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.
“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.