We chat with Toyota Motor North America's CEO in Detroit
Jim Lentz has been Toyota’s top American executive for more than a decade, calmly guiding the Toyota, Lexus, and Scion brands through the recession and into the current boom. Lentz spoke to Motor Trend at the Detroit auto show in January.
A few years ago, we were trying to find more capacity for RAV4. We decided to move all K-platform vehicles toward the northern part of the U.S., the C-platform vehicles to the south, and trucks in the southwest. We moved Corolla out of Canada to Guanajuato, Mexico, to make room for more RAVs. And we used our Baja plant for more Tacomas, which we were building at a 60,000-unit annual rate in December. The pickup market continues to grow, so we needed more pickup capacity. At the same time, there was an opportunity with Mazda. The quickest way to make this happen was to move Tacoma production to Guanajuato. That solved our most pressing need. We sold 329,000 Corollas in America last year, plus another 50-ish in Canada. We have Mississippi building 165,000, and the new joint venture in Alabama will build 150,000 more. (Mazda gets the other 150,000 from the Alabama plant.) So we have 310,000 capacity in North America. Either we need to find a way to build a few more depending on demand, or we get a few from Japan. We think that’s the right long-term sustainable Corolla number.
First sharing the Yaris with Mazda2, now the plant. Is Toyota getting cozy with Mazda?
The biggest thing is the philosophy of the two companies. They are both headquartered in an area where they’ve been for a long time. We’re in Nagoya, and Mazda is having the 100th anniversary of being in Hiroshima in 2020. Mazda is a company that really loves cars and loves driving cars. That’s a good match for us and for (Toyota Motor CEO and company scion) Akio (Toyoda). The head of Mazda and Akio really hit it off. Mazda is part of a mobility group working with us on the e-Palette (concept), along with Uber, Amazon, and Pizza Hut. And they are working with Denso, working on the fundamentals of EV platforms. This has evolved over time.
You predicted years ago that the RAV4 would outsell the Camry, and now it has. How far can SUVs go?
Last year, we sold 407,000 RAVs including Canada, and Camry was 387,000. The shift from passenger cars to light trucks been shifting 3–4 percentage points a year. That’s going to slow, but there still will be some movement. Obviously the big growth has been in the small SUV segment, and I don’t see that slowing down. I still think they will be red hot. If any one segment has surprised me it was entry (subcompact) SUV. I thought it would have been hotter, but it also shows people know the value of the (compact) SUV.
Toyota has shown some interesting, rugged small SUV concepts such as the FT-4X. Do you see a return of an FJ Cruiser-type vehicle?
There’s room for an authentic small off-road SUV. Everyone moved out of that segment because of truck CAFE ratings, but the 4Runner continues to do well in its segment. But we’re getting a lot of requests from folks who want another FJ or some variant. Some of our concepts are along those lines. We’ll see how market testing goes. As all these SUVs get larger, and we see proliferation in the overall SUV segment—there is room on the lower end in terms of price or authenticity for an authentic, off-road, frame-based SUV, which is what the FJ was. This would be for people going outdoors but truly going off-road. This would not be about all-wheel drive for safety; this would be four-wheel drive with ground clearance. The difference is in wheel travel, and you can only do that with frame-based. This could be FJ-sized, but for an enthusiast, it’s gotta be something with a small wheelbase to be more maneuverable when in the rocks. We’ll do some testing with small concepts.
Where does the SUV trend leave the 4Runner and Sequoia?
The jury is still out. Most SUVs have gone car-based because they needed to get lighter. There’s market demand for frame-based SUVs, but we have to crunch all the CAFE numbers to see if there’s room for them in our lineup. 4Runner continues to do well, but the softest segment is for big SUVs, where Sequoia is. It’s been OK but not great because the midsize SUV rear-seat packages are so good, and the size has gotten larger. If you have a large family and a lot of cargo, you gotta go large. But the segment was flat, whereas midsize was up 6.5 percent and small was up 8.9 percent. But entry SUV was down 1.3.
BMW has already shown its Z4, which will be shared with a Toyota sports car. Anything you want to say about the new Supra?
We have no announcements yet. This is the longest introduction in the history of mankind.
Toyota recently announced it would launch 10 EVs globally by the early 2020s. But how many are destined for the U.S. market?
It depends on where market heads in the U.S. We’ve talked about 5.5 million electrified vehicles by 2030, but that could be either pure battery-electric, fuel cell, or hybrid. About 1 million was going to be battery-electric, which could include fuel cell. Looking at the U.S. market today, hybrid is 2.7 percent of the industry, and EV is just 0.6 percent. It’s a tough market for EVs. Demand still is not there in the U.S. The good news is that because of need for EVs in China and Europe, that’s creating a global push for EVs. But when demand comes here, we will have a stable of EVs to choose from. When you look at the number of manufacturers chasing that 0.6 percent, it’s still not a business yet. We’re at 9 percent of our sales mix is hybrids and will be 15 percent by 2020. Toyota is going to increase the number of hybrids, plug-in hybrids—we’ll continue to see the technology of hydrogen and see where the technology goes with battery electric vehicles. If you take out the GM EV1 and the Toyota RAV4 EV, then battery EVs have been on the market as long as hybrids in the modern era. Hybrids have gone from 0 to 2.7 percent in 18 years. EVs are still at about a half-point of share. The question is whether the adoption of EVs will grow faster than the adoption of hybrids, slower, or about the same. Even if it grows more quickly, it’s difficult to see a robust EV market in the near future. Unlike hybrids, EVs still have range and infrastructure challenges.
Small-car maker Daihatsu is a Toyota subsidiary. What about bringing the Compagno show car to America instead of the boring old Yaris?
We’re not involved very much in their product right now. They are viewed as a small car and developing-market car brand, not a mature-market car. It’s not targeted for developed markets. But we can go to see if there’s something that gets us excited. Back in the Scion days, the Copen got us excited, but it didn’t work out.
Toyota held back from having Apple CarPlay and Android Auto infotainment in its cars. But the 2019 Avalon will have CarPlay. What changed?
Everyone wants to control the center stack of the car. When you look at who’s responsible for the safety of the center stack, it’s on the OEM. So we need to control it. Apple understands that need. Not everyone does.
What do you think of the Lexus LF-1 flagship SUV concept?
There are concepts to stretch the imagination of the designer, made on imaginary platforms, but they not buildable. Then there are concepts built on platforms that could go to market. This is on a platform that could go to market. That’s the direction Toyota goes, especially in North America. We use this as an antenna into the market. You can stretch the imagination, but then you still have to get the concept to production. To us, we think there’s a market for a vehicle like this. We’d rather have a concept that could go to market much quicker. There is an insatiable appetite for light trucks. And the luxury segment is moving as hard as the mainstream.
The German luxury brands have had turbo-four engines forever, but the idea is new to Lexus. How have Lexus customers reacted to turbocharging?
They have been well received. The LS twin-turbo six-cylinder is just hitting the market, and the reaction has been spectacular. Turbos are viewed as a higher-tech engine, so luxury customers see it as a step ahead of a naturally aspirated engine. Just like hatchbacks were. They were the cheap cars; now they’re the cool cars. But it’s about how you execute the turbo or the hatch. Hatches were cheaper, but now they make a really nicely styled car. You can have a great performing engine with a turbo; it’s not just a way to jam a small engine in a small car.
What about the future of the Lexus F and F Sport subbrands?
They’ve been going really well. Some of the executions have allowed F Sport to spread across entire lineup. Before the LFA (supercar), an F Sport made sense only on a few select models. It would only work on a GS sedan. But we had some image creep with the LFA, and now the LC and RC, so it makes sense to have F Sport across the line. It allows us to reach broader demographics, and F Sport skews younger. F Sport brings Gen Y into the brand.