Bartiromo: Toyota CEO Lentz talks trucks, SUVs and cars – USA TODAY
The auto sector has been one of the shining lights of the economy throughout this recovery. In fact, we are witnessing a bit of a revolution for cars and trucks, given new technology, rock-bottom gasoline prices and a new focus on quality. I caught up with industry leader Jim Lentz, Toyota’s CEO of the Americas, to find out how sustainable the good times are and what our cars will look like in the future. Our interview follows, edited for clarity and length.
Q: Can you characterize what you’re seeing right now in the auto business?
A: The industry is tracking about 17.4 million (units sold). To me, what’s most interesting about that is the passenger car industry is actually down a bit from last year, and all this growth is in the light truck side of the business. It will be up over a million units, and we’ve seen a lot of strength on the pickup side of the market. The big moves are still on the sport-utility side.
A: In the case of pickup trucks, it’s the perfect storm for growth. After the recession, you saw a big drop in housing, an aging of the pickup truck fleet. The average pickup truck is over 12 years old today. So as we’ve seen housing come back, you saw this big move towards pickup trucks. You also have gasoline dropping. I’m living in Texas, and I paid $1.87 a gallon this weekend for gasoline. So you’ve got low fuel prices, you’ve got an older fleet, you’ve got increase in housing. You have a lot of manufacturers that have introduced new trucks in the last couple years. Almost everyone in the full-size and the small truck arena has introduced a new truck. So it’s the perfect storm for people to really be pushing that pickup truck market.
Q: So when gasoline is cheaper, people don’t care about spending too much on their gas tanks in bigger trucks?
A: I think that’s true. The interesting one is on the sport-utility side. Because you have small sport utilities that are now the No. 1 volume segment in the industry. That’s never happened before. It’s always been standard midsize cars. That segment’s up almost 20% year over year. People are moving from standard midsize passenger cars towards these small SUVs. And the small SUVs today are probably midsized than they’ve ever been in the past. They have the ride and comfort of a sedan. They’re as quiet as a sedan, the fuel efficiency of a sedan. And they’re transacting at about the same price point. So I think that shift towards the SUV is being driven a little bit more than just gasoline price. I think that’s going to be here to stay.
Q: How does today’s vehicle look different as a result of technology?
A: It’s changing drastically. Power trains are changing while hybrids have been hurt a little bit by low fuel prices. You’re going to see more hybridization of cars. That’s more technology, more fuel cells. We’ve just launched our fuel cell. Our entire first year of production, all of ’16 is already sold out. So you’re gonna see improvements through technology in the types of fuels, whether they be battery, battery electrics or even internal combustion gas. You’re going to see more and more telematics in cars. And you’re going to see the advancement of autonomous cars that I think we’re just seeing the beginning of that today from a number of different safety components that are now being integrated to kind of create what we’re calling autonomous cars.
Q: An autonomous car can be one where if I want to take the wheel of the manual I could drive but I also could press a button and it will drive for me?
A: Yes, there are two really different schools of thought. One is what I would call the chauffer-driven car where it’s a car that you literally would get into, you may or may not even have a steering wheel. And you would be taken from point A to point B. That’s not the direction that we believe is going to dominate. I think the bigger area is the cars that can actually enhance the driving skills of the driver and in time reduce serious and fatal accidents. if you look at the Boomer generation, cars have been a symbol of freedom for them since they turned 16 and got their driver’s license. Boomers are aging. They are still a large percentage of the population. And they still have a desire to drive much later into their years. So imagine a vehicle that can react quicker, that can see better, can see distances better, it could see in fog, it could anticipate movement of pedestrians on the street. All of that will enhance the skillset of a driver. But the driver is still behind the wheel and in control of that vehicle. You’re also going to have the ability for vehicles to communicate with the infrastructure around them. Whether they’re traffic signals, whether they are other pedestrians, whether they’re other vehicles. So all of that is going to converge untill someday we’ll probably be talking about accidents and especially fatal accidents being a thing of the past.
Q: And when you’re talking about a driverless car, we know that a driverless car did not drink alcohol last night, was not just texting while it was driving and it knows everything that’s around them because there are sensors.
A: Yup. it will be interesting 15 years from now to look back at what cars can do, what they’re going to be powered by and compare them to today where we think cars are at the peak of technology. I think it’s just beginning.
Q: So you’ve been investing both in autonomous as well as driverless.
A: Yes. Our view of autonomous is really not that chauffeur-driven concept. Ours is more of a concept of a co-pilot where the driver is always in control of the car and behind the wheel. Similar to what you would see on an aircraft where you have a co-pilot, the technology of an aircraft can enhance the skills of a pilot. But that pilot is still always in control of that aircraft. I mean, there may be occasions where they would rather relax a little bit more or frankly, if someone becomes tired where the car can sense that and decide when the car needs to take over.
Q: I recently interviewed Marc Andreessen, the venture capitalist. And he said that in the future, there will be four car companies. It will be Tesla, Uber, Apple and Google. What do you have to say about that?
A: Uber, I think, is a concept. They’re not a manufacturer of cars. So they provide transportation. So if you take them out and there are three other car companies, there are roughly 80 to 100 million cars sold in the world. The biggest car company today — and there are a couple of them — sell around 10 million. So that would presume that the big car companies in the world sell about 35 million cars a year. I think that’s very difficult to assume. I think the other issue is we are assuming that based on the needs of buyers in America, that is, in fact, the entire world. You know, I don’t think in sub-Saharan Africa, it’s gonna be that important to have a driverless Uber car anytime soon. I really don’t buy that. And I think as Tesla has seen, it’s not an easy business. Manufacturing cars, getting the scale and the volume that you need to be able to satisfy all customers around the world.
Q: And yet these two companies have been disrupters. What has been the impact of Uber, would you say, on the industry?
A: It’s forced us all to look at mobility and not just becoming a manufacturer. We have to look at how we provide transportation which goes beyond just becoming an original equipment manufacturer. And I think our whole move towards artificial intelligence and robotics is part of that. It goes beyond just selling a car. It’s really about providing transportation. And if the public wants to go more towards — public transportation or more towards shared rides — as a manufacturer, you’re gonna have to go with whatever direction that is and find out how you can add value and survive in that kind of environment.
Q: So in terms of 2016, what kind of a year would you expect for the industry?
A: We’re gonna continue to see growth in the industry. I don’t think we’re going to see an industry that grows at the rate that it is today. The industry’s gonna be up almost a million vehicles this year. That’s a surprise to me. I thought it would’ve been half of that rate. But it just shows the growth in the U.S. population, the fact that consumers are more confident today, the fact that the average age of the vehicles on the road is quite old. And if you look at the impact that the recession had, removing on average about 6 million vehicles a year out of the sales stream, on the overall number of vehicles available, we’re still playing a little bit of catch-up from that deep, deep recession. I think we’ll see growth in the hundreds of thousands, not in the millions, of vehicles in the next couple years. But we have yet to see the end of the overall growth of the industry.
Q: It’s interesting to see what people spend money on. Overall, they’ve saved all this money at the gas pump. And yet they’re not spending it on apparel and shopping, but they’re buying cars.
A: When you look at it, cars really led us out of this last recession. The car industry started to move well in advance of the general economy. But again, I think a lotta that was there was so much pent up demand that the average age of these cars became older. But part of it, frankly, is the quality of cars today across the industry are so much better than what they’ve been. They are able to last 12, 15, 18, 20 years when that wasn’t the case 15, 20 years ago.
Everyone is just spending a lot more time on quality of cars. The materials are much stronger; the use of technology allows us to build much better cars today. The engines are much stronger than they were in the past. So the industry is building a much better product for its customers.
Maria Bartiromo is anchor of Mornings with Maria on the Fox Business network. Follow her on Twitter @mariabartiromo @morningsmaria