Wall Street Journal 2/25/2003

DETROIT -- Even though the minivan market, over-powered by sport-utility vehicles, has been contracting in recent years, Toyota Motor Corp. predicts industry sales of family vans will grow as much as 18% over the next two years, a company official said.

Don Esmond, a senior executive of Toyota's American sales unit, said demand for minivans in the U.S. auto market, which totaled about 1.1 million minivans in 2002, could reach as much as 1.3 million a year over the next two years and stabilize in that range for a while. An onslaught of redesigned and in some cases less expensive minivans, which are expected to be launched this year and next, "could stimulate sales in the minivan segment, even though it has trended downward for the last two years," Mr. Esmond said.

The Toyota executive admitted some consumers continue to be turned off by the conservative styling and overly functional image associated with minivans. "If it looks like a duck and if it walks like a duck and swims like a duck, it is a duck," he said. "But I still think the minivan market is alive and well … with a sizable core of buyers."

Growth in the minivan segment appears to have peaked several years ago, as auto makers shifted product development and marketing focus toward higher-profit sport-utility vehicles. But the new minivan entries being planned for the next two years could further intensify the price war already under way, as segment leader DaimlerChrysler AG fights to defend its share.

Toyota is expected to launch its redesigned Sienna minivan next month, while Nissan Motor Co.'s redesigned Quest minivan is to arrive in dealer showrooms later this year.

In addition, Ford Motor Co. has unveiled two new minivan models, the redesigned Windstar, which will be renamed the Freestar when it arrives in showrooms later this year for the 2004 model year, and an up-market version of the Freestar, the Mercury Monterey. General Motors Corp. has indicated it is launching next year four new models for the Chevy, Pontiac, Saturn and Buick brands that it calls "crossover sport vans" -- combining attributes of minivans and SUVs. Honda Motor Co. also is expected to come out with the redesigned Odyssey as early as next year.

Both the Sienna and Ford's minivans will have third-row seats that fold flat to create more storage space -- a feature that has drawn a lot of minivan buyers to the rival Honda Odyssey. Odyssey sales rose 17% last year to 153,467 vehicles, by far the biggest gain among major minivan models.

With the new Sienna, Mr. Esmond said, Toyota wants to command more than 10% of the minivan market. In other words, he said, Toyota is aiming to sell 130,000 to 150,000 Siennas a year, up sharply from the 81,000 it sold last year.

"It's a reasonable task to achieve," he said.

Increased Sienna sales will likely come at the expense of rivals, especially those without new products, like Chrysler, Mr. Esmond said.

Toyota's confidence stems in part from its successful move to drop base prices for various Sienna models, even as the Japanese auto maker added more standard features to the vehicle, such as more seats and second-row windows that can be rolled down.

Toyota slashed base prices for the entry-level seven-passenger Sienna SE model by $950, or 4%, to $22,955, while it cut the base price of the better-equipped Sienna LE model to $24,260, a reduction of $1,495, or 5.8% from the prior model, which was smaller and less powerful than the new Sienna.