Toyota redesigns RAV4 for U.S. market

by Alan Ohnsman

Bloomberg

Toyota Motor Corp.’s RAV4 was an oddity when it went on sale in the mid-1990s: a tiny, low-priced alternative to hulking sport utility vehicles such as the carmaker’s own 4Runner and Ford Motor Co.’s Explorer. But it was a hit.

Now it lags behind Honda Motor Co.’s CR-V and Ford’s Escape, which arrived later. With U.S. demand for compact light trucks expanding, Toyota has put a higher priority on the RAV4 as part of a redesign for the 2013 model year, said Bill Fay, Toyota’s group vice president for U.S. sales.

“It was a great concept and we’ve done well with it, but we never took it and ran with it as hard as we’ve run with” the Camry sedan, Fay said of the RAV4 in an interview in Scottsdale, Arizona. “It’s a complete package this time.”

The revamp makes the RAV4 look more like a wagon and less like a truck-based SUV, reflecting changes in the segment. The new version arrives amid Toyota’s U.S. rebound after three years of recession, recalls and natural disasters that have hurt demand for its cars and trucks. Through November, Toyota’s U.S. sales surged 29 percent from a year earlier, and the automaker expects its U.S. vehicle sales to top 2 million for the first time in four years.

Including so-called sport wagons, U.S. sales of small SUVs totaled 2.89 million this year through November, or 22 percent of the total 13.1 million light vehicles purchased. The segment trails only midsize cars, led by Toyota’s Camry, at 3.3 million units, according to Autodata Corp. based in Woodcliff Lake, New Jersey.

Sales of compact utility vehicles should grow 6.4 percent in 2013, according to IHS Automotive — faster than compact car sales projected to rise 5.8 percent and midsize autos at 4.9 percent, IHS Automotive data show.

While RAV4 sales jumped 33 percent to 157,526 through November, it trails the CR-V, the top-selling SUV in the U.S. market, by nearly 100,000 units. Ford’s Escape came next with 240,877 sales through last month, and even General Motors Co.’s Chevy Equinox outsold the RAV4 this year, with 199,070 deliveries.

The restyled RAV4, unveiled last month at the Los Angeles Auto Show, sports a lower roof line and sleeker exterior for a more contemporary, wagonlike look. The spare tire, previously carried on a side-hinged rear door, is hidden in the rear cargo area, making the new model look less like an SUV.

Yoshikazu Saeki, the model’s deputy engineer, said the old RAV4′s spare tire on the rear door gave the vehicle a more “old-fashioned look” compared with its competitors. A year ago, Ford similarly altered the Escape, also unveiled in Los Angeles, eschewing a rugged exterior look in favor of a more wagon-type appearance to try to overtake the CR-V.

Toyota also will no longer offer optional V-6 engines or three rows of seats. The company’s strategy is to nudge customers needing such options to the larger Highlander.

“What’s happened is these products have been redefined; they’ve evolved to match the times,” said Jim Hall, principal of auto consulting firm 2953 Analytics in Birmingham, Michigan.

The new RAV4′s pricing is also intended to boost its appeal. While the base model starts at $23,000, compared with the entry-level CR-V price of $22,795 and that of the Escape at $22,470, Toyota says the RAV4 has more standard equipment, including a backup camera and hands-free Bluetooth system.

Top-end Limited RAV4s with all-wheel-drive cost $28,410, compared with $30,295 for an AWD CR-V EX with leather and $32,120 for a Titanium grade four-wheel-drive Escape, according to Honda’s and Ford’s websites.

Toyota’s American depositary receipts rose 3.1 percent to $89.25 at the close in New York. They’ve risen 35 percent this year.

Toyota is also counting on the new RAV4′s increased space and improved fuel economy to reach a 200,000-unit sales target next year, Fay said in Los Angeles last month.

A year after its introduction in Japan, Toyota began selling the RAV4 in the U.S. in 1996. Initially available in both two- and four-door versions, the company touted it as a “new concept” SUV. The name stood for recreational active vehicle with four-wheel drive.

The original model was derived from Toyota’s Corolla sedan, developed to solve a production dilemma, Hall said. “There was too much Corolla capacity in Japan at the time, so it was created to round out plant capacity, since it was built on the Corolla line,” he said.

Toyota already had SUVs, including the truck-based 4Runner and the Land Cruiser, so it wasn’t initially as focused on the RAV4 as Honda was on its CR-V, according to Hall.

“Honda didn’t have anything in the truck space at the time, aside from the Passport — a rebadged Isuzu SUV,” Hall said. “For Honda, the CR-V was a product of desperation.”

When the first CR-V arrived in the U.S. in 1997, derived from Honda’s Civic platform, it was available only as a four-door model. Honda dealers had an incentive to push the CR-V because it was more profitable for them than the Passport, which was made at an Indiana plant co-owned at that time by Isuzu Motors Ltd., Hall said.

“They didn’t want the product originally,” Hall said. “That changed when they understood that a Honda-produced vehicle made more money for them than one supplied by Isuzu.”