Even though Toyota
is in 3rd position in the USA market, it does so with the best gross
and net profit margins. In 2016, Toyota’s brand value was US $ 28.7 billion,
the highest for any automobile company, with Ford, the highest American player,
at US $ 13.07 billion (Brandz, 2017). Furthermore, the Toyota Camry and Corolla
were the highest selling cars in USA in 2016 based on unit sales at over
388,000 and 378,000 units respectively (GoodCarBadCar.net,
2017). Both the brands (Lexus at 86; Toyota at 85; Average at 82) had
the top two Customer Satisfaction Index (CSI) scores in 2017 in USA.
Additionally, both the brands had CSI scores above the industry average for the
last 10 years (ASCI, 2017).
Toyota has always
been on the forefront in new technologies in cars, especially in production and
power train. In line with this, Toyota launched the Toyota Smart Center in USA
in 2005. This center operates a unique energy management system that smartly
connects home, cars, utility companies, and users. This center is at the heart
of Toyota’s vision for “a Smart Mobility Society that connects people, vehicles
and communities”. It operates a robust, secured, and dedicated cloud data
system, that consolidates every customers’ vehicle’s data (globally) and
analyzes that data to provide users with bespoke services that target the
customer’s value drivers (Berkshire Hathaway, 2016).
In 2016, only 7%
of Toyota’s sales were for rental fleets. The trailing 5-year average is 6%. Currently
Hyundai’s percentage at 26%, is the highest in the industry. Toyota should look
to upscale its fleet car business to tap into the 1.82 million rental fleet
cars sold in 2016. Furthermore, rental fleets assure returns for aftersales for
a longer term (Manheim Press Room, 2017).
Toyota’s US sales
have declined in FY 17 by 9.1%. The main decline was seen in the Lexus (21%
decline) and luxury vehicles (5% decline). Toyota is facing stiff competition
from a new generation of cars from BMW, Mercedes Benz, Jaguar, and Volvo.
Toyota’s Return on
Equity (ROE) has improved from a low in 2009 of -4% to >10% in 2016. Return
on Assets (ROA) improved as well from -1.42 in 2009, to 3.79 in 2016. However,
more scope is there to improve, as some competitors are achieving ROE of 20%.
The alternate power train is booming and Toyota is positioned well with its
portfolio of hybrid and electric vehicles, thus it can look to expand into
solar power. Furthermore, Toyota should look to continue building its
international footprint as a globalized supply chain has been of the firm’s
core strengthens. Building capabilities in house is Toyota’s modus-operandi,
however its US $ 3.1 billion acquisition of Daihatsu Motors Corporation in 2016
shows that the firm is strongly considering inorganic growth opportunities
exist (PwC, 2017).
product recalls and corresponding legal proceedings are expensive errors and is
hurting the brand image. Toyota is currently discussing matters with the
National Highway Traffic Safety Administration related to faulty power window master
switches in the Camry and RAV4.
faces large amounts of forex risk, especially with the high amount of with the
variation in Yen – US dollar exchange rate. Car companies’ operations are
“subject to currency and interest rate fluctuations as the majority of the
value chain is international” (Schmid & Grosche, 2008).
successfully captured a significant share of the USA passenger car market and
has been producing in USA for past 31 years, building up its dealer network and
manufacturing capabilities. It currently has 10 plants and 1500 dealers in USA
in 2016 for Toyota and Lexus (Toyota-USA, 2017). Despite fierce competition,
Toyota holds the top three spot, as it has over the past 10 years. Its growth
is driven through appealing designs and product innovations.
Today, Toyota has
cars in every key sub-segment and the firm is continuously evolving per the
needs to the American consumer. Toyota vehicles have also become synonymous
with reliability and efficiency. This is adequately marketed with US $ 2
billion spent on advertising in USA in 2016, up 10% from the 2015 (Advertising
Age, 2017). These factors contribute to Toyota’s strong market positioning and
brand messaging. In future, Toyota seems poised to keep its competitive
position in the American market.