AIMS: Toyota feeling tremors in light cars

Toyota has a lot riding on the new Yaris. The successor to its VFACTS light-car segment stalwart has arrived in the country just as Chinese brands are beginning to pop up.

Unfortunately for the company, the car on display at the Australian International Motor Show in Melbourne today is a pre-production car shipped here from Europe. A production model won't go on sale here until the final quarter of 2011.

Toyota remains confident the Yaris can hold its own in the segment, citing sales growth of 10.3 per cent last year (up to 21,452 units sold for the year), but the segment is ever more competitive.

It's not specifically the Chinese brands that will challenge for supremacy in the short term, says Toyota Australia senior executive director sales and marketing, David Buttner.

"It's a critical segment," Buttner said in Melbourne for the motor show today. "You look at that small, compact segment and the percentage make-up of passenger cars [including light and small cars]; in 2006 that was about 42 per cent. Our projection is that by 2015, it'll be up around 60 per cent. So you can't ignore the smaller compact [segment], where we compete with Yaris and Corolla.

"Then, emerging below that now is sub-compact [models like] the Suzuki Alto... There's about seven other products coming into that segment over the next few years as well. So this generation of Yaris is very important to us, as are subsequent generations. We have to ensure we remain competitive. You've gotta be in the mix...

"The Yaris has greater loyalty than any other Toyota product; it is the entry point to Toyota [for] the largest percentage of people who go on to buy Toyotas. So it's an important segment; we've got to retain our focus."

But if the most important entrée model to the Toyota brand is being undermined by competitors, what's the hold-up then with the smaller iQ?

"The main issue with iQ is just the price. We couldn't land it in this country [that] means we would be competitive. We all love the car, but it's an expensive car," Buttner answered, insisting that even with currency exchange rates they were the landed cost wouldn't cut it. The follow-up question concerned the possibility of sourcing the car from a country where labour costs are lower — Thailand or India, for instance.

"Never write off any possibility," Buttner replied. "We're continuously scouring the Toyota globe [to see] what we could get in this generation? What can we get in the next generation?

"The source is an important issue; you look at the trends now, and a lot of manufacturers are changing their sourcing away from what used to be specifically Japan. I think that's a trend we'll continue to see throughout the total industry."

Has Toyota been slow to respond to the changing global market dynamics though? Buttner didn't acknowledge that point, but the company does seem to be angling towards sending Japanese production offshore, based on Buttner's response.

"I think all of those things are on the horizon in the future," he concluded

Decentralising production would also lead to stabilised global manufacturing in the wake of the great eastern earthquake that hit Japan earlier this year. Toyota Australia president Max Yasuda revealed during this morning's presentation that Toyota's Thai facility resumed normal production last month. Altona has also made a full recovery during the last three weeks and Japanese facilities are currently back to 90 per cent of pre-disaster production.

But the slowdown in production as a result of the quake must have Toyota looking to diversify the logistical risk in future.