Toyota‘s Strategy towards the
Brazilian market
Prof. Kobayashi Hideo
Graduate School of Asia-Pacific
Studies, Waseda University
Toyota sales by country
2500000
2000000
Brazil
Canada
China
1500000
Europe
India
Japan
Mexico
1000000
South Africa
Thailand
USA
500000
0
2008
2009
2010
2011
Source: Toyota
2
Regional distribution of Toyota
sales
• Concerning sales, the USA, Europe, Japan and
China are central, especially the US have
gained relatively strong importance. Although
sales have decreased in 2011, Toyota
recovered in 2012 and came back as the
global number one automobile maker.
3
Toyota production by country
4500000
4000000
3500000
Brazil
3000000
Canada
China
2500000
Units
Europe
India
2000000
Japan
Mexico
1500000
South Africa
Thailand
1000000
USA
500000
0
2008
2009
2010
2011
Year
Source: Toyota
4
Regional distribution of Toyota
production
• Due to the Lehman shock of 2008, production
figures decreased in 2009. In 2010, brief recovery
could be achieved, but the 2011 Great Tohoku
Earthquake and Thai floodings affected Toyota
negatively. Despite these problems, a quick
recovery was achieved in 2012 with annual
production of 9.900.000 units, which made
Toyota the world largest car-maker
• Until 2011, Brazil was no major car-producing
country for Toyota. In comparison to
China, Europe, the USA and Thailand, the
production capacity was low
5
Toyota’s emerging markets dedicated models at
a glance
Model
Segment
Brazil Russia China India
Etios HB B
Dedicated compact
HB for emerging
markets
X
X
Etios
Sedan
B
Dedicated compact
sedan for emerging
markets
X
X
Vios
B
Compact sedan
dedicated to Asian
emerging markets
Agya/
Ayla
A
Developed by
Daihatsu.
Indonesia
X
X
X
Avanza/ MPV
Xenia
IMV
Series
Thailand
MPV
Innova (Thailand,
Malaysia, India...)
SUV
Fortuner (Thailand,
Argentine...)
X
PU
Hilux (Thailand,
Argentine,
Malaysia...)
X
X
X
X
X
X
X
X
X
X
X
X
6
Development of Brazil‘s auto
market and Toyota
Source: Toyota
4000000
3633000
3515000
3500000
3141000
3000000
2500000
2820000
2463000
2000000
1500000
1000000
500000
80600
72300
99600
99500
94700
62700
67200
64000
66200
66000
2007
2008
2009
2010
2011
0
Market
Toyota Production
Toyota Sales
7
Toyota‘s position in the Brazilian
market
• Brazil produced 3.630.000 units, becoming the
world‘s seventh largest car producing nation
after China, the USA, Japan, Germany, South
Korea, and India. However, 75% of the
domestic market are dominated by the „Big 4“
Fiat, VW, GM, and Ford. With production of
70.000 units and sales of 100.000 units,
Toyota‘s market share is a mere 3%, which
means that it does not make a profit
8
Toyota‘s position
Data Source: ANFAVEA 2011
Toyota, 2.02%
Nissan; 2,02%
Kia; 1,80%
Hyundai; 2,35%
Citroen; 2,67%
Peugeot ; 2,75%
Honda ; 2,89%
Fiat; 22,56%
Renault; 6,70%
Ford ; 9,21%
VW; 22,13%
GM; 19,97%
• Data indicate that the
share of Toyota‘s
imported cars increased
while domestic
production remained
equal
• Nevertheless, Toyota‘s
market share is still small
• No Toyota model among
the top ten sellers
9
Toyota do Brasil at a glance
Sorocaba plant
Sao Bernardo
Indaiatuba
Location
Sorocaba City, Sao
Paulo
Sao Bernardo do
Campo, Sao Paulo
Indaiatuba, Sao Paulo
Start of operations
September 2012
November 1962
August 1998
Produced models
Etios
Corolla and Hilux auto Corolla
parts
Capacity
70.000
Area
370 hectare
19 hectare
178 hectare
Employees
1.500
1.200
2.000
-
70.000
Toyota do Brasil outline
Location
Sao Bernardo do Campo, Sao Paulo
Esablished
January 1958
COO
Mr. Nakanishi
Capital
709.980.000 Real
Ownership
Toyota Motors (100% subsidiary)
Employees
4.700 (as of August 2012)
10
Toyota Brazil‘s production output
Etios units produced in Brazil 2012
＞17.254 units
• Corolla units produced in Brazil 2012
＞ 67.980 units
11
Construction of Toyota‘s new plant
in Sorocaba City, state of Sao Paulo
• Toyota announces that it aquired an areal for
the construction of new assembly plant in
Sorocaba, Sao Paulo. The surface area is
around 370 hectares. Here, Toyota will
investigate the construction of a new plant
with an annual production capacity of around
150.000 for a compact car from 2011
onwards. From the start of operations,
approximately 2.500 new employees will be
hired. ＜July 2008＞
12
Sorocaba City plant‘s foundation
stone ceremony
• The foundation stone ceremony for Sorocaba
City plant was held. From the start of
operation in second semester 2012, annual
production capacity will reach approximately
70.000 units. After construction, the compact
car will be produced and sold domestically as
well as export of surplus units. Total
investment is around $ 600.000. The complete
surface area is around 370 hectare and
operation will generate around 1.500 new
jobs. ＜September 2010＞
13
Construction of Toyota‘s new
engine plant
• August 9th, 2012： Toyota announced that it will
construct a new engine plant in Porto Feliz, Sao
Paulo. Operation is scheduled to begin in the second
half of 2015. Initial annual production capacity of the
plant will be 200.000 units. For the low cost compact
car Etios, 1.3L and 1.5L engines, for the Corolla 1.8L
and 2.0L engines will be produced.
• After localisation of engine production the local
content of these two models is increasing from 65%
to 85%. Further, Toyota starts production of the Etios
from September in its new Sorocaba plant.
14
Sorocaba plant Etios production
output
• September 2012： On September 18th, Toyota‘s
Brazilian production and distribution subsidiary
Toyota do Brasil announced that it will release a
hatchback and sedan version of the world car Etios
on September 28th.
• The Etios is a Flex-fuel vehicle (FFV) which engines
can operate on blends of gas and ethanol. Sales price
of the hatchback (1.3L/1.5L) starts from R$ 29.990,
the sedan from R$ 36.190. Production of the Etios
will begin from middle of September. Target annual
production is 70.000 units.
15
Sorocaba plant Etios production
output
• Toyota announced that daily production of
Etios models in Sorocaba plant will increase
from 150 to 300 units due to the introduction
of a second shift in the beginning of January.
＜January 14th, 2013＞
• This plant employs 1.600 workers and the plan
is to produce 70.000 units in 2013. Etios
prodcution started in August 2012, the
number of assembled units was 10.000, more
than the targeted number of 9.500 units.
16
Toyota‘s new organisation
structure
CEO
Lexus International
500.000 units
Vice CEO
Vice CEO
Vice CEO
Toyota 1 (North
America, Europe,
Japan)
4.000.000 units
Toyota 2 (China, Asia,
Australia, Middle East,
Africa, Central and
South America
3.000.000 units
Unit Center (engine,
transmission)
Each subdivision manages procurement, assembly, and
accounting independently
17
Toyota‘s new organisation
structure
• Latin America, Africa and the Middle East are controlled
by an independent division (Toyota 2), which also set up
a develoment department for KD engines
• Business reform: the KD department thereby increases
its formal rank inside the company
• Organisation structure: Instead of the former division
into 6 centrally controlled regions, the structure has been
shifted to 2 main divisions, which are headed by Vice
CEOs, who should react more quickly to occuring market
demand in each single market under their authority.
Lexus is controlled directly by the CEO
18
Increasing localisation
• Toyota‘s new plant in Sorocaba City will produce
the Etios (70.000 units; could be increased to
100.000 units)
• Initially, the motors will be imported from Japan.
Later, the currently constructed plant in Porto
Feliz (investment: R$ 1 billion; operation
scheduled for 2015) should produce the engines
for Etios and Corolla
• Through this facility, the local content of Etios and
Corolla models should be increased from
presently 65% to 85%
19
Suppliers in Sorocaba City supplier
park
Production
Assembly/Logistic
Kanjiko (welding / painting)
Pirelli (tire+wheel)
Sanoh (fuel tubes)
Faurecia (exhaust system)
Toyota Boshoku (seat, interior trim)
Pilkington (glasses)
TT Steel (blank)
TKL (logistic)
Tsucho Scrap (recycle)
Formtap (carpet)
Scorpios (stamping parts)
Inergy (plastic reservoir)
20
Suppliers
• Toyota Boshoku will invest together with Aisin
Seiki and manufacture seats, door trim and air
cleaners for the Etios
• Kanjiko will produce body assembly and press
body parts. Moreover, the firm will support plant
management and engineering services in
Sorocaba City plant.
• Sanoh already supplies parts for Corolla and
Honda Fit from Americana industrial park. Local
manufacturing appears to be extended
21
Suppliers
• TT Steel (Toyota Tsusho affiliate) will deliver
internal and external body blanks
• Pirelli will only mount the tires on the wheels
• The investment of Brazilian firms like Formtap
and Scorpios shows that Toyota does not
solely rely on foreign suppliers
22
Suppliers
• Faurecia illustrates that market-specific technology
development and R&D are conducted in Brazil
(Limeira, Sao Paulo). Here, R&D and production are
located in the same facility
• According to Faurecia, the Tech Center in Limeira is
part of the global R&D network, but without any
unique, company-wide function. Therefore, Faurecia
appears to mainly serve OEM interests in reliable,
local service and problem-solving capability
• In which way Brazilian suppliers of Faurecia can profit
from technology transfer is unclear
23
Toyota do Brasil‘s latest developments and trends
(2011 onwards)
1. Sales trend
・2013 sales target
Doubling 2011 sales number of 200.000 units
・Expansion of dealer network
Increasing the number of dealers from 134 (in August
2012) to 150 by the end of 2013
・Product launch
September 28th, 2012: Etios launch (hatchback & sedan)
October 2012: Prius launch planned
2nd half of 2014: New Corolla launch is scheduled
・Introduction of Lexus brand
in June 2012, the first dealer of Lexus in Sao Paulo opened
24
Toyota do Brasil‘s latest developments and
trends
2. Production trend (2011 onwards)
・Production halting
In May 2011, local production at TdB stopped for 2 days
due to a production adjustment procedure
(Due to the Great Tohoku Earthquake, parts supply from
Japan became short in May 2011)
・Capacity utilisation in the 2 plants
Sorocaba City, Sao Paulo plant which produces the Etios
started operations in September 2012
・Engine plant foundation
In August 2012, the construction of a new engine plant in
Porto Feliz, Sao Paulo by the second half of2015 has been
planned
25
R&D localisation
• Toyota‘s past decisions suggest that Brazil is
not an important R&D location for the OEM
– Global R&D Center was opened in Changshu,
China. This facility is similar to prior established
ones in the USA, Belgium, Australia and Thailand
– Emerging market dedicated model Etios was
developed in India and later modified and
introduced to the Brazilian market
26
Partnerships
Source: AutoData
• Sorocaba City and the state government of
Sao Paulo reacted to demand from Toyota for
better skilled labour by
– Investing in classrooms and laboratories at Sorocaba‘s
Technology Collage (Fatec), which led to doubling student
numbers
– Fatec created new courses in logistics, polymers,
automotive metallurgy and electronic processes to
respond to companies‘ demands
– Further, two ETC technical schools operated by the state
government are expanded and one is newly constructed
27
Summary
• Investment into the market indicates growth
perspective
• Etios and flex-fuel engine production indicate
that Toyota is adapting to Brazilian market and
customers to gain higher market share
• However, locating a major R&D center in
China, Etios development in India as well as
sales and production data suggest that other
emerging markets play a more important role
for Toyota‘s global strategy
28
Summary
• Increase of local content is already planned
• Increased local content should decrease cost
per unit
29
Research Institute of Auto parts
Industries
Http://www.waseda.jp/prj-japiri/