Toyota is expanding its car insurance business into the world's second largest country (by area). “If everything goes well, we want to [offer policies] within a year,” Toyota Canada's president and CEO told ReportonBusiness. The automaker already sells auto insurance in Asia, Europe and Australia. University of Calgary prof Ryan Lee is good with the expansion. Ish. “Having the ability to sell insurance through an existing dealership network would give an auto maker a major advantage at the outset; however it is not clear to what extent such a move would shake up the market.” Toyota has also set its sights on the retail banking industry. ToMoCo has a bank in Poland and recently opened ZAO Toyota Bank in Moscow. In the U.S., Toyota Financial Services offers everything from mortgages to savings accounts from its offices in Henderson, NV. The juggernaut rolls on.
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Ladies and Gentlemen,
Toyota is now front runner for the Darwin Award in the category of “how to unnecessarily devalue your brand”.
Is it time yet for the Toyota Deathwatch series? We all can see it coming.
Soon, Toyota (along with the other mega-corporations) will unveil their plans for a Rollerball League.
These deviations aren’t always a good thing, and since I’m not an MBA I don’t know why. I’m not so concerned about the branding impact of this (although it’ll massively confuse “Toyota” in the mindspace of consumers) but the business implications are far and wide. Case in point: Target has a massively successful credit-card business that makes fantastic profits, but Wall Street can’t wait for them to sell it. Why sell a superprofitable business that affiliates well with your already existing successful business? Idunno and that’s probably why I have this crap job.
In it’s home country Toyota has been in many, many industries for a very long time. In fact, the parent company started by making automatic looms for the fabric industry. Thus, this isn’t a move into new industries, but rather is a case of further expanding the global marketing of industries Toyota already has a long track record in.
You can have a look at Toyota’s non-automotive businesses here:
http://www.toyota.co.jp/en/index_non_automotive.html
Nobody seems to have a problem with automotive companies running large lending operations such as GMAC, so why shouldn’t they also be in the automotive insurance business? GM already has a branded credit card (although HSBC actually runs it), so why not a Toyota credit card, especially if the user gets points towards money off their next Toyota purchase?
Sounds like smart business expansion to me. Toyota has one of the most trusted brand names in the world built the hard way over time.
“Target has a massively successful credit-card business that makes fantastic profits, but Wall Street can’t wait for them to sell it. Why sell a superprofitable business that affiliates well with your already existing successful business?”
Because Wall Street is filled with over-trained half wits who love nothing more than for deals to be done . Toyota and Honda would be out of business by now if they listened to “Wall Street” over the decades.
One thing which really separates Japanese management from most American management is tenacity. The Japanese held fast to the consumer electronics industry when Wall Street screamed at the US companies in the 1970s to get out of these “mature” industries. As if once the transistorized color television had been developed the party was over. Duh.
Toyota plans to offer auto insurance in several provinces across Canada. Certain provinces have provincial auto insurance plans.
Its not new, the rationale: Offer the product, offer the financial package, offer the insurance package.
GM for years offered collision insurance through MIC.
As the profitablity of new vehicle sales erodes, offering branded services is an alternative. Or offering a vehicle with a financial and insurance package is a tactical lever to gain additional business.
There have been numerous studies done that offering automotive services is a lucrative aspect of the entire automotive business.
Manufacturers are on a strategy to capture additional profit opportunities for themselves in a myriad of ways. Insurance is one.
jthorner,
GM and Ford do have financial divisions and look at how successful their auto divisions are(!)
In fact, they more or less rely on their financial divisions to prop up their woeful auto side!
Toyota don’t need to do that. Well, not yet….!
Oh how great it would be if auto companies were also insurance companies! I can see it now:
My brakes failed and I crashed, is this covered in my warranty?
No.
Is this covered by my insurance?
No.
guyincognito,
or…..
My brakes failed and I crashed into a tree.
Sounds like your car was poorly built, Who made it?
You did!
Having the ability to sell insurance through an existing dealership network would give an auto maker a major advantage at the outset; however it is not clear to what extent such a move would shake up the market
Toyota’s business acumen may not be perfect, but it ain’t bad. Toyota may have looked at the Canadian market and thought ‘There is an industry dominated by a few large firms that extort their clients and offer poor service. We did well last time we moved on an opportuntiy like that’
Now all Toyota needs to do is open a bank and they will be challenging two of Canada’s most tenacious oligopolies.
I’d be a little concerned about an automaker owning a car insurance company. Would regulators be allowed (or able) to prevent Toyota Insurance from discounting insurance on Toyota cars over other brands? That could lead to a situation where Toyota Auto can claim an unfair advantage by having cheaper insurance rates than other comparable cars, even (especially?) if other insurance companies have to follow suit to be competitive.
From a consumer standpoint, I think I’d want to be very wary about this.
I want this to happen. Manufacturers will then bundle insurance discounts into new car rebates as they do with financing. Considering how much insurance we pay in Toronto this is a welcome option.
KatiePuckrik:
Ladies and Gentlemen,
Toyota is now front runner for the Darwin Award in the category of “how to unnecessarily devalue your brand”.
Huh? Devalue the brand? Right, because in Asia, Europe, and Australia the Toyota brand is considered “devalued” because it sells auto insurance there.
I don’t see the branding problem, per se. As noted above, Toyota has had its fingers in a lot of pies for quite some time, and you already automakers involved in financial services, such as GMAC and Toyota Motor Credit. Hasn’t been a problem for any of them so far.
Still, I question this move, if only because of the nature of the insurance business, particularly in North America. Insurance companies generate profits by lowballing costs, denying claims and stalling out payments, all of which are not exactly the best ways to build goodwill. It would be stupid to lose a $25,000 Camry sale just because you pissed someone off over an $600 auto insurance policy..
It sounds to me like it might provide Toyota with an incentive to design safer automobiles in order to reduce the costs of claims paid out.
It might also influence their design in making their products easier and cheaper to repair.
Maybe they’ll even start building cars with bumpers that can take a low-speed bump from another car without resulting in thousands of dollars in damage.
It’ll be fun to see whether an owner of a 5-year-old Camry gets railroaded into accepting a cheaper, non-Toyota aftermarket fender by his ‘honorable’ Toyota Insurance claims adjuster…
Or said Camry owner gets steered to an ‘approved’ repair shop that just happens not to be a Toyota dealer, but by some strange co-incidence the shop agreed to discount the published labor times by 10%…
Yup… should be fun. Our provincial government’s insurance regulator is notoriously weak in Ontario.
Sludge was small potatoes.