High stakes hybrid

Toyota's best efforts to convey the significance of local manufacture for the Camry Hybrid have not struck root yet. With television advertising for the new car already airing -- a month ahead of the official launch -- the Australian public appears to remain unaware that the latest Camry variant to be produced by the Altona plant carries a heavy burden. It's a car that is expected to sell around 10,000 units (approximately 25 per cent of all domestic Camry sales) in the first year on sale, so the real-world proof of concept really rests with consumers.

For Toyota Motor Corporation (TMC) in Japan to approve local production of the car that will take the company's 'Hybrid Synergy Drive' technology mainstream is a major filip for Toyota Motor Corporation Australia (TMCA). It's also a milestone and a jumping-off point for the local arm, which anticipates that there'll be a hybrid variant in every Toyota product range sold around the world by 2020. TMCA will play a small but important role in that goal -- and that task begins now.

How TMCA came to secure approval to build the petrol/electric sedan seems like quite a story in itself, but it's a story that Toyota's David Buttner doesn't really clear up. In fact, he admits to being surprised that the local arm of Toyota landed the Camry Hybrid production role at this time, when the Carsales Network spoke to him during the Camry Hybrid's styling presentation last month. According to the TMCA exec, it's highly unusual for any regional arm of Toyota to be handed the responsibility for production of a car at the mid-cycle facelift.

"In terms of the final sourcing decision -- any sourcing decision, particularly mid-model -- it's really unusual... to actually get a product in the middle of a model, at facelift time," he said. "I don't know of any other instance."

That suggests that the parent company is right behind TMCA making an immediate start on inoculating the Australian buying public with hybrid technology -- and not waiting for the next generation Camry, still three or so years away.

Put to Buttner that the Australian plant picking up the production role for the hybrid-drive vehicle is an unlikely event whatever the model lifecycle timing and Buttner agrees that "There was a whole lot of debate". With the Toyota plant in Thailand building the Camry Hybrid -- and a free-trade agreement already in place between Australia and Thailand -- one would presume that the landed cost of the car imported from Thailand must be very competitive with the final cost of the finished product built here.

"One option was build it in Thailand and import it to Australia," Buttner confirmed.  "The other option was build it in Australia."

"In Australia, we don't just automatically get granted product... There has to be a strong [volume] case, you have to have rationale -- who your buyer type's going to be."

Buttner is very careful to steer clear of mentioning the $35 million understood to have been offered by the federal government after Toyota had already announced that the Camry Hybrid would go into production locally. The fact that the decision was made to build the car here before the government made the offer -- under the auspices of the Green Car Innovation Fund (itself not officially announced at the time Toyota revealed it would build the Camry Hybrid in Altona) -- suggests TMCA had a strong business case for the car even without the government assistance.

Buttner, explaining in an "apolitical" way, does suggest that the "millions of dollars" invested in the upgrade of the Altona plant and commencement of Camry Hybrid production wouldn't have happened in a legislative environment less favourable in the longer term.

"You want to make sure that the short, medium and long-term policy frameworks give you an opportunity to get a return on investment. If... the investment horizon is so short... why would you invest?

"When you can see those horizons, it gives the parent much more confidence that the incumbent government understands what it is you're trying to do...

"I think that for any investment decision -- regardless of what you're doing -- if you're looking at investing in a country, you want to make sure that the policy regime that exists is conducive to the on-going survival of the auto industry."

According to Buttner, Toyota (TMC) recognises that the Camry Hybrid has long-term 'legs' in Australia. Presumably, in doing its sums, TMC has worked out that Australia should remain a benign and stable economy for the foreseeable future. But foreign exchange rates surely play a part in the viability of a locally-manufactured car, you would think.

"Toyota isn't a short-term thinker, Toyota is a long-term thinker," says Buttner. "Economies go through cycles... You can't just make a decision on the prevailing economic circumstances. You have to be able to look at it over time..."

What would happen though, if the Aussie dollar remains high over a longer period -- or just as likely, the Thai Baht crashes -- making an imported Camry Hybrid more profitable than a locally-manufactured one?

"You make decisions for resourcing or budget or whatever they may be, based on a set of precedents -- and those assumptions will change over time," Buttner responds.

Toyota, applying its "Kaizen mindset" would "set targets" and introduce different tactics to bolster the locally-manufactured car's profitability.

"You strive again to find a better way of doing it, a more cost-effective way. You have to learn to work in that environment."

Buttner says that the proposition to build the hybrid in Australia was one pushed hard by TMCA with its parent ("We just kept arguing..."). Since TMCA has on occasion been a 'kindergarten' for Japanese executives who went on to bigger things at TMC (including Executive Vice President Yukitoshi Funo), there was some support for Altona to build the car from within the parent company too.

"That was a passion felt right throughout Toyota Australia," says Buttner. "We had some strong supporters in Japan and, in the end, we got the green light to build it here."

But what about the level of support for the car outside Toyota? Would buyers more readily consider the locally-manufactured hybrid ahead of an imported one? Buttner reckons that's not a major consideration in purchasing a car these days.

"I still think there's some sentiment -- albeit not as high as it used to be -- that 'made in Australia' encourages people [to buy], but at the end of the day, whatever you're selling has to stack up, in terms of... quality control, reliability, value for money... and its appeal as a product."

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