The car Toyota is counting on now

August 25, 2011: 3:36 PM ET

The badly bruised Japanese giant is pinning its hopes on one vehicle -- and it's not a flashy new sports car or a gas-sipping hybrid.

By Doron Levin, contributor

Toyota CamryFORTUNE -- If there's one vehicle that matters most to Toyota's fledgling rebound, it's not a flashy, made-in-America pickup or even the expansion of its vaunted Prius hybrid line. It's the Toyota Camry, a no-muss, every-day family sedan. Badly battered by the unintended acceleration fiasco and last March's Japanese earthquake, Toyota desperately needs American car buyers to keep flocking to the Camry, newly redesigned for 2012.

Toyota's (TM) seventh-generation Camry, which goes on sale Oct. 3, keeps most of the mechanical and architectural underpinnings of its predecessor. The exterior is new and the company is touting a sophisticated new "infotainment" system to appeal to tech-savvy consumers. A new gas-electric hybrid version, more powerful and yielding better mileage than its predecessor, will also be available. That model will average about 41 miles per gallon, combined.

The new Camry will have a lot to live up to. The model has been the top-selling sedan in the U.S. for the 13 of the past 14 years. A whopping 9.7 million units have been sold worldwide since 1983. Akio Toyoda, Toyota's chief executive officer, himself pitched in to publicly present the new model and start production from the factory floor in Georgetown, Kentucky.

Toyota's dominance in the U.S. family-sedan market will be harder to maintain with competition like Nissan's (NSNY) Altima and General Motor's (GM) newest version of the Chevrolet Malibu due out later this year. Altima sales, though running behind Camry's, were up more than 17% this year, while Camry's were down 8%. Volkswagen (VLKPY) is also suddenly a factor in the segment thanks to an all-new Passat specifically designed to contend with the best Japan can offer.

Toyota has a few advantages. Price, for one. Bob Carter, Toyota's group vice president, said Tuesday at the new-model introduction in Hollywood that it has always represented "the best value" in the segment. He announced prices for the new model that were mostly lower than the models they replaced. The $22,500 LE model, for example, sells for $200 less at retail than the 2011 model. "The lower prices impressed me," says Senior Analyst for Edmunds.com Michelle Krebs. "While others are raising prices, Toyota is saying 'we want our leadership back, we're willing to give up some profit to be No. 1.'"

Another big advantage is Toyota's Georgetown assembly plant, where the Camry is built. Given the 35% slide in the value of the dollar versus the yen over the past five years, domestic assembly will allow Toyota to play aggressive hardball on price -- something competitors will have a harder time doing. With the relative strength of Japanese currency, cars exported from Japan are costly to sell to U.S. customers compared to those built-in the U.S.

Unknown is how Toyota's reliance on high-tech infotainment software will play out. The 2012 Camry is the first Toyota model to get the company's so-called Entune system, which can recognize voice commands, run apps from smartphones and perform searches using Microsoft's (MSFT) Bing. But any quality hiccups with the new Entune system or poor reaction from consumers could cost Toyota dearly. Ford Motor Co. (F) suffered a decline in its overall quality ratings from J.D. Power & Associates due to customer complaints with Ford's highly-touted Sync infotainment system, developed with Microsoft.

What's certain is that the Camry is Toyota's most important car in the U.S. The reception the new model gets among the faithful will be the most telling turn yet in the Japanese giant's dramatic attempt to come back from pervasive woes.

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