Toyota travails: Lesson for Chinese carmakers

0 CommentsPrint E-mail China Daily, March 8, 2010
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"Where there is a way for cars, there is a Toyota" said the Japanese carmaker's popular advertising slogan in China in the 1980s.

Yet the beleaguered auto giant is now facing a different path - finding a way to recover consumer trust after massive recalls around the world.

Due to faulty gas pedals, brakes and floor mats, the company has now recalled 8.5 million vehicles globally since October last year - including more than 75,500 RAV4 sports utility vehicles in China - due to potential accelerator problems.

Widespread doubts about the quality of Toyota cars have now been raised among Chinese consumers.

Akio Toyoda, president of Toyota Motor Corp, admitted at a press conference in Beijing last week that the company's overly rapid expansion resulted in quality problems.

"The China market is very important to Toyota, so I decided to fly here directly from the US in person to deliver my expression of apology and explanation to Chinese consumers in the hope of regaining trust here," Toyoda said.

'Saftey should be first'

He added that in the past several years Toyota deviated from its original idea that safety should always come first and the cost of it should rank last.

Toyoda said the company will establish a special committee with several chief quality officers from Toyota's markets across the world to better hear consumer voices and respond quickly and appropriately. Toyoda himself will head the committee.

The committee plans to hold its first global meeting on March 30 to discuss the recent multiple recalls and the company's flawed quality management, Liu Peng, spokesman of Toyota Motor (China) Investment Co Ltd, told China Daily.

Concrete action plans will be discussed at the upcoming meeting and then publicly released, said Liu.

Despite negative impacts from the recall, the carmaker has kept its sales target at 800,000 vehicles in China this year.

Masahiro Kato, president of Toyota's China operation, said they even hope to surpass the goal as the Chinese market has such strong momentum.

Yet analysts believe that merely talking about sales aims is not enough and the company might reduce prices in a tradeoff to increase sales.

Zhang Xin, an auto analyst with Guotai Jun'an Securities, said it will be hard for Toyota to be profitable this year.

But he remains optimistic about the carmaker's future performance in China.

"If there are no new incidents, Toyota is likely to get through the trust crisis in China, at the soonest in six months," Zhang said.

He noted that automakers usually offer new models in the third quarter of the year and if Toyota's new cars have solved the safety problems and are priced reasonably, consumers will continue to buy the brand.

Market researcher JD Power's statistics show that Toyota's share of the Chinese passenger car market last year declined to 7.5 percent from 10.3 percent in 2008, and continued to drop to 6.6 percent in January this year.

"Toyota's market share in China is expected to decrease in 2010 and 2011, and climb back to about 7.5 percent in 2012," said Marvin Zhu, a senior market analyst at JD Power Consulting (Shanghai) Co Ltd.

According to Zhu, Toyota's RAV4 will take a hit in near-term sales but in six months will gradually return to its position as a principal model in the Chinese market, which has a strong demand for compact SUVs.

Toyota's China sales last year increased by 21 percent to 709,000 vehicles, far below the 52.9 percent growth in the overall passenger vehicle market.

Zhu said Toyota's overall sluggish performance in China should be mainly attributed to weakening competitiveness of its existing models - for example, its mainstream model Camry now faces more rivals in the compact car segment, like Nissan's Teana and Buick's LaCrosse.

JD Power predicts Toyota's sales this year will probably stay the same or see slight growth compared with last year.

Worldwide prestige

As the top-selling brand in the world renowned for its production efficiency, Toyota has received worldwide accolades for its manufacturing systems and attracted many followers, including some Chinese manufacturers, who are eager to expand capacity and reduce costs.

"One shouldn't say Toyota is good for nothing merely because of the recent recalls - the company still has much worth learning," said Li Shufu, president of domestic carmaker Geely.

Li said his company is studying Toyota's problems and how it works to solve them in an effort to learn from its mistakes.

Toyota's recent travails have also put China's recall regulations in the spotlight.

Last year, China recalled a total of 1.36 million vehicles, according to statistics of the national quality watchdog - the General Administration of Quality Supervision, Inspection and Quarantine - of which nearly 1 million were Toyotas.

The figures don't necessarily mean that Toyota cars have poor quality, analysts said, noting most domestic carmakers don't take the initiative to make recalls since supervision is weak.

According to current regulations, vehicle producers in China that try to cover up defective products will be fined a maximum of 30,000 yuan, a trivial punishment compared with what their foreign counterparts have to face if they attempt to hide serious defects.

Jia Xinguang, an independent automotive analyst, wrote in an online comment that Chinese regulators should increase penalties and invest more energy in building an effective information system to manage complaints. He also calls for more integrity in manufacturers.

Jia said that the current regulations tends to protect carmakers rather than consumers.

Guotai Jun'an Securities analyst Zhang Xin agreed that regulators' reluctance to implement stricter rules is due to considerations about protecting domestic automakers, which are generally not as good as foreign brands.

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