For the third straight year, Toyota took the crown as the world’s biggest auto manufacturer.
Toyota edged past General Motors, but the gap narrowed. Toyota sold 8.4 million vehicles, 28,000 more than GM. In 2009, Toyota outpaced GM by 330,000 vehicles.
Some analysts predict that GM will regain the top spot this year, mostly because of its dominance over Toyota in China. In 2010, GM sold more cars in China than it did in the U.S., a first for the company.
Let me cut-and-paste from an email discussion I’ve had….the thrust is that Toyota is very large and has typical large firm problems.
Another large Toyota recall was announced, though most are outside the US. This will bring the total number of Toyota recalls since fall of 2009 to 18 million vehicles. Now there are millions of recalls every year, by every manufacturer — today’s vehicles are so complex that that is inevitable, accentuated by the low tolerance for even potential safety issues that affect only a very, very small percentage of vehicles (today’s two recalls involve potential gas leaks — something systematic hence open to recall as the source has been diagnosed, while safety-related and so mandatory). Still, this cumulative total is pretty big….
Part of the challenge is that Toyota has in my perception three marketing strategies. One has been quality. Since everyone has multiple recalls every year, this became a risky strategy as the quality gap between Toyota and other manufacturers vanished. Now the risk has become reality.
Another was to develop niche products aimed at particular markets, e.g. the Scion brand that was intended to capture a younger demographic (the average Toyota-brand purchaser has gotten older and older). My sense is that this strategy has not been particularly successful, in part because it’s not sold that well but also in part because it doesn’t necessarily lead purchasers to later buy Toyota brand vehicles. Nevertheless it still beats the attempt by GM, when faced with a similar problem, to improve the market presence of Cadillac with an advertising campaign that centered on the phrase “…not your father’s Cadillac…” This was a slap in the face at fathers, so didn’t improve sales among the brand’s aging demographic, and didn’t endear the brand to their children, either, who didn’t want to be thought to be driving their aging dad’s brand….Cadillac, at the time the oldest brand in the US, was later eliminated.
The third was to emphasize green. The Prius has been very suc cessful that way, garnering advertising that money couldn’t buy and almost paying for itself just in that. However, as a small car it is fundamentally low in margin and as a hybrid with two full powerplants plus batteries, it is also fundamentally high in cost. The only thing that allows Toyota to break even on it is that customers tend to purchase them with lots of high-margin options rather than buying the “base” vehicle. However, the Prius is the only hybrid of any manufacturer that has sold well. So the benefits are not great.
Finally, Toyota has very conservative styling, perfectly rational for a full-line, high-volume manufacturer. But as with other such firms, the bias is to become too conservative. That can be undone, but it takes a full model change, and only so many new models can be worked on at a given time (the norm of a decade ago was a 4-year cycle, but many firms extended that to 5 years). Nor is there any guarantee that attemp ts to improve styling will work — there will still be the temptation to only tweak things a bit, because losing a little market share by being too conservative is preferable to losing a lot of market share by not being conservative enough.
All of these marketing issues plague every mass market car manufacturer; at any given time Ford, GM, VW, Nissan et al. have versions of these problems. And in a growing global market, well, Toyota is underperforming, not failing. But at the moment they lose money on operations in Japan and (as they’ve tended to do all along) in Europe. They make only a little money in the US. What really dominates their bottom line are the profits from their financing arm. Again, shades of GM…which having unloaded GMAC into what is now Ally Bank is needing to rebuild its finance arm to support dealers and consumers.
So yes, Toyota has challenges as a late-comer in China. But it has challenges in ALL of its other markets. It may do better than its two big rivals, GM and VW, and keep its claim as #1 in volume. And at least management is aware of problems (which doesn’t mean they’ve diagnosed them, much less come up with remedies that can make it through Toyota’s bureaucracy). Still, I think the momentum is gone.