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Toyota is now Part of Detroit

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Detroit's Growth Engine: Toyota

Friday October 13, 11:43 am ET

By Rich Smith

Detroit has a new growth engine, America.

Not Detroit, per se, mind you. For decades, the American auto industry has been synonymous with the word "Detroit." No more. In a situation akin to what we've seen with digital video recorders, the name synonymous with the concept has become the also-ran. To record a television show might be to "TiVo" it. But the device that does the TiVo-ing is more likely made by Motorola (NYSE: MOT - News) or Cisco's (Nasdaq: CSCO - News) Scientific Atlanta than by TiVo (Nasdaq: TIVO - News).

Similarly, growth in the U.S. auto industry today relies on a company far removed from Detroit: Japan's Toyota Motor (NYSE: TM - News). Yesterday, Toyota announced that its Georgetown, Ky., plant has produced the first U.S.-built hybrid Camry sedan, and it plans to continue producing the vehicles at the rate of 48,000 per year. Simultaneously, the company projected that in 2007, it will sell a whopping 290,000 hybrids -- Priuses, Camrys, Highlanders, and so on -- in the U.S. alone.

Now I know what the naysayers will say. (They'll say "nay.") I know they'll argue that 290,000 is barely 2% of all annual new-car sales in the U.S. But look at what else 2% is. Two percent of the U.S. auto market is:

The entire U.S. market share controlled by Hyundai.

More than all of the Prius hybrids sold to date in the U.S.

Roughly twice the number of Toyota's 2005 U.S. hybrid sales.

Faster growth than the 79% compound three-year growth rate in total U.S. hybrid auto sales.

As the "Detroit" auto sales of DaimlerChrysler (NYSE: DCX - News), Ford (NYSE: F - News), and GM (NYSE: GM - News) stagnate, there's at least one segment of the U.S. auto market that's booming, and that's hybrid gas-electric-powered vehicles. And within that segment, Toyota's sales outpace the average.

What does the future hold for "Detroit"? It depends, really, on how long Toyota can keep up this rate of growth. Market share of 2% doesn't sound like a lot today, but the longer it continues to double annually, the fewer "nays" we'll be hearing.

Not meaning to be a Toyota cheerleader here, but when Detroit sneers "2%," I can't help remembering the old chant: "Two, four, six, eight ..." Whom should U.S. auto investors appreciate? Toyota.

Fool contributor Rich Smith does not own shares in any company named above. The Fool's disclosure policy has a surprisingly roomy interior.


Edited by andy82471

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