Toyota Motors: A Japanese Multinational Automaker in China




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Excerpts

Chinese Automobile Industry

The automobile industry in China had grown to become the largest in the world measured by automobile unit production since 2008. In 2012, China overtook the US as the world’s biggest car market with sales of 19.3 million vehicles compared to 14.5 million in the US. China’s dominance was expected to continue with its low vehicle penetration rate of 85 vehicles per 1000 people, compared to 797 vehicles in the US.

According to the China Association of Automobile Manufacturers (CAAM), in 2013, the total sales of cars, buses, and trucks in China increased by 14 percent to 21.98 million units and was expected to surpass 24 million in 2014. By 2030, China’s annual sales were expected to reach 39 million, which would be 28% of global sales. “We believe clearly for anybody working in the automobile industry, if there’s one place to be, it’s China.

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Toyota In China

Historically, relations between China and Japan had been strained due to the World War II legacy when the two countries fought on different sides. Many Chinese did not like Japan as Japanese troops had occupied large swathes of China and committed atrocities during World War II. This also affected the business of Japanese companies in China. After the China-Japan relations were normalized during the early 1970s, Toyota not only worked toward developing the auto parts industry in China, but also trained personnel in order to contribute to the development of the Chinese automobile industry........

Toyota's Strategies In China

Before Toyota started full-scale passenger car production in China, it used to export completely built vehicles from Japan. In 1993, Toyota Motor (China) Ltd. (TMCL) was established in cooperation with Toyota Tsusho as the first distributor in China. TASS and Toyota Authorized Parts Dealers were put under TMCL. In the initial years, TMCL laid emphasis on developing sales networks before full-scale car production commenced in China. .....

Geo-Political Tensions

Industry experts opined that as a Japanese company in China, Toyota had been facing troubles, a fallout of the Japanese occupation of China during World War II. The political tensions between Japan and China flared up into riots in 2005. In 2005, when the then Japanese Prime Minister Junichiro Koizumi visited a Tokyo shrine where war criminals were among those honoured, the Chinese people and politicians protested.....

A Failure in China?

Analysts claimed that the root of Toyota’s troubles in China went deeper than the anti-Japanese sentiments prevailing in China. Industry experts blamed the company for misreading the evolution of China’s auto market. Although Toyota started exporting to China in 1964, it did not focus on the Chinese market. In fact, it concentrated on developed markets like the US and Europe until 2002 when it rolled out its first locally produced, Toyota-brand car in China........

The Road Ahead

In January 2014, Toyota sold 85,600 vehicles in China, an 18% increase from the previous year. In February 2014, Toyota announced that it would launch the Toyota Avalon sedan in China in 2015. The Toyota Avalon, which was only available in North America, the Middle East, and South Korea, would be manufactured in China by the Guangzhou-Toyota joint venture.......

Exhibit

Exhibit I: Toyota’s Consolidated Vehicle Production and Sales (2008-2014)
Exhibit II: Toyota’s Consolidated Financial Performance (US GAAP) (2008-2013)
Exhibit III:Toyota’s Sales in China (2012-13)
Exhibit IV:Toyota’s Journey in China
Exhibit V:Market Share of Leading Automobile Companies in China