Toyota extends product life cycle to 9 years
The Japanese automaker aims to preserve vehicle value through software updates instead of quickly launching new generations.
According to Nikkei, Toyota will extend the sales cycle of its core models from 7 years to an average of 9 years, while also focusing on electrification and maintaining product value through software updates.
Software-defined vehicles can deliver improved performance without requiring new hardware. This marks a shift from the industry’s current business model, in which new features are introduced all at once in a refreshed vehicle.
An average 9-year cycle for a new model is unusually long for Toyota. Previously, full overhauls of key models typically took place about once every 5 years. But as vehicle performance improved in the 2000s, that timeframe was gradually extended to 7 years.
The new-generation Toyota RAV4 will debut in 2027, 7 years after the previous generation. Photo: Car and Driver
For example, the RAV4 sport utility vehicle gets a new generation after about 7 years. The exact length of the product cycle is expected to vary depending on the model.
Toyota is facing a large volume of orders, leading to longer delivery times and temporary order suspensions. For the company’s Land Cruiser SUV, it can take years from placing an order to delivery — and by the time the vehicle is delivered, the next version may already have been launched. A longer sales cycle will increase opportunities to buy popular models and also raise the likelihood of reselling used vehicles at higher prices.
With longer sales cycles, Toyota will review the wholesale prices it sets for dealers. Those prices are typically reduced over time after a model is launched. In the future, wholesale prices will be set more flexibly, depending on the model and the sales situation.
Dealers’ main source of revenue is the gap between the wholesale price and the actual selling price, which may be discounted for customers. Although wholesale prices gradually decline over time after a vehicle launch, discounting also becomes more common as sales become more difficult.
While extending product cycles, Toyota is aiming for a revenue model that preserves vehicle value through updates, including advanced software and other features, while still making major model changes, including functional improvements and exterior styling.
Among Japanese automakers, Honda typically fully redesigns models every 6 to 7 years, while Nissan sometimes takes nearly 10 years. Tesla updates models about once every 3 to 5 years, while emerging Chinese automakers sometimes make changes every year or longer.
Toyota will extend the update cycle for its main models. However, for models offered only in regions such as China, the company will continue developing products to suit local market conditions.
Most of Toyota’s roughly 230 affiliated dealers in Japan operate independently. Some dealers have opposed adjustments to wholesale prices, saying the move would put pressure on dealer profits. Toyota says the average wholesale price over 9 years will not change.
