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Toyota Motor Corporation (ADR) (TM): Is It Time to Hit the Brakes on This Stock?

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Between the economic recovery and the aging of the average car on U.S. roads, it’s a good time to get into auto stocks. If sales are any indicator, everybody’s in the market for a new car – and Toyota Motor Corporation (ADR) (NYSE:TM)‘s capitalized with growth.

Credit: Toyota Auris Facelift front 20100926 by M 93

Japan’s leading automaker capped off its first quarter with U.S. year-over-year sales growth of 1% in March. For the entire quarter, Toyota grew sales year over year by 8.7%, delivering more than 500,000 vehicles into the hands of consumers.

Despite the overall gains, however, not every model in Toyota Motor Corporation (ADR) (NYSE:TM)’s fleet has sold well over the beginning of 2013. With rivals in the auto industry eager to take a bite out of Toyota’s strength, is this company facing trouble in the U.S. market it can’t afford to lose its position in?

The problem with the Camry
Toyota Motor Corporation (ADR) (NYSE:TM)’s not in real danger in the U.S. just yet. Its Toyota, Lexus, and Scion brands combined to rank as the No. 1 retailer in March, beating out faster-growing sales from rivals such as Ford Motor Company (NYSE:F).

But are cracks showing in this top titan’s armor? The company’s core Toyota division – maker of Toyota-branded and Scion vehicles – saw sales fall 0.5% in March and posted only 2.9% growth through the first quarter. Cars such as the Corolla managed to stave off losses: Corolla sales picked up by more than 11% in March and more than 17% over the first quarter. The Avalon has also done well, although it sells far fewer vehicles than the company’s top brands.

So what’s holding Toyota back? Look at the old reliable vehicles: Sales of the steady Camry haven’t held their own in 2013. The sedan lost more than 4% in first-quarter, year-over-year sales, and more than a whopping 11% in March. The Prius, Toyota’s third-leading U.S. seller, has lost ground too, but the Camry’s the most trend of most concern. The vehicle is Toyota Motor Corporation (ADR) (NYSE:TM)’s top seller in the U.S. by a big margin, outselling the next-best-selling Corolla by more than 20,000 vehicles in the first quarter. If sales of the Camry keep slipping, this company – and stock – could be in trouble.

CEO Jim Lentz predicts his company will sell more Camrys in 2013 than last year, but that might not be enough to reverse Toyota’s fortunes in this market. As fellow Motley Fool contributor John Rosevear points out, Ford’s Fusion sedan is snapping up sales and threatens to carve into the Camry’s niche in the midsize market. Lentz even admitted that the Camry will likely lose market share to rivals this year as the midsize industry grows, and Ford’s well-positioned in its recent growth to pose a significant threat to Toyota’s place in the U.S. auto industry.

A future in flux
So should you kill your faith in the world’s top automaker? Not quite yet.

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