Emerging market-san: Toyota's Yukitoshi Funo
If you are the executive of a car company, then you better be with both feet in the emerging markets, or seek other employment. Markets in the U.S., Europe and Japan are saturated and off their peaks. At the same time, people in the world’s most populous countries are trading in their mopeds for cars, and this is where you want to be. Sadly, Detroit appears to be underrepresented in these markets.
Toyota Executive Vice President Yukitoshi Funo today singled out Volkswagen, Hyundai, and Nissan/Renault as the companies that are in “fierce competition” with his employer when it comes to the growth markets of Asia and South America. A Detroit company was not mentioned.
Much to the chagrin of some patriotic Japanese reporters in the room, Funo said that Toyota’s production capacity in emerging markets skyrocketed from 450,000 units in 2008 to 3.1 million next year, which is “equivalent to our Japanese domestic production level.”
World car production currently stands at around 80 million units per year. Levels of 100 million or higher are expected soon. These cars, says Funo, will be “built where they are sold.” They will be built in emerging markets, not in the U.S., Europe or Japan. 45 percent of Toyota’s sales already are in emerging markets. Conservatively, the number is expected to climb to 50 percent by 2015.
Bolstered by the success of Toyota’s Etios, Toyota will launch eight new compact cars until 2015, designed for and built in emerging markets. Introduced in December 2010 in India, the Etios pierced the 100,000 mark in cumulative sales just a few days ago.
According to ample hints dropped today, the Etios platform will provide the underpinnings to the eight compact cars that will spearhead Toyota’s continued assault on the emerging markets. The cars will slot “below the Corolla and will have a size similar to the Etios,” said Managing Officer Kazuhiro Kobayashi, who promised that “the Etios platform naturally will be made good use of.”
This was then: Toyota's "wild cow", the 1976 Tamaraw
Toyota has big plans for these cars. They form what Toyota call the “new compact car category.” They are supposed to bring in sales of one million units per year before 2015.
This is now: Toyota Fortuner, a small SUV that is a hit in emerging marekts
They will not be low cost cars. Funo rejected rumors of a low cost car that would retail in the 500,000 yen ($6,300) category. Looking at a green Tamaraw, or “wild cow,” a very basic jeepney-type vehicle that led Toyota’s invasion of the Philippines in 1976, Funo said that times have changed:
“Customers in emerging markets no longer like the Tamaraw. They want to shift to better things, they want better and even better cars.”
Toyota wants to leave the low cost car segment to other makers, including its sibling Daihatsu. Toyota is focused on a price level around $12,000, which leaves room for families, bags, and aspirations.
I would not say Detroit is under-represented in emerging markets. At least GM has a strong presence in China and Brazil and in some other South American and Asian places…
It’s a strong presence, but not a leading one, e.g. not the one on which Toyota focuses as a competitor.
Toyota is not leader either, at least in larger markets like Mexico, Argentina, Colombia and Brazil
As does Ford. Sadly though, Ford’s presence is a declining one and there seems to be nothing in the future.
Now, GM at least has a chance. People are liking very much the new Cobalt. Ride, size, comfort etc. If GM succeeds in spreading that platform to their other small cars, they’ll likely see some growth in Brazil. Kill Celta and Agile though now GM!
Part of the reason for success in emerging markets is not absolute reliability but cheap and fast maintenance. Part of the reason GM, Ford and the French still lag in many Latim America markets is the absurd cost of parts. They can’t compete with VW and Fiat in this area.
12000 dollars. That’d be abot 20000 reais. Plus taxes and amortization costs would mean 40000+ reais to the consumer. No, in Brazil Gm will stay in single digits.
For the time being anyway
Yes indeed. European cars (American cars barely exists here) generally considered to be hard and expensive to maintain here, as a result their resale value free fall in spectacular fashion. This, combined with prices that’s generally way over its Japanese/Korean competition, makes them hard to market in developing countries. Mercedes-benzes are the only exception here in Indonesia. Because of their longtime reputation they still have a bulletproof reputation, and good resale value, despite their past horror like the W210.
Hi Mr Whoopie!
Whoops! My last sentence should’ve been Toyota will remain in single digits. Actually they have about 3% now. With Etios they could encroach on Ford at 8%. Though the big candidate to pass Ford is Renault at 6%. If you put them together with Nissan, they are now the fourth maker in Brazil with something like 9%.
Gm hovers from 17 to 19% the last couple of years. To grow further they have to cut Celta and Classic price or substitute them with something more modern. But their product onslaught has just started (Cobalt and derivatives), so let’s see how it goes.
Japanese parts aren’t exactly cheap. So +1 on Marcelo.
However, many Brazilians, and Venezuelans and… I think you get the point, will fall in the “scam” of buying a “premium” product which in other markets is just a cheap entry level car. It is depressing. And I am looking straight at the toaster with wheels, an acceptable A-B appliance, which according to the marketing honchos of that respective OEM is “the most aspirational car in the market”.
With the European product it will only get worse, servicing one of those downsized “marvels” is going to be “funny” in a 3rd world country. And that is putting it nicely. A big brand should have no issues, but mass market ones will be another story.
All the leather lined NAV equipped Land Cruisers I waded through shopping says this strategy works in the USA too. Hey you just paid 80 grand for the same damn vinyl lined 5 speed diesel that I tool around the “roads” on in Afghanistan.
“…the Etios pierced the 100,000 mark in cumulative sales just a few days ago.”
The Etios probably sells because its a Toyota-branded product and its affordable but there is nothing that suggests that it is even remotely connected with say a Camry of the current generation. No resemblance in style – nothing.
When people in emerging markets discover that they are paying for something that’s not a “REAL” Toyota, they won’t be buying as eagerly. I just hope those models don’t replace what’s over here.
Heaven forbid a stripped out Infiniti is sold to us as a Datsun! That would be humiliating.
humiliating….and Awesome!
Is the Fortuner based on the HiLux? I see them around Kandahar and just assumed them to be another RAV-4 style CUV but in walking by one I saw 6 lug wheels on one. I don’t know about emerging markets, but here in, for lack of a better term a crap hole market, the HiLux is still king.
Think of it as something like the 2nd gen 4Runner and you get the idea.
And before I have to go after the flame retardant suit, I know the Fortuner is not based on that old truck. It’s on the current one.
The Fortuner is part of Toyota’s IMV project, which includes the Innova MPV and the Hilux pickup. It definitely is not city type SUV, as it has a ladder frame chassis. It’s more of an old school SUV.
Maybe Toyota doesn’t want to mention that GM is the leader in the most important emerging markets!
“At 13%, GM has the largest market share in the BRIC markets and is best positioned to benefit from the rapid growth as car penetration increases. This compares to GM’s closest peer Ford (NYSE: F), which has a low single digit market share (1.9%).”
“http://beta.fool.com/sumzeroresearch/2012/01/25/hedge-funds-eyeballing-shares-gm/1250/
BRIC is not a single country. GM is strong in 3 out of 4 of those countries, I think. Was it strong in India as well?
I’d have to agree Doctor. Comparing to Ford or Chrysler, GM is much better positioned in BRIC countries. Ford somehow seems to not have adequate products to sell here as the One Ford policy prices them out ofmost emerging markets
The Japanese are very strong in Southeast Asia (Indonesia, Malaysia, Philippines, Vietnam..etc), where they basically monopolizes the market.
Keep in mind that the population of ASEAN countries together are about 1 billion; these countries are also endowed with fertile soil and plenty of natural resources; these countries have booming economies but lack the capital and technologies the Japanese posses, but they have the growing market and natural resources the later lacks.
A case in point of this symbiotic relationship is the resurgence of Mitsubishi — they are now highly profitable mostly due to surging sales of pickups and SUVs in Thailand and other SE Asian countries.
And lastly, Japanese companies do not face the “political” problems in SE Asia as they do in China.
GM’s market share in China is much less impressive if you take out the 1 million + Wuling econovans — a joint venture in which they only own a minority share.
Take the Wulings out and GM’s market share in China is declining.
Wuling’s success is a direct result of GM management and technology, which grew Wuling from around 100,000/year when GM invested in the company in 2002 to well over 1,000,000 today.
It is true that GM only owns 44% of the joint venture.
http://www.autonews.com/article/20120131/BLOG15/120139981
It is also true that GM is NOT a leader in India, with about 4% market share.