By on March 5, 2011

On Wednesday, March 9th, Toyota will announce its new long term strategy plan to the public. A core piece will be a push into emerging markets. TTAC has been following signs of this for a while. The signs range from a car, the Etios, designed exclusively for the emerging markets, to a factory up in the woods near Sendai, Japan, that looks very much like a prototype for Toyota’s latest export product: Low cost car factories.

The Nikkei [sub] agrees and says that “Toyota Motor Corp. is overhauling its strategy because it is now clear that emerging nations will replace industrialized ones as its most important markets.” Will replace? Wake up!

Emerging auto markets already buy more cars than the established markets. According to a J.D. Power study, emerging markets accounted for 51 percent of the global light-vehicle sales in 2010. For this year, J.D. Power expects this number to rise to 53 percent, mostly driven by China and to some degree Brazil. As other markets join the fray, this shift will accelerate.

As the BBC said last month:

“The main battles will be fought in Asia, where sales are set to grow the fastest in the years ahead. Whoever wins in China and India will become the biggest in the world.”

Toyota needs to shift its focus along with these developments. Toyota suddenly find itself in the wrong places at the wrong time. Toyota dominates in Japan, a shrinking market. Toyota is strong in the U.S., a market that has matured and promises no significant growth. In Europe, the world’s most competitive and crowded marketplace for cars, Toyota holds a crumbling market share of 4.8 percent, with Hyundai hot on its heels.

Toyota is a late-comer to China, they forged a joint venture with FAW and sold their first Made-in-China Toyota in 2003. According to J.D. Power, Toyota holds a 4 percent market share in China, a far cry from Volkswagen’s 12. In India, where Toyota arrived a few years earlier than in China, Toyota defends a tiny market share of less than 3 percent, whereas their colleagues at Suzuki own half of India’s growing market. In Brazil, Toyota boasts a market share of 1.9 percent. Something needs to be done, fast.

A step in Toyota’s new emerging market strategy is that Toyota will tailor the vehicles it sells in emerging markets to local tastes, writes The Nikkei [sub].

According to another story in The Nikkei [sub], and as predicted by TTAC last December, Toyota will derive five or six models from the Etios, including a minivan and an SUV. The cars will be introduced beginning next year in emerging markets in Asia and Latin America, including China and Brazil.

The new Vitz/Yaris subcompact, released last December in Japan, will be sold in Japan, the U.S. and Europe only. Too expensive for emerging markets. Instead, “Toyota plans to develop a subcompact with a 1.2- to 1.6-liter engine for release in 2013. Parts procurement costs for this model are to be roughly 20 percent lower than those for the Yaris,” says The Nikkei.

“The roads of the world make the automobile,” Akio Toyoda said. “Our goal is not to sell 10 million vehicles but to provide automobiles that 10 million customers desire.”

It will be a while. This year, Toyota’s sales are projected to reach 8.61 million units. That is only slightly up from the 8.55 million units delivered in 2010. Other manufacturers spent many decades in emerging markets and are way ahead.

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9 Comments on “Toyota To Emerge With Emerging Market Strategy...”


  • avatar
    Educator(of teachers)Dan

    “Toyota to Emerge With Emerging Market Strategy” right after they have their “Strategic Planning Meeting to Strategically Plan Their Strategy.”  

  • avatar
    obbop

    Toyota’s share in Europe, China and that crowded milling throng south of Laramie…. uhhhh, the Himalayas seems to be excruciatingly small to me.
    That Vitz critter?
    I hope that Toyota makes it then rolls out a “new improved” even smaller version and name it, “Son of a Vitz.”

  • avatar
    Steve65

    How is Brazil an “emerging” market? There has been an established market and factories there for decades. “Growing” ≠  “emerging”.

    • 0 avatar

      it’s a matter of opinion, but most analysts put Brazil into the emerging market column.

    • 0 avatar

      How is Brazil not an emerging coiuntry? With a population in which 50% are functionally illiterate? 40% doesn’t have plumbing? Where more than 40% of domestic sewage is just dumped into rivers? Where the people don’t know better than to take out credit and pay 3% a month to buy refrigerators and tvs? Where only 1 in 6 have cars?

      No, thoug we now have the 7th largest GDP in the world (just passed Italy and Canada), we are firmly in the developing world side of this world. DOn’t be fooled.

      Someone in the 80s said Brazil should be called Belindia. What he meant was: 20% live in Belgium and 80% are still stuck in India. Since the 80s that proportion may have changes somewhat (and now with have a lot of places with standards closer to Greece or Portugal), but the name Belindia is still an apt description of us. Sadly

    • 0 avatar
      Signal11

      @Bertel
       
      As pointed out in that wiki article you linked, the term is a little outdated, not because the goalposts have moved and definitions are invalid, but because the teams in the leagues have changed.  There’s a tendency for many to apply the definitions as they were taught to us in school, but the composition of NICs and the emerging markets as classifications as they were taught in my comparative government and political economy classes fifteen years ago have changed greatly since then, much less as they were originally defined fifteen years before then.
       
      I think most economists have moved Brazil into the NIC classification along with India and China.
       
      Also, the back page of The Economist keeping 30 year old classifications doesn’t help.

  • avatar
    Stingray

    Any strategy that they make that doesn’t include LOWERING the prices of their cars/parts/service and getting away with their BS “holy” image is destined to FAIL. Period.
     
    In that kind of market price on both car and parts, and service support sells. See Brazil. A Corolla, even being more modern than an Optra, is about 30-40% more expensive in Venezuela, and has less equipment. If the prices were similar, GM would have a severe run for the money in that segment. Just as an example.
     
    I really would have enjoyed visiting their new factory, I guess for the volume and techniques, that I’ve seen some of their tricks in the assembly sites I’ve worked so far.

    • 0 avatar

      yES Stingray, you are absolutely right!

      The question for Toyota is: Do you want to be profitable and market keader or do you merely want to be obscenely profitable and a nich player?

      If you want the latter, do as you’re doing, charge 30% above what everybody else does and hope the idiots keep paying more for your bs of utter reliability. However, note there’s a limited market for that. The ones who crowned you the “must-have” have now moved on. What you’re getting now as customers are those who are making sacrifices to have you, and once they’ve had you they’ll move on and make the same sacrifices they’re making for you now, but it’ll probably be a Hyundai they’ll buy (if they don’t burn themselves completely with their aftermarket mess). Take a look at Honda at how they’re bleeding customers. High prices plus low content do not make you market leader in Brazil.

      In the Brazilian market today you can be very profitable just charging what everybody else is. If ou do that, you have the chance to become market leader. Just beware, keep your costs down, the Chinese are coming. I know you’ll never go down market and dispute the lowest hanging fruit, but you’d be wise to chase the second lowest hanging. And you’ll have in uphill battle there. To wit, Fiat’s 30 year battle to become leaders. In this market, with the brand loyalties already in place, you’ll have a tough time here (see Renault and PSA)


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