Tough Road Ahead: Three Challenges That Toyota Faces in 2013

2012 Toyota Camry XLE

It is widely predicted that Toyota will once again become the best-selling automaker in 2012, unless continued tensions between Japan and China affect their sales, which so far, it has. That being said, it’s not all sunshine and lollipops for the Rising Sun automaker, as it faces unique challenges in 2013. Will they be able to maintain its momentum?

How Long Can They Sustain Declining Sales in China?

It’s no secret that Toyota has taken the brunt of the sales dive that all of the Japanese automakers have suffered since September of this year, recording double-digit decreases in total number of units produced and sold. From shuttering production lines to dealing with vandalisation at their dealerships, they have suffered tremendous losses in the world’s biggest auto market, and arguably the most important. Although sales in November slightly improved, the conflict over Japan nationalising two of China’s natural resource-rich islands is far from over. Coupled with American, Korean, and European automakers capitalising on the fickly Chinese buying public shunning Toyota and others, an increase in tensions could negate any small gains that they may make in the next few months. Toyota has gone on record as saying that they expect that sales and production numbers will return to normal levels by July of next year, but that remains optimistic at best.

Pressure Coming in From All Sides in North America

Conversely, in the North American market, Toyota has enjoyed increased foot traffic and sales, thanks to the all-new redesign of its most important (and best-selling) model, the Toyota Camry. However, due to the Japanese government no longer being able to “control” the yen, and the subsequent rising of versus the American Dollar, has led Toyota to quietly continue to use cheaper materials, especially in their interiors. It has also been mentioned that Toyota is not interested in conquest sales, but rather attempting to appeal to existing Camry owners, or to Corolla owners looking to move up. Added pressure from revamped vehicles such as the Honda Accord and the Ford Fusion only look to take away potential buyers, especially the Honda Accord. I look for the Accord to regain its best-selling title within a couple of years.

Speaking of which, the long-awaited replacement of the Corolla is scheduled to debut next year. If the new Corolla is not class-leading in any category, it may not be able to wrestle the crown of best-selling compact away from the current king, the Honda Civic (itself receiving an emergency refresh due to widespread criticism from both the automotive press and enthusiasts). In addition to the Civic, Toyota will also have to contend with the likes of the Ford Focus, Hyundai Elantra, the upcoming all-new Kia Forte, Chevy Cruze, Dodge Dart, and the red-hot Volkswagen Jetta, amongst others. This segment may be even more competitive than the mid-sized one, especially since automakers like Mitsubishi concentrating on the compact (C-segment) market with its Lancer.

The same goes for the recent debut of the Toyota RAV4. First impressions lead us to believe that it may not be enough to top the current heavyweights in the white-hot compact CUV market, the Honda CR-V and the Ford Espace. Dropping such features as the V6 engine and the side-hinged rear liftgate will no doubt turn buyers off from considering purchasing another one. As an owner of a 2003 RAV4 L, I would say that not having the latter feature is enough to not consider purchasing it.

Conversely, Toyota is only coming out with minimal changes to its full-size Tundra, and those remain mostly cosmetic. This leads me to believe that Toyota has conceded the full-size market to the Americans to continue to battle it out. Also, Toyota is bizarrely marketing the Avalon to a younger demographic, instead of building on its solid older crowd of loyal buyers. Odd, since I would assume that they would be in a good position to capture those that are no longer able to purchase the Mercury Grand Marquis and the Lincoln Town Car.

Even the ever-popular Prius line is facing stiff competition from Ford, with its C-Max hybrid outselling the Prius V for the past few months. Sales of the Prius C will undoubtedly taper off, and the regular Prius will only continue to face even more competition, as automakers begin to roll out better versions of their own hybrids.

Things Aren’t Looking Good in the Rising Sun

Japan is just now recovering from the devastating tsunamis that claimed thousands of lives and billions of dollars in damage. More specifically, Toyota suffered with decreased production levels, and dealerships both at home and abroad felt the sting, while competing automakers captured their prospective customers (sound familiar?). Japan attempted to give their automakers a boost by offering tax incentives on their vehicles…but I suspect that this would have been done anyways, as the younger generations are eschewing automobiles in favour of the latest mobile devices. we are experiencing the same trend here in America, albeit not to the degree that they are.

In any event, much like the American Cash For Clunkers federal programme, everyone that wanted/needed to purchase a vehicle has already taken advantage of this programme, which leaves Toyota and the auto industry right back to where they started…selling less vehicles than they were before. Toyota is forecasting that it will produce/sell about 1.36 million units, down a staggering 19% from 2012. It’s not certain if the Japanese government will come out with a similar programme, or readjust to an ever-changing fickle consumer market.

Can Toyota overcome all of these challenges in 2013? The only solution is the same for any company with their backs up against the wall…release best-in-class products with customer support that exceeds their expectations.

News Sources: NasdaqInternational Business Times, and Market Watch

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