Toyota’s Problems In China Bigger Than Acceleration issue
Jason Lancaster | Mar 17, 2010 | Comments 9
By sheer volume of sales, China is the biggest automotive market in the world. 13.6 million new vehicles were sold in China in 2009, compared to only 10.4 million in North America…and that trend is only going to become more pronounced as the world’s economy revs up again.
Note that China’s market is only bigger by volume – the average new car in China costs about a third as much as a new car in the U.S. or Canada, so it will be awhile before the actual value of China’s market exceeds the value of the North American market…but that day is coming. Fast.
In other words, an automaker’s success in the 21st century depends on having an effective presence in China. While Toyota’s unintended acceleration problems might seem important to U.S. consumers, the truth is that the unintended acceleration issue is minor compared to Toyota’s struggles in China.
In news that’s good for America’s economic future, China is one market where many U.S. automakers have the upper hand. Buick (believe it or not) is tremendously popular in China. Chrysler and Ford are strong in China as well.
Sidebar: I’ve seen Buicks in Beijing with my own eyes – I spent more than 6 weeks in China in 2008 – and the number of Buicks I saw was nothing short of astounding. Jeep Grand Cherokees are also quite popular, as is the Ford Focus. In fact, most American brand vehicles are something of a status symbol.
When it comes to China, GM and VW are the big dogs, with Ford, Hyundai, Nissan and local automakers Geely and Chery rounding out 9 of the top 10 manufacturers in China. GM might even sell more cars in China in 2010 than they do in the USA (but that’s using some tricky accounting).
Toyota…not so much. They’re predicted to lose market share over the next three years. Here’s why:
1. Part of the issue is cultural. You don’t have to be a history expert to remember that Japan invaded China 60 years ago, and there’s a lot of residual cultural animosity from this event.
As I interviewed drivers about what car to buy, I realized that a large part of Toyota’s or Nissan’s problems in China come from nationalism…When we interviewed drivers in Shanghai, they overwhelmingly told us not to buy a Japanese car because the “Japanese are evil.” – link
2. Part of the issue is being late to the party. Toyota didn’t start seriously investing in the Chinese auto market until 2004, years after VW, GM, Ford, Hyundai, Nissan, and Honda. While Toyota experienced strong sales in China in 2008, their Chinese market share has been falling ever since. Part of the problem is that they simply don’t have the manufacturing and sales capacity of their rivals.
3. Part of the issue is poor public relations. Toyota’s P.R. gaffes in the last 6 months could occupy a semester of graduate-level study. Not only did Toyota completely mishandle pedal gate in the USA, they also completely screwed it up in China. According to one poll (albeit somewhat suspect in terms of accuracy):
According to a survey conducted by Chinese website sina.com, 73.6 percent of [Chinese] online respondents said they would not buy Toyota or Honda branded cars after the recalls, with only 16.4 percent maintaining Japanese cars are still their preference in terms of choices.
The online poll was conducted on 258,000 participants between March 1 and March 8, 2010.
In addition to bad publicity from recalls, there’s Toyota’s “Climbing-ability-gate” scandal in China. A Chinese Toyota Highlander owner, angry at the fact that his Camry-based SUV couldn’t climb a 30% grade, decided to post video on a popular Chinese video sharing site showing his Highlander failing to climb a hill that other competing SUVs could climb…as well as a cheap little car from Geely (image the Chinese version of the Yugo beating an SUV up a hill and you get the idea).
In the United States, a video of a Highlander failing to climb a 30% grade probably wouldn’t be a big deal. After all, the typical Highlander buyer isn’t looking for an off-road vehicle. Anyone with those concerns living in the United States probably wouldn’t be caught dead in a Highlander (I know I wouldn’t).
However, China’s relatively poor infrastructure and rough country roads means that any vehicle pretending to be an SUV should actually be an SUV.
Toyota’s “Climbing-ability gate” demonstrates a key point we’ve made about Toyota’s leadership: Because Toyota is managed from Japan, they simply do not understand the needs of every market. Just like Japanese managers fail to understand how to market the Toyota Tundra, they’ve failed to recognize Chinese consumers need REAL SUVs – not Highlander SUV wanna-be’s.
The bottom line: Toyota is losing market share in the world’s biggest auto market. While this isn’t a major concern in the here-and-now, Toyota can’t afford to be a minor player in China going forward. As big as Toyota’s problems in the USA might be, they pale in comparison to Toyota’s problems in China.
Toyota has a lot of work to do, don’t they?
Filed Under: Auto News
If it is a camry based Highlander, can I assume it is the 2.4L 4 cylinder? I thought, at least in the USA, the Highlander comes standard with the powerful 3.5L V6 that is a rocket ship almost on par with some V8’s all while still maintaining about 25 mpg hwy. which is far better than any V8.
This article goes to show you that China and Japan, at least in the immediate future until older generations die off and the younger generation in China do not have the recollect of the past wars or don’t care anymore and have an open mind to the world as a whole, are much like the US and their allies fighting a war Afghan/Iraq. We will never 100% win the war because a lot of the people in Afghan, Iraq, etc. are set in their old fashioned ways and values and we cannot change 200 years of history in 10 years. It cannot be done and Bush and his cronnies who got us into this mess should have realized this long ago that this war that we are in will never truly be won.
mk – I’m not sure about the powertrain. I searched long and hard for the video (it’s gone ‘viral’ in China), but alas my Chinese reading skills are non-existent.
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Part of the cultural issue between China and Japan stems from Japan’s decision to completely ignore the fact their troops raped tens of thousands of Chinese women for more than 10 years during their occupation of China. The story of these so-called “comfort women” is horrific, yet it wasn’t until the late 90’s that Japan’s government officially acknowledged and apologized for these acts. To the Chinese people, Japan’s unwillingness to acknowledge their past accentuated the negative feelings many had.
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Interesting fact: The U.S. Canada border was militarized for nearly 200 years, the vast majority of that time the two countries were at peace. I think it’s fair to say that every country has a case of “old fashioned values” when it comes to conflict.
The GREAT WHITE NORTH COULD STRIKE AT ANY TIME!!!! Aye.
Jeremy – If it wasn’t for the NRA, the Canadians would have attacked the USA in 1989. (I have proof). Just kidding – LOL!
Yhea when the french when a war!
Oh no my Highlander can’t climb a 30% grade!!!!!! So I have a 1st gen Highlander V6 and it’s a 4×2. I wouldn’t expect it to climb after getting it’s front wheels stuck in a ditch 2 weeks after I bought it. It’s a crossover SUV built on the Camry platform and not intended for off road use. It’s a great vehicle with lots of power and pickup but I don’t think of it as a Jeep. It’s just a crossover that provides some height and cargo space. It shows the ignorance of the consumer and not the manufacturer in the case above.
TXTee – I think that you’re half right…just remember that roads in China aren’t necessarily like roads in the USA. People who buy a vehicle in China expect to be able to drive wherever they need to go, even it that means deep ruts, steep grades, etc. That’s especially true for SUVs. I think it’s a great example of Toyota’s “Japan-centric” leadership. If Chinese execs could make product decisions, these types of things might be less likely…but maybe not. As for your point about consumers expectations, duly noted.
Talking about the hill climb on top u should know that that person had a 2.7L I4 2wd not the 3.5L V6 4wd version. So he should be bitching. Anyone that wants to watch the videos should go here http://www.youtube.com/watch?v.....038;sns=em (but this video is in chinese).
John – Thank you very much for the video link…I looked hard for that and could not find it.
I read that there was a video showing the Highlander stalling out and then a Geely running right up the hill…any idea where that one is?