Toyota's chief executive in North America doesn't see a U.S. auto sales bubble anytime soon, but he does expect shifts in the market as demographics change and thousands of late-model vehicles come back from leases.
Jim Lentz predicts that auto sales this year will match the record 17.5 million sold last year, even with uncertainty in the economy from the volatile stock market.
Lentz discussed sales and other topics Monday at the North American International Auto Show in Detroit. His remarks are edited for length and clarity.
Q: With the stock market drop and interest rates rising, do you see a U.S. auto sales bubble this year, especially in the luxury market?
A: I don't get that sense. Especially given the fact that Gen Y (ages 18 to 34) is now becoming a big buying force in the industry. I think today they're 27 percent of all sales. By 2020 they're going to be about 40 percent of all sales. Naturally they're going to grow from there. They are very luxury oriented in what they want to choose. If we look at baby boomers at age 35, what percentage were buying luxury vehicles versus Gen Y, I'll bet you it's much higher with Gen Y. We still think the luxury market for '16 is actually going to grow, where the general market is going to be flat.
Q: There are predictions that compact crossover SUVs are going to pass midsize cars in U.S. sales soon. Do you see the day when the RAV4 outsells the Camry, which is the top-selling car in America?
A: I think it will at some point in time. That small SUV has already surpassed midsize passenger car. I think this is a trend that's going to continue. I think that is a trend that will continue even if fuel prices go up. It may have started and been enhanced by low fuel prices. But if you look at a small SUV today, RAV4, for the most part it has the same interior volume as a midsize car. It has the same ride quality. It gets very similar mileage. It's almost selling at the same dollar amount. So these two vehicles from the standpoint of value are almost the same.
Q: There are a lot of cars coming off leases in the coming months. What impact will that have on new car sales?
A: They're going to be competing as certified pre-owned cars with new car sales, so I think that may be a little bit of a drag to the new side. Might that dampen overall luxury business? It might. But this millennial thing, the millennials are going to be luxury buyers. And they may not be Mercedes S-Class buyers, but they may buy Lexus ISs. I think the luxury market is going to be strong.