Ask anyone why the new-car market has lost so much ground against the million-plus sales last year and they'll tell you it's about the Global Financial Crisis.
There's more to it than that, however. Take Toyota for instance.
While the behemoth of the Australian market sold 238,983 vehicles last year, it's going to be struggling to break the 200,000 mark for 2009. That's somewhere in the vicinity of 40,000 lost sales. How is it that a company with Toyota's product reputation, brand image and marketing expertise could suffer such a sales backlash, when its nearest competitor -- Holden -- has not endured the same result, by percentage?
The GM subsidiary sold 107,795 vehicles for the year to date, as at the end of November. That's 9.8 per cent lower than last year, whereas Toyota's November aggregate is 180,389 -- 18 per cent lower. Of the mainstream car companies, Toyota's result for the year so far is among the worst. Ford is down 10.1 per cent, to use another example.
Although it's undeniably true that consumers have held back from buying new cars during the latter half of last year and the first several months of 2009, the situation for Toyota has worsened as a consequence of other elements that are either peripheral to the Global Financial Crisis (GFC) or altogether unrelated.
The Carsales Network spoke to David Buttner, Senior Executive Director Sales and Marketing for Toyota Australia, concerning how Toyota had reached this point and what the company planned for the new year to redress the situation.
"We went through the first part of the year where we had a lot of stock -- and when the market started to pick up in June, we didn't quite have the stock then to meet the pick up," said Buttner.
That's understandable, given his remarks back in January that Toyota was forecasting a 900,000-unit market for 2009 -- and that's proved a little pessimistic, as it turns out -- although it was optimistic at the time.
"But our main areas of loss this year, from a share point of view, have been the smaller, compact segment," Buttner continued. "In the Yaris [VFACTS light car] segment, there's been a couple of new entrants. And there's been some aggressive activity from competitors -- where we have a transactional spec-adjusted price in the marketplace for one particular model of 76 per cent, which is a 24 per cent sweetener in the marketplace..."
The two new competitors have been the Ford Fiesta and the Mazda2, both vehicles that have added substantially to the sales volumes of their predecessors. Supply-constrained though it has been, the Fiesta is over 2000 units in front of its predecessor, based on year-to-date sales for 2009. Mazda2 has lost 2000 sales, but it's competing 'against itself' for 2008, not against the first-generation Mazda2 which was attracting half the sales volume. In 2008, Mazda2 added over 6000 units to the tally for the first-gen car in 2007 -- and if the GFC hadn't hit in the last half of 2008, the advantage for the new '2' might have been significantly better again than 6000.
Hyundai Getz, the other light-car segment competitor to the Yaris is nearly 3000 units ahead of its 2008 volumes for the same period. Honda's City sedan has snatched 3000 units for the year and that has possibly hurt Yaris too, since Yaris and City are two of just a handful of sedans competing in the segment. By comparison with the competition, the Yaris has fallen back over 6000 units so far, this year.
"In the Corolla segment, we've seen the emergence of Hyundai there and some other model activity," said Buttner about the VFACTS small-car segment.
"Corolla share has hung on pretty well, but it's contributed about 0.6 per cent to the overall 2.5 per cent share loss, where Yaris is 0.7 [per cent]."
It's Buttner's contention that perhaps more than other Toyota products, Corolla has suffered due to the disparity between the Korean unit of currency, the Won, and its Japanese counterpart, the Yen -- when converted into the Australian dollar. Cars like the Hyundai i30 have capitalised on that relativity between the Korean-to-Aussie and Japanese-to-Aussie exchange rates.
"From a transactional price point of view, when you look at the relationship between the Australian dollar and the Won and the Australian dollar and the Yen, it's 22 per cent favourable to the Won. So in terms of general price increases in the market, the Korean-sourced product, it hasn't had the price [increase]. In fact, some of it hasn't had a price increase since September '08 -- over 12 months ago."
Traditionally, the small and light-car segments -- especially the latter -- have been perceived to be price-sensitive, but Buttner says they're 'product-sensitive' also.
"What you'll find in those segments, they're very sensitive segments to new product. Particularly the Yaris now is in its mid-model life and we're starting our special edition-type activity -- to keep that going for another couple of years.
"They're segments that are really important in establishing people for a lifetime habit -- of buying your product. We're frankly not happy with the share loss in those two segments. It's always a bit awkward when you're 'mid-model life' and you've got a whole plethora of new models happening around you -- and we've already seen that happen this year and there's more activity next year, both from our Japanese and Korean competitors.
"So we have to ensure we continue to revitalise the product through special editions or value-add-type packages for the next couple of years -- because they'll go through a normal model cycle, about four years or so. So we have to make sure we keep attracting those customers into those segments, because they are so important to then getting people into the habit of buying Toyotas."
Buttner also points to the increased diversity within model ranges -- especially among small cars -- as a factor in the Corolla's sales erosion.
"You look at a lot of those competitors now in both those segments, when you look at body styles -- a lot of them are offering three or four body styles. In terms of alternate engines, whether it be sports... some of them have three or four offerings: you've got a petrol, a turbodiesel, a sports engine.
"So in that segment there, we still have two body styles for Corolla and we still have one engine offering. We went through a phase there, a few years ago, we had a wagon -- we haven't got a wagon now.
"When you look at that overall Corolla [small] segment, in 2002, we had offerings in 96 per cent of that market -- nearly 97 per cent. We had a wagon, we had a Corolla Sportivo out of South Africa with a sports engine. Now we've only got the one offering.
"What's happened now, is that competitors have come in with different fuel types, different body styles. In fact now, we're competing in 82 per cent, so we have to look at how do we bring some other body style, how do we bring some other engine offering -- because when you reduce the space in which you play, then your potential to maintain your share and get the volume as it comes along becomes increasingly difficult."
Moving up to the medium segment, Buttner is pleased with the market performance of the Camry over the year. Just like the large-car segment, medium was one vacated in droves when buyers began radically down-sizing their new-car purchases, but while the Camry slipped back 12.3 per cent, that was as nothing compared with Mazda6 (-15.1 per cent), Holden Epica (-30.2 per cent), Hyundai Sonata (-17.4 per cent) and Subaru Liberty (-20.2 per cent).
In that company, the Camry was the one car manufactured locally. The others -- Subaru's Liberty being one in particular to come to mind -- suffered a setback due to lack of supply, once it became apparent the local market was not as badly afflicted by the GFC as the rest of the world. Subaru were running down stock of the previous model Liberty too, compounding the mid-size Suby's lower sales.
"Camry has been a star…" Buttner noted. "When you look at that [VFACTS medium] segment, all the segments have been down naturally, over the previous year. But Camry has held up well..."
On the subject of the medium SUV segment, Buttner is a little happier about Toyota's performance during the year. The Kluger would have sold faster than it did if the stock had been available and the heavy-duty Prado was in runout for a good part of the year, but will likely reestablish itself in the front ranks of the segment now that the new model has arrived.
"We've had stock issues," observed Buttner. "Kluger has just been a sensational vehicle since the day it was launched. Kluger now, in fact, year to date -- because we're in run-out with Prado -- Kluger's run ahead of Prado. But between them, they still command over 30 per cent of that medium SUV [segment] and we're absolutely confident the new Prado will sell at least to the current levels, which in a good market is about 15,000 a year.
"We've got the addition of the three-door, which will give us another platform. While the volume won't be huge, but it might be another four or five hundred a year. We are happy with the cars in those segments and in spite of what's happened in the market there, our products are still really strong.
"For example, on Prado, we really had a five or six-week blackout, because we've had no stock of the old model. You pull that sort of volume out, that's three or four thousand vehicles. That was just on the back of the previous generation, it just keep selling and selling. Of course we couldn't get more because the plant had shut down production in Japan and they were gearing up for the new model. So that gave us a five or six-week hiatus there.
"The pre-orders on Prado, even with price totally unknown, has been amazing. Turbodiesel's about 76 per cent at the moment -- and we could have sold a lot more this year, but we couldn't get the product, being a runout year.
"With Kluger, we just haven't been able to get the volumes that we really wanted -- to capitalise on the sales there -- because it just keeps going from strength to strength. Kluger is still a really strong product. It's styling's still holding up in that segment; there hasn't been a lot else happening around that segment. We're confident that Kluger will be fine for the next couple of years."
In light commercial vehicles, the HiLux remains broadly unassailable, but Toyota is about to face its most significant new rival for decades in the ute and cab-chassis segments: the Volkswagen Amarok.
"In both the 4x2 and particularly the 4x4 segment, there [is] a plethora of very good competitors in there again," said Buttner. "When you look at the pricing of the product and the spec-adjusted pricing, then we don't have the advantage that we had years ago. We believe that HiLux will always be capable of commanding a certain premium in the marketplace, but you've always got to be careful to watch what the tipping point is.
"Volkswagen's got a number of niche offerings at the moment. They're not growing their volume to the same extent that one of the Koreans in particular has, but I always take every manufacturer seriously, because it only takes someone to sneak up behind you with a really hot product that really takes off in the marketplace..."
That Korean competitor, without Buttner naming it as such, is clearly Hyundai. The upstart is arguably seeking to 'out-Toyota Toyota'. Its history is not dissimilar from Toyota's, having risen from budget-brand recognition and cheap-and-cheerful product to a powerhouse importer that has already sold 60,000 cars in Australia for 2009 -- with a month of sales remaining. That's roughly a third of Toyota's sales, but it's a decent number for a full-line importer -- and one not competing in all the market segments Toyota is. Hyundai has really made gains while foreign exchange rates have suited it -- and it's not only Toyota that's concerned. Mazda is too.
"We're mindful of the volume loss and we are a volume franchise," said Buttner. "Certainly, for our dealer network, we've always advocated profit through volume.
"When you look across the board, there's really only one brand that's grown its volume and share this year. Hyundai is up 16,000 units and their share's gone to 6.2 per cent..."
For the moment, Toyota still has its wide-ranging product portfolio working in its favour though.
"We compete in 16 segments, right?" explains Buttner. "For a number of years, with the product we had, in some segments, pretty well had it on our own. What's happening now is that the segments that they're in, they're getting stronger -- because there's no doubt their products are improving.
"The Yen -- and the 22 per cent difference -- if you've got that sort of a difference in terms of a source country exchange rate, that means you can do a lot more from a merchandising point of view and be really aggressive and try and take advantage of that particular [rate].
"We're all subject to the vagaries of exchange rate, regardless of our source, and that's usually a bit of a spinning wheel type thing. One day you'll have an advantage, the next day you'll have a disadvantage, but the way the Won's been, it's certainly been a significant advantage for a long time now -- over 12 months -- and we've seen a lot of aggressive activity."
Toyota is a company that has been widely admired for its strong branding and image within the community, but even Toyota has its weak links. The front-wheel drive Aurion large car is one that has not gained the necessary traction in the marketplace. As far as Buttner is concerned, that's fundamentally a brand-management failure.
"When you look... through the product range, we've still got some challenges in some product areas," said Buttner. "We landed a new brand called Aurion three odd years ago, and we've used the AFL extensively, we've had the Aurion on the grass, we've had it on the grass at the Rugby -- and yet, from an average of 98 per cent [recognition for the brand overall], it's still only running about 60 per cent. So there is still some work to do on some of our brands, and we're looking now at how do we ensure that Hybrid Camry gets landed, as opposed to just Camry."
Buttner acknowledges that Toyota should manage to drag across the line for 200,000 sales this year, thanks largely to the government's incentives.
"The key thing for us is that we want to sell 200,000 again this year. We're on track to do that. We need to do 20,000 in both November and December. We need to pull about 23.5 per cent share in November, 24 in December. We're confident, we've got the largest order bank we've ever had -- and a lot of that's on the back of the investment allowance from the peak we saw in orders and deliveries in June.
"A lot of those deliveries will carry on through, because you've got the period next year for delivery -- so we're still confident of a strong finish for the year. And we've seen some good growth in share for our locally-manufactured cars, which is good."
With Camry Hybrid due soon and consumer confidence on the rise, Toyota should make a strong comeback in 2010. We'll be analysing VFACTS with interest.
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