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Toyota faces a turning point on its way of growth. Carmakers in U.S., Europe, Japan all suffer earnings decline

8, 13. 2008

   Toyota Motor Corp., together with its subsidiaries Daihatsu Motor and Hino Motors, sold 270,000 units of cars more than the U.S. General Motors (GM) in the first half (January-June) of 2008, becoming the world's largest carmaker again following the first half of 2007, it has been learned. This showed that Toyota won the sales race over GM, which suffered from slow sales of large cars. However, Toyota itself also faced conspicuously sluggish car sales to such an unprecedented extent that the company is now beginning to consider car price raise.

New car sales in U.S. drop 7% in first half

   Toyota's car sales in the world during the first half went up 2.2% on year to 4,817,941 units, renewing the sales record on a first-half basis. For GM, on the other hand, the sales decreased 2.9% to 4,540,409 units. The sales of large cars, the main line of products for GM, dropped sharply as a result of decline in consumer spending and soaring gasoline prices. It might be said that GM was directly hit by the U.S. economic slowdown.

   As a result, it has become strongly possible that Toyota, which was defeated by GM in car sales race by a marginal difference of 3,000 units in 2007, might clinch the world's top place in the whole of 2008. In fact, Toyota had registered the world's largest car sales for three consecutive quarters from October-December term of 2007 through the April-June term of this year, beating GM.

   The present condition of Toyota can not be described as bright, however, as some of its own officials sighed that it means nothing if the company becomes the world largest carmaker under the "present condition as it is."

   Although Toyota managed to maintain an increase in its world sales in the first half at 2.2%, the increase rate had been the lowest since such statistics began to be made public in 1999. Views are expressed by many persons in the auto industry to the effect that Toyota has come to a turning point on its way of growth.

   The sales in the United States, the largest market in the world for Toyota, dropped 7% in the first half 2008 from a year earlier. In Japan, where many people are shunning cars, Toyota's sales also went down by 2%. In Europe, excluding Russia, the sales decreased 7%, meaning that Toyota's sales dwindled across the board in all industrialized countries. Toyota's sales in China were brisk with a 34% rise. The declines in sales in advanced countries were offset by increased sales in newly emerging countries. Japan, the United States and European countries primarily account for almost 70% of Toyota's total sales, and the sales decrease in the advanced countries must have dealt a severe blow to the company. Even if the company placed emphasis on the sales in newly emerging countries, the problems still remains that cars for exports to these countries bring less profit than those for advanced countries.

Domestic prices increased by 1-3% centering on luxury cars

   Against this background, Toyota is making an utmost effort in reviewing its production system in the United States. The plant that was being constructed for the production of large cars has been redesigned for the production of the hybrid "Prius" cars that are selling well. The company also took a decision to close down existing plants for the production of large cars for three months beginning in August.

   Simultaneously, Toyota is taking steps to raise the prices of cars centering on luxury cars for the domestic market by 1-3%. It is unusual to raise the prices except for model changes and other model improvements. But a company official explained that increases in materials prices can no longer be absorbed in the production cost.

   Toyota is now making furious efforts for the restructuring of its production system and reviewing of its pricing strategy. It has no time to enjoy being the "world's top carmaker," but it has entered a crucial stage.

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