TOYOTA in China:The right products?

Day 2

Research project

Toyota Global Vision

Sales goals by market

20152010

40%

60%50% 50%

Emerging marketsIndustrialized nations

Toyota Global Vision

Sales in 2010: 7,308,000 units

Emerging markets in 2010: 2,923,200Emerging markets in 2015: 4,384,800(If the numbers of units sold in industrialized nations stays the same.)

Therefore, forecasted CAGR in emerging markets is 50% over 5 years, i.e. 10% growth per year.

Can Toyota do it? Is there a market potential?

Global AutomotiveSales Forecast

2011 2012 2013 2020 CAGRAverage growth

per year

U.S. 13 14.5 15.5 15 15.4% 1.7%Japan 4.7 4.6 4.7 4.5 -4.3% -0.5%W. Europe 14.6 15.3 16 14.5 -0.7% -0.1%E. Europe 2.1 2.3 2.7 3.2 52.4% 5.8%Brazil 3.4 3.6 3.8 5.7 67.6% 7.5%Russia 2.2 2.5 2.9 5.7 159.1% 17.7%India 3.2 3.5 3.9 8.4 162.5% 18.1%China 18.7 20.7 22.4 30.2 61.5% 6.8%Asia 5.6 5.8 6 6.8 21.4% 2.4%Rest of World 10 10.5 10.3 13.1 31.0% 3.4%Total 77.5 83.3 88.2 107.1 38.2% 4.2%

Source: Goldman Sachs Japan through wardsauto.com/ar/forecast_global_demand_110216

How to achieve 50% CAGRin emerging markets over 5 years

Key markets to succeed - China and India (sales growth and volume)

China - the biggest market in the world, slower growth from now due to government policies but still high

Toyota - the largest manufacturer in the world in 2010, now losing its position to VW and GM

So, Toyota must succeed in China. What is the reality?

China’s 10 largest carmanufacturers in 2010

Units 2009 Units 2010 Growth 20101. SAIC 2,705,390 3,558,400 31.53%2. Dongfeng 2,002,793 2,724,800 36.05%3. FAW 1,944,660 2,558,200 31.55%4. Changan 1,869,832 2,378,800 27.22%5. Beijing Auto 1,243,034 1,489,900 19.86%6. Guangzhou Auto 636,715 724,200 13.74%7. Chery 500,330 682,100 36.33%8. BYD 448,374 519,800 15.93%9. Brilliance 348,340 501,400 43.94%10. JAC 321,845 458,500 42.46%Total of top 10 12,021,312 15,596,100 29.74%Market share 88% 86%Grand total 13,641,918 18,061,900 32.40%

Source: China Association of Automobile Manufacturers through www.thetruthaboutcars.com/2011/01/china-car-market-101-who-makes-all-those-18-million-cars/

Passenger car salesin China in 2010

Units 2009 Units 2010 Growth 20101. SAIC-GM-Wuling 976,776 1,135,600 16%2. Shanghai GM 708,406 1,012,100 43%3. Shanghai Volkswagen 728,291 1,001,400 38%4. FAW Volkswagen 669,179 870,000 30%5. Chongqing Changan 518,513 710,000 37%6. Beijing Hyundai 570,293 703,000 23%7. Chery 500,334 674,800 35%8. Dongfeng Nissan 518,961 661,000 27%9. BYD 448,374 519,800 16%10. Toyota 425,126 505,900 ??? 19%Total 5,773,037 7,793,600 35%Market share 57%Grand total 13,672,982

2010GM 2.4 milVW 1.9 mil

2010Hyundai 1 milNissan 1 mil

Source: China Association of Automobile Manufacturers through www.thetruthaboutcars.com/2011/01/china-car-market-101-who-makes-all-those-18-million-cars/and Reuters: in.reuters.com/article/2011/01/10/idINIndia-54043220110110

Toyota: 846,000

China’s Best SellingCars of 2010

Model Manufacturer Price in $ Units sold

1 BYD F3 BYD 7,821 - 12,200 263,900

2 No.2 Volkswagen Lavida Shanghai VW 18,117 - 21,137 251,600

3 Hyundai Elantra Yue Dong Beijing Hyundai 16,247 - 18,088 233,300

4 Volkswagen Jetta FAW-VW 11,440 - 14,912 224,500

5 Buick Excelle Shanghai GM 15,976 - 17,940 222,500

6 Volkswagen Santana Shanghai-VW 11,592 - 12,045 210,100

7 FAW Xiali FAW 6,626 - 7,532 198,700

8 Chevrolet Cruze Shanghai GM 187,800

9 Cowin Chery 173,500

10 Volkswagen Bora FAW-VW 16,280 - 22,321 172,500

Source: autos.globaltimes.cn/photo/2011-01/611358.html

China’s Best SellingCars of 2010

1. BYD F3 2. Volkswagen Lavida

3. Hyundai Elantra Yue Dong No.4 Volkswagen Jetta

China’s Best SellingCars of 2010

5. Buick Excelle 6. Volkswagen Santana 7. FAW Xiali

8. Chevrolet Cruze 9. Cowin 10. Volkswagen Bora

Where is Toyota?

No. 1 world manufacturer is not in top 10 in the biggest market!!!Does Toyota have the right products in China?

Toyota in China - products

17 models (excluding Lexus) Rather luxurious, only 5 of them below

$30,000!!! Big difference from the top 10… Camry – middle class in the US, high-end

in China A new small car designed specifically for

China to be launched in 2013 – rather late! approximately US$12,000 (Etios in India launched in

Dec 2010 – also late…)

Toyota in China – other issues

Promotion issues – weak in magazines Dealerships – relatively luxurious service:

check in, greeting by name, automatically playing piano, leather sofas, free coffee, internet access…

Weak partners for joint ventures with local manufacturers : China FAW Group - state-owned enterprise, difficult to work

with Guangzhou Automobile Group – not among the top

manufacturers GM partnered with SAIC - a premier auto manufacturer with

international ambitions

Outlook

VW – investing $13.8 billion by 2015 GM - current growth of 15% versus the

market growth of 5% (rate of growth revision in October)

Toyota - “We’re not going all out to go as fast as we can in China. We’ve learned a big lesson. We want to be careful.”

(Karl Schlicht, head of the global product and marketing division at Lexus)

Toyota is too cautious…

Outlook

Low-end car market – lower growth but still good (tax subsidy was lifted)

Middle class – more promising

Suggestions:

Get a low-end car, China specific car quickly.

Improve corporate image. New and better joint venture?

Sources

Toyota Annual Report 2011Reuters Bloomberg BusinessweekChina Association of Automobile ManufacturersGlobal Times