David Christ on Toyota’s electrification and dealer strategy

David Christ joins Inside Automotive to discuss how Toyota navigates a rapidly evolving market, balancing affordability, dealer support, and electrification. Christ explains how lean inventories, diverse powertrains, and digital retail tools allow Toyota to maintain profitability and meet changing consumer expectations. He also outlines strategies for electrification, dealer profitability, and operational resilience in 2026 and beyond.

•  Maintaining strong resale values and dealer margins through lean inventory and selective production 
•  Expanding electrification with hybrids, BEVs, plug-in hybrids, and hydrogen fuel cell vehicles 
•  Launching new BZ, CHR, and Highlander BEVs to meet urban and family buyer needs 
•  Supporting dealers with profitable leasing programs and digital retailing via SmartPath 
•  Balancing a broad product portfolio, including small cars, SUVs, trucks, and body-on-frame models 
•  Strategic investments in battery production to ensure flexibility and long-term growth

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Transcript

Jim Fitzpatrick 0:07

Welcome to Inside Automotive with Jim Fitzpatrick. Hey everyone, Jim Fitzpatrick. Thanks so much for joining me on another edition of Inside Automotive right here at cbtnews.com. When it comes to consistency and staying power, few brands have delivered like Toyota, and they continue to set the pace in a market that's anything but predictable. On today's show, David Christ, who's the group vice president and general manager of the Toyota Division at Toyota Motor of North America, is here to give us his outlook on the company's strategy as the industry navigates shifting demands, electrification, and the road ahead for dealers. So thank you so much, David, for taking the time out of your busy schedule there at Toyota to join us on the show.

SPEAKER_00 0:45

Thanks, Jim. Great to be with you.

Jim Fitzpatrick 0:47

Sure. So over the past year, we've seen inventory levels stabilize while consumer demand has become a little more selective. How is Toyota balancing production incentives and profitability in today's normalized uh uh market and uh but still unpredictable market?

SPEAKER_00 1:03

Yeah, we're we're in a great place, Jim. You know, we have a very low inventory. Uh this month we're running at about a 15-day supply, wow, uh, which is uh very low in relation to the industry. Many of our products are sold out, meaning customers are coming in and uh placing orders for cars that are coming in the future. Uh so from an inventory and sales management perspective, we're really in great shape and uh business continues to be really robust for us.

Jim Fitzpatrick 1:32

Sure. So is great shape the is is is a 15-day supply the new uh the new bar for great shape? I know when I was a Toyota dealer, uh we wanted more like a 30 or maybe a 45-day supply of cars, but you guys have stayed lean and mean, right?

Affordability Without Diluting The Brand

SPEAKER_00 1:47

Yeah, we've been lean, and you know, the great part of our story is it's not from a lack of production. Uh last year we actually had a record production year for North America. And in spite of building more cars than we've ever built, we actually continue to have lean inventories. So for our story, it's all about consumer demand. Our products are really hitting the market. Uh, we have great value price uh strategies. So affordability is obviously a big issue in the industry, and our cars are really hitting the sweet spot for customers, and we continue to have a really brisk sales pace. And uh we're really proud of our dealers and our team to uh stay on top of the market.

Jim Fitzpatrick 2:30

That's great. That was actually my next question with higher interest rates and affordability concerns that are out there that are still impacting buyers. What specific strategies is Toyota using to help dealers move metal uh with it without sacrificing long-term brand value?

The Portfolio Powertrain Strategy

SPEAKER_00 2:46

Yeah, great question. Affordability is without a doubt one one of, if not the most talked about topic in the industry right now. Uh Toyota's taking a lot of steps uh recently and some steps over our over the course of many years to keep affordability low for our customers. We offer 11 vehicles under$35,000, uh, which is more than any other brand. So we're really proud of that. Yeah. Uh one strategy that's really paid off is our continued investment in passenger cars. Uh so Camry and Corolla are both really uh selling well and popular with consumers. Uh, another thing we focused on is making sure we keep lower-end products in each car's lineup. Uh so we don't just sell the high-end models, we also sell entry grades for customers to achieve them. Uh, we've added to the lineup, so lower end vehicles like Corolla Cross that have been a huge hit. And then one other strategy we think that has paid off uh in in many ways is our portfolio approach. And what we mean by portfolio approach is we want to offer powertrains uh across the lineup for customers. So we don't just sell hybrids, we don't just sell internal combustion engines, we sell internal combustion engines, hybrids, plug-in hybrids, and battery electric vehicles. And we even sell fuel cell vehicles powered by hydrogen in the state of California. So we believe by offering this wide range of powertrains, it gives one, consumers affordable choices, and two, it really fits their lifestyle. B EVs are awesome, but they may not work for everybody because of range or maybe long commutes. Well, we want to offer something to everybody, and that's what our portfolio approach does.

Jim Fitzpatrick 4:34

Yeah, you guys um Toyota has really doubled down on hybrids. I mean, while the your competitors out there went all in on EVs, and now given the current EV demand trends and policy shifts, do you feel that that strategy has has proven to be the right call?

SPEAKER_00 4:49

Yeah, we you know, we took a very customer-first approach when it came to our powertrain uh selection, and we really think that's paid off. The industry last year was at 22%, what we call electrified, so that's hybrid, plug-in, hybrid, or BEV. Okay, we were over 50%. So our our makeup lineup of our cars has a lot of different choices for customers, and the hybrid plug-in hybrids and BEVs have been really popular.

Toyota’s Realistic EV Adoption View

Jim Fitzpatrick 5:17

That's great. That's great. As EV growth moderates and and infrastructure concerns remain on that, what does Tayota see as a realistic adoption curve over the next, let's say, five years? And how should dealers be preparing today for that?

Dealer Profitability And Resale Strength

SPEAKER_00 5:31

Yeah, so we actually are very high on BEVs. We think the industry is going to move more towards BEV as infrastructure comes uh online. Uh, and we think as the technology continues to improve, more and more customers might choose an EV that may not have chosen one five years ago. Yeah. Uh so we actually just relaunched the BZ, uh, previously called the BZ4X, and that car has much higher range, faster uh charging times. It's been a home run. We've had uh three of our best, three of our four best months ever in December, January, and February. Uh the car is doing really well in the marketplace. We're launching CHR, uh, which is a small, fun, exciting urban BEV. We're launching BZ Woodland, which is a derivation of the BZ nameplate, a little bigger, a little more outdoorsy for people that want to be out outdoors. And then we just recently announced to the public the Highlander Bev, which is coming out in the fall, and that's a really capable, spacious third three-row BEV SUV for families. So we really are investing big time in BEVs, and we want to have not only um powertrains with B or cars powered by BEV uh powertrains, we want to have cars across the pricing spectrum for our customers. Yeah, that's fantastic.

Jim Fitzpatrick 6:52

That's great. We're seeing front-end gross profits tighten across the industry. Where do you see the biggest opportunities for Toyota dealers to protect profitability in 2026?

SPEAKER_00 7:03

Yeah, we really care about our dealers' profitability and we believe that profitable dealers are a really important um aspect of delivering the right customer experience. If a dealer isn't profitable, they're not gonna go above and beyond for the customer because they really can't afford to. So when a dealer's profitable, we we applaud that. We we get excited about it because we know they're gonna invest in facilities, they're gonna invest in people, they're gonna invest in the customer. Uh so on profitability, you know, our dealers uh are are having success. And I think that success is a function of we've built the right products for the market and and we'll continue to very closely monitor and make sure we're we're bringing the right vehicles to market.

Jim Fitzpatrick 7:48

Sure. And with that lower daily supply that dealers are running with right now, it also has a tendency to maintain resale value on the cars that consumers are buying, right? I mean, if it's got not even yet, you know, and you're not selling, you don't have a whole backlot of 120-day supply of vehicles, you're not going to be seeing those huge discounts that maybe some of the other automakers are offering, right?

SPEAKER_00 8:08

Yeah, absolutely. And you know, between residual values that are published by different companies or uh different um publications publish the highest and best resale value cars, Toyotas are always on that list. And it's a function of affordability and also I think the reliability, the fact that those cars are still going to be running years to come.

Jim Fitzpatrick 8:31

Yeah. I see some really uh great lease offers from Toyota. Is leasing coming back? I mean, obviously, after COVID and what have you, we saw that really take a dive, but um, but the but but some of the numbers that I'm seeing coming out of Toyota are very appealing. Uh is that is that a push of yours to get leasing back to where it was?

SPEAKER_00 8:51

Yeah, we really like leasing. Uh we really like the opportunity to get that customer back in two or three or four years. Um, we really like those cars when they come back to us because our dealers snatch them up and sell them as really high quality, either certified used vehicles or used vehicles. So we're a big fan of leasing. Leasing has improved over the last few years. We're not back to our pre-COVID level of leasing, but neither is the industry. Uh, and we really would like to continue to build on our lease offers so uh we can, you know, get customers coming back every few years. Sure.

Jim Fitzpatrick 9:26

What do you think is preventing the industry from getting back to the pre-COVID leasing levels?

SPEAKER_00 9:32

Well, I think historically the industry has always subsidized leasing more than retail. And the math just seemed to work back then. In this new era with higher used car prices, uh, the the leasing uh math, you know, when you compare the cost of a retail contract versus the cost of a lease contract, in the past it was so significantly higher or better uh price-wise that everybody went with the, or not everybody, but a fair percentage of people went with the lease. Now that the gap is a little bit tighter. So I think it's just more the economics of the business today and and manufacturers not putting as much subsidy on leasing as they have in the past. But at the end of the day, we believe in leasing, we support leasing on many series, and we're gonna continue to do so to grow that portfolio.

Jim Fitzpatrick 10:25

Yeah, yeah, that's that's fantastic. And it helps, you know, obviously with the affordability uh situation that we're in, leasing is a is a great alternative, right? For for sure.

SmartPath And The Hybrid Retail Journey

SPEAKER_00 10:33

Absolutely.

Jim Fitzpatrick 10:34

So speaking of COVID days, uh digital retailing surged during the pandemic, but many consumers still want an in-store experience. There obviously it was it looked like it jumped up in digital retailing a little bit, but customers were coming back into the showroom in a in a big way. So, how's how's Toyota thinking about that? And how are they helping dealers strike kind of the right balance between a digital experience where many consumers will say, well, I'm not I'm not closing the deal on online, but I'm doing a lot more of the sales process online. My trade allowance, my my credit uh information, getting the best price on the car and such, but they're still using the showroom for kind of affirmation and confirmation. How do you guys look at that? And do you think that that that may be a big part of the future of retail sales being more online?

SPEAKER_00 11:23

Yeah, we we do. We believe in it, and we've made a massive investment in a product called SmartPath. And SmartPath is a digital retailing solution that over half of our dealers use today to offer the customer what we call the seamless experience from the couch to the showroom. Uh, traditionally, before SmartPath technology was available, a customer would spend hours online researching the car they want. They knew exactly the car, the model, the trim. And then they would walk into a dealership and have to start all over again with a salesperson. Unbelievable. It was very time consuming, it was clunky, and the customer didn't like that experience. So with SmartPath, we really studied the customer and we said, what does the customer want and need in a car buying experience? And then we built the technology to support that. So the great part about SmartPath is you can do all of it online. You can start it online and finish it in the showroom, or you can start it online, come into the showroom, and then finish it on the couch. Yeah. So it really uh meets our customer where they are. Right. And it helps the dealership be knowledgeable about everything the customer wants to do without having the customer to make explain everything again. So huge time savings, faster transaction, easier transactions. We have absolutely exceptional customer reviews uh from the customers that use this technology and the dealers that use the technology. Over half of our dealers have adopted it. It's the number one, uh, in fact, our second, third, and fourth um digital retailing platforms that our dealers use added together, don't equal the number of dealers we have on SmartPath. So we're really proud of the technology. We're proud of the improved customer experience. Sure. And we're going to continue to invest in it to uh create a competitive advantage.

Jim Fitzpatrick 13:21

It begs the question how come only 50% of the it sounds like a great program. Why are only 50% of the dealers adopted it?

SPEAKER_00 13:28

Yeah, no, great question. You know, some dealers uh from a technology standpoint are committed to the vendors that they've used for years. Okay. And we respect that. Yeah, I get that. We've never wanted it to be a hundred percent program. We don't want to force our dealers into using it. We want them to be the willing. And from an integration standpoint, you know, there's some technology providers that aren't interested in integrating with us because, you know, we're competition. So uh there's a there's a multitude of reasons of why the other 40, 45% don't use it. Uh, but at the end of the day, we've we've basically made it available to those who want it.

Incentive Discipline In A Discounting Market

Jim Fitzpatrick 14:06

Yeah, that's great. That's great. Um uh we're we're starting to see incentives creep back into the market, uh, obviously from your competitors and such. How disciplined is Toyota uh willing to remain if competitors become more aggressive on discounts and incentives that we see out there?

SPEAKER_00 14:25

Yeah, we spent a lot of time studying the market on incentives, and we always want our dealers to be competitive. Uh last year was the fourth best year in Toyota's history, uh, selling cars for almost 70 years in the U.S. So we had a really good year. Uh and we did that despite offering the lowest incentive spend in the industry, not just big competitors, um, but also smaller brands. So uh we that that happens for a reason. And the reason is there are several reasons. One is we have a really consumer-driven product lineup, and our consumers are really happy with our product. Uh, second reason is we put a lot of time and energy and focus into helping our dealers get better at the retail at the front line through systems like SmartPath and some of our sales training um technologies are really exceptional. So the customer gets maybe a better experience and might be willing to pay a little more for it. Right. Uh but overall, we've had the a very low incentive spend and we're very proud of that uh while still hitting our sales goals.

Jim Fitzpatrick 15:31

No, no stair-step programs for you guys?

SPEAKER_00 15:33

No, we're not a fan of those.

Gas Prices, Trucks, And Product Bets

Jim Fitzpatrick 15:35

Not a fan. You're not alone. You're not alone. Hey, with ongoing discussions, obviously around tariffs and global trade policy and a lot of the things that we see now out there uh happening, you know, with Iran and what have you, how exposed is Toyota to potential cost increases and what could that mean for pricing at the dealership level?

SPEAKER_00 15:55

Yeah, you know, we don't really get into geopolitics much in our building here. We really focus on the customer and the dealers and what they're experiencing. I I would say an outgrowth of all that geopolitical stuff is obviously prices at the pump. Yeah. And that's an area where there's high sensitivity to new car sales when you know gas prices go up. Sometimes people say, hey, I don't want to drive an SUV anymore. Uh and that's where we really shine, I think, because we offer some of the most fuel efficient vehicles in the industry, and we offer a lineup that has everything from a very small car all the way up to a full-size tundra or sequoia and everything in between. So we really built our product lineup to have something for everybody. And we think that when there is uncertainty around gas prices, you know, people tend to want to consider uh a car that that's more fuel efficient. So we're there for them, we're ready for them, and and we have all the powertrains that they could want.

Jim Fitzpatrick 16:59

Yeah. Speaking of powertrains, uh Toyota continues to see strong demand in trucks and SUVs. What's driving that momentum and how are you protecting uh you know market share in such a competitive segment?

SPEAKER_00 17:12

Yeah, so we've we've basically over the last five years redone our entire body on frame lineup, uh our pickup trucks and our body on frame SUVs, which we think are a really important part of our product lineup. Um our product is really good right now, and we're very proud of the redesigns of all those products. Uh, the technology in those products is really good. So, from uh, you know, whether it's off-roading in a Land Cruiser, a Forerunner, a Sequoia, we've got it all. And uh we're gonna continue to offer a really wide uh selection of products for our customers.

Jim Fitzpatrick 17:52

Um when you when you look at the next 24 months, where is Toyota placing its biggest strategic bet? Is it electrification, is it software, connected services, manufacturing, or someplace else?

SPEAKER_00 18:04

Yeah, great question. So first and foremost, you know, we we have great products coming. Yeah. Um, you know, I like to say the car is the star. And we have this year, we're launching um four products. The BZ launched late last year, so technically it's three. But um, you know, we're with with more BEVs available in the Toyota brand, we can offer to customers who may have left our brand a few years ago because we didn't have a BV, BEV, or we only had one BEV, we can now offer them a selection. So the electrification of our lineup, including BEVs, is a big focus area for us this year. And we put a lot of time and energy into not only the product, but also the marketing plans, the consumer outreach plans, because we really want to have something for everybody. And when we say that, we want them to have BEVs. So a lot of people ask, well, wait a minute, Toyda's launching BEVs when other brands are canceling BEVs. And we believe if BEVs are 5% of the industry, well, that's hundreds of thousands of cars. Yeah, and we want to represent in that space for our customers. So we are gonna launch BEVs and we're gonna push hard to be successful with them. In addition, overall electrification, you know, we built a$13.9 billion battery plant in North Carolina. And a lot of people have asked me, well, wait a minute, why would you do that when everybody else is canceling their BEV programs? Well, what a lot of people may not know is our plant builds BEVs, hybrids, and plug-in hybrid batteries. Okay. So regardless of where consumer demand goes, regardless of where government regulation goes, well, we're going to be building batteries in the great state of North Carolina for our customers, and we're really proud of that. So that will help us electrify more and more of our lineup and continue to contribute to positive movement uh towards the environment.

Jim Fitzpatrick 20:06

And this is uh the reason that every dealer I talk to, when I say what's on your short list for the number for the type of dealer that you'd like to acquire over the course of the next couple of years, Toyota is always at the is like the number one spot right there. So you guys do do just an awesome job. I know your dealers feel like that.

SPEAKER_00 20:24

Well, thanks, Jim. We appreciate that. We work hard to uh support our dealers.

Jim Fitzpatrick 20:27

Yeah, you really you really do. No question about it. Last question how are you feeling about 2026 overall with regard to the car market?

SPEAKER_00 20:34

We feel it really good. You know, our retail business is up 6% year over year. Um, obviously, there's a lot of uncertainty in the air, a lot of uh active things happening globally that are totally out of our control. Um, we feel really good about our product lineup uh and the cars we're launching this year. Uh, we feel really good about our ability to service our dealers and service our customers. So we're feeling really good. And obviously, with all the uncertainty out there, you never know what's gonna happen tomorrow. But I think we're prepared and ready to support our dealers and our customers regardless of what happens tomorrow. So we're excited about 2026. We're gonna keep pushing forward. That's great.

Jim Fitzpatrick 21:18

David Chris, the group vice president, general manager of the Toyota Division at Toyota North America. Thank you so much for all the time you've given us here at CBT News. Very much appreciate it. Love to do a follow up with you to see how the year's moving along.

SPEAKER_00 21:30

That sounds great. Thanks so much, Jim. Have a great day. Thank you. Okay, bye bye. Thanks for watching Inside Automotive with Jim Fitzpatrick.