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Toyota seeking breakthrough in resolving stagnant car sales at home,

5, 28. 2007

   Selling more cars over the world than General Motors Corp., Toyota Motor Corp. is nearing to becoming the world's top carmaker. But Toyota is troubled by a problem it can not solve easily -- stagnant sales of its cars in Japan, its home market.

Domestic market shrinking even with mini cars included

Sales are brisk in the U.S. but...
Sales are brisk in the U.S. but...

   For the term ending in March 2007, Toyota reported sales of 23,948 billion yen, or an increase of 13.8% over the previous term, and operating profit of 2,238.6 billion yen, a 19.2% rise. Both figures were record high. The report meant the company's operating profit doubled from the 1 trillion yen level to 2 trillion yen level in five years' time, symbolizing the company's fast expansion over the world.

   In North America, the largest market in the world, Toyota's sales jumped 15% over the previous term to 2,940,000 cars, far passing the sales of GM and the other two major automakers comprising the Big Three. Toyota's brisk sales in North America reflected the rising popularity for hybrid and other types of cars with good mileage against the background of soaring gasoline prices.

   The company's domestic sales, however, have been going down for the past two years in a row. The sales of the Toyota Group, which include Daihatsu Motor Co. and Hino Motors, decreased 4% from the previous term to 2,270,000 cars, further widening the difference with sales in the United States. As the sales decline on the domestic market was smaller than the sales of all carmakers in the country, the domestic market share of the Toyota Group cars rose to the highest ever percentage of 45.8% (excluding mini cars). This was not a pleasing result for Toyota, however, as its unconsolidated domestic sales decreased by 110,000 cars.

   The domestic new car registration in Japan for fiscal 2006 decreased 8.3% from the previous year to the lowest level in 29 years of 3,580,000 units (excluding mini cars). The declining new car registration trend has generally been said to be due to the rising popularity for mini cars which are recognized to be better in terms of economy and practical use than regular sized cars. The domestic car sales as a whole, including mini cars, however, went down 4.1% from the previous year to 5,610,000 units.

   "The declining cars sales in Japan are not a problem for Toyota alone but for the auto industry as a whole," says a person responsible for the industry. "But, no matter how good at globalizing the management, a carmaker is destined to face a business decline in a long run unless it does well on the market in its own home country," he said with a critical tone.

Seriously looking at structural factor for declining sales

   Toyota fully modified its main product "Corolla" in 2006 and added the "LS460" to the luxury "Lexus" line as a main model. The cars enjoyed good reputation and they were accepted as near perfect models. But they did not seem to have stimulated the consumers' interest enough to lead the whole car market to explosive sales expansion. "While Japan's economic recovery is continuing and there is the potential demand growth for cars from the consumers who are moving to trade their cars for new ones, why does the car market remain stagnant like this?" questioned a person at Toyota.

   "We introduced luxury models that bring in high profit, but we could not offset the decline from the decrease of 110,000 units in the car sales. I think we are facing a severe condition on the domestic market," Takeshi Suzuki, executive director of the company, said. In response to his view, Toyota began late last year to find a way out of the sales stagnation by forming a team of members selected from across the entire company.

   The team will not limit itself to studying automobiles within the framework of merchandise. It will search for automobiles that will help stimulate demand in a region or society as a whole. The team would be seriously concerned with the structural factors that have caused decreases in car sales. Some of such factors to be tackled with would be the rising expenditures by young people for mobile phones and other information related products rather than cars, and the decreased population of young people as s result of declining birth rate. The car market will be scrutinized as a whole by taking into consideration the ages of the people making up families and the activities consumers in each region.

   The declining birth rate is one of most difficult problems for which even the government is still unable to work out an effective countermeasure. Katsuaki Watanabe, President of Toyota, boldly says, however, that it would be most important to introduce a market-creative product in order to vitalize the market. "We have to take various measures for the vitalization of also the locality," he said, placing a high hope on the work of the new team.

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