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Testing the Waters

Toyota Dips Into the U.S. Boat Business

July 28, 1998|JOHN O'DELL | TIMES STAFF WRITER

Toyota, long a leader in moving metal on dry land, is about to get its feet wet with a high-priced, high-performance entry into the American powerboat market.

Torrance-based Toyota Motor Sales of America's new marine sports unit will launch a pair of tournament-class water ski boats next month outfitted with the same powerful V-8 engine used in the company's Lexus luxury cars.

Competitors in the high-end ski boat industry believe Toyota is merely using the $225-million-a-year market for exotic speed boats as a test bed for its engines and boat design--preparatory to a broader assault on the $2-billion-a-year recreational powerboat market.

Indeed, the firm acknowledges that its move into boating is part of a corporate drive to diversify. Toyota has a goal to derive at least 10% of its revenue from outside the automobile business by the end of 2000. Since World War II, Toyota has mainly been a car maker. Now, it intends to join counterparts such as Honda, which makes outboard motors, power generators and motorcycles.

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In Japan, Toyota already has divisions that build houses, resorts and marinas and provide telecommunications services. It began a Japanese marine division in 1990 that brought its first product--a 28-foot cabin cruiser--to market last year.

"We are an expansion of that overall strategy," said Doug Plescia, general manager of Toyota Marine Sports. "And we are in boating because the U.S. is the No. 1 boat market."

Toyota already has signed the world champion wake board rider, Darin Shapiro, to serve as celebrity spokesman for the expensive new line. Wake boarding, like snow boarding, is a popular and fast-growing sport that attracts younger consumers.

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Prices have not yet been set, but Toyota expects to sell the 20-foot-10-inch Epic 21 for about $32,000 and the 21-foot-8-inch Epic 22 for $33,000. The prices include a boat trailer, custom-fitted boat cover and an on-board CD player. Sans extras, the boats probably would sell in the $28,000 to $30,000 range, making them among the most expensive in their market.

Without extensive modifications, the high-performance Epic boats can operate only in fresh water, because their internal aluminum block engines would be destroyed by saltwater. The boats will be built for Toyota by a contractor in Florida, using Toyota engines and other parts supplied by outsiders.

The pond Toyota will play in is a small one--fewer than 7,500 tournament ski boats were sold in the United States last year.

And it is dominated by two major players--MasterCraft and Nautique--that aren't about to hoist a white flag just because Toyota is bringing its guns to bear.

One competitor insists that Toyota Marine Sports may actually be starting life as a guppy rather than as a Godzilla.

"In fact, we don't understand why Toyota is even messing with this market," said Larry Medoc, vice president of Correct Craft Inc., the Orlando, Fla.-based maker of Nautique ski boats.

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Several heavy hitters, such as Sea Ray Boats and Bayliner Marine Corp., "already tried it and failed," he said. "And they are already well-established boat makers."

To succeed in the broader market, Toyota must have a complete line of inboard-outboard powerboats--the kind with internal engines and external propeller and rudder systems and lots of room for passengers, coolers and fishing equipment.

Tournament class ski boats use a direct-drive system that places the engine in the middle of the boat to generate power and a flat ride that won't swamp the skier. But it is a system that leaves little room for passengers or coolers, dramatically slashing the boats' mass market appeal.

Toyota expects to sell only 300 boats its first year. "We can launch in major markets across the country, but in a small way," said Plescia.

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It is a good strategy in the competitive boating market, said Phil Keeter, president of the Chicago-based Marine Retailers Assn. "They'll get good play from the Toyota name and reputation," so following quickly with a recreational boat should develop a decent customer base, he said.

Toyota Marine hopes to win a few major ski and wake board competitions with the Epic in order to generate brand recognition and then to start marketing the Lexus-based engine to other boat builders.

"You need volume sales if you are going to be a player," Plescia said, "and that means engine sales."

Although Toyota can claim the engine as its own, the rest of the package consists of parts purchased from outside suppliers and assembled onto a hull made under contract to Toyota by Maritec, a Florida firm best known for its bass fishing boats.

Plescia said Toyota Marine Sports will introduce a third model early next year--one that moves the engine to the back of the boat and creates more room for passengers. "It's closer to a recreational boat," he said. "And there are other products coming."

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