Toyota: Driving the Mainstream Market to Purchase Hybrid Electric Vehicles

Summary Toyota is a large, international automobile manufacturer with plans to become the largest worldwide automaker, striving for 15% of global sales. Toyota is committed to becoming the leader of the hybrid-electric automotive industry and is relying on changes in the industry and customer perceptions to bring its plan to fruition. Toyota's challenge is to develop consumer attitude and purchase intent from an early adopter, niche market model into universal mainstream acceptance. In 1957 Toyota introduced its first vehicle to the American market, the Toyopet Crown. The small, fuel efficient vehicle had seen much success in Japan, but did not fare as well in the U.S. market. With relatively inexpensive gas available in the United States, the American consumer saw no need for a reliable, fuel efficient vehicle manufactured by a foreign auto company. In its first venture into the U.S. market Toyota learned some valuable lessons; auto manufacturers must align their vehicles with customer needs and a high quality product does not always succeed in the market. Toyota found an opportunity to re-enter the U.S. marketplace during the fuel shortage of the 1970's. For the first time, American consumers were looking for fuel efficient vehicles and Toyota had the answer. In 1965 foreign auto groups held just 5% of the U.S. auto market. This share has steadily been increasing with foreign auto manufacturers currently holding 40% of the market. With its foot in the door of the U.S. market, Toyota developed a reputation for designing simple, fuel efficient, reliable, affordable vehicles. In April 2003, with a solid reputation, low cost flexible production, and more than $134 billion in cash and assets, Toyota set its sights on becoming the largest auto manufacturer in the world. The auto industry and the environment in the U.S. had changed dramatically since Toyota hit the U.S. scene almost 50 years ago. In the 1950's there were 50 million vehicles on the roadways, this number had increased to just under 500 million (a 90% increase!) before the new millennium. Carbon dioxide emitted from the traditional combustion engines in automobiles was linked to global warming, rising sea levels, and increasing smog.

Intro/Situation Toyota's goal: 1. 2. 3. 4. Become the largest worldwide automaker Grow by nearly half during next decade Be the leader in the hybrid market Make all of its vehicles with a hybrid option by 2012

Situation: Consumers are becoming more environmentally conscious; gas engines will not meet future regulations; government providing tax incentives and passing laws to encourage/require cleaner vehicles. Advantages: Past success in producing hybrids, superior fast production systems; predicted HEV growth high. SWOT analysis Strengths Best fuel efficiency Spacious interior Good performance Comfortable Appeal of high-technology Excellent scoring in crash test Opportunities the price of fuel will continually rise 2011 PHEV extended the electric range Customers awareness of environmental concerns is growing Sales are spread to new market in developing countries Weaknesses fuel economy varies and optimization requires careful driving premium price still uses non-renewable fuel requires more energy to build

Threats Internal combustion engines become cleaner, more efficient and greener EVs are greener and cheaper New competitors will soon enter the market The economic conflict between Japan and china is having a big negative influence on TOYOTA

Objectives and strategies 1. Attain leadership in the HEV segment Prediction about the change in the market Ability to determine the needs and desires of customers before they express them The Toyota production system: o Just-in-time production o Flexible and fast in changes Pioneer in HEVs market 2. Evolve HEV technology from a niche to a mainstream Focus on making the 2004 Prius a normal car in design and feel with advantage of an HEV Make the customers loyal to the Brand by providing better services than competitors Create an awareness campaign to get the customers used to the product and the technology Train technicians 3. Increase acceptance of HEVs Proof security with crash test Initiate long-term-driving studies to prove reliability and safety Transfer/use existing TOYOTA image of a reliable and safe car to promote the HEVs livelong (maybe 100.000km) guarantee Stay present in the media 4. Make all of TOYOTA vehicles with a HEV variable by 2012 Once HEVs are accepted as a mainstream product, an HEV option in each TOYOTA line will be viable Recommendations 1. Attain leadership by having highest quality hybrids build on already established quality superiority. Emphasize in communications that hybrids are built to Toyota standards and need infrequent service. 2. Increase production of SUVs and also minivans for the American market. Large vehicles rule those roads.

3. Offer free or low-cost training to mechanics. Provide a service station locator on their web site. Offer coupons, in conjunction with mechanics, for consumers who might have to drive some distance for service.