but sales of Toyota's Tundra fell over 16%. Toyota's midsize Tacoma pickup fared somewhat better, but still posted a 5.6% year-over-year sales decline.

What helped Toyota's sales in May

Toyota and its Lexus luxury brand do have SUVs, of course, and those models performed well in May. As a group, sales of Toyota-brand crossover SUVs (including its Sienna minivan) rose 4.2% last month despite the calendar-related disadvantage. That was led by a 12% increase for Toyota's best-selling SUV, the compact RAV4, and a 21% gain for the truck-based 4Runner.

The big-selling RAV4 SUV was one of a fewbright spots in a mostly dismal month for Toyota. Image source: Toyota.

Lexus-brand crossovers managed a 3.4% increase as a group, paced by a 10% gain for the RX line. Lexus's U.S. general manager, Jeff Bracken, said that sales of Lexus's SUVs were probably limited to some extent by tight supplies. That's a good problem to have, but it's still a problem, one that Toyota is working to address.

What it means for Toyota investors

North America has long been a key source of profits for Toyota. Right now, those profits are being squeezed by a number of factors, including the overall market's slowing growth, the shift in demand toward SUVs, and exchange-rate trends that make U.S. dollars worth less when translated into Japanese yen.

There's not much that Toyota can do about the exchange rates aside from warning its investors (and as the company readily admits, it benefited greatly while the trend was moving the other way). But while sedans are Toyota's traditional strength in the U.S., it does have some popular SUV models, including the RAV4 and Highlander as well as its Lexus entries. If it can increase supplies of those vehicles while demand is still strong, it may be able to make the most of the slowing market.

The article Toyota's Sales Are Clobbered as Buyers Turn Away From Sedans originally appeared on Fool.com.

John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.