Eddielogic

– Thoughts on Strategy and Management

Perspectives for Toyota and Lexus in Germany

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Contrary to the United States, where Toyota and their luxury brand Lexus have gained a considerable market share, both brands have been struggling for years in Germany. According to official statistics, both brands together have a market share of new cars sales of only 4 %. Although Toyota had been enjoying a reputation for superior reliability and even for customer satisfaction for years, they have not been able to improve their position significantly.
I have a few hypotheses why this is so:

  • Firstly, most Germans prefer German or at least European car brands over Asian brands. A German car is related to a higher status and so Toyota as a Japanese brand has a natural disadvantage.
  • Secondly, despite ongoing advertising activities in Germany, I think that Toyota’s main strategic focus was on America over the last decades. According to their website, they have 10 manufacturing companies with a production volume of 1.5 million units in North America – 8 of those were set up in the seventies, eighties or nineties. In Europe, there are currently 7 manufacturing companies (plus one planned for Russia in 2007) with a total production volume of 0.6 million units. Of those, only two are from the nineties and one from the sixties.

My personal feeling is that they consistently pursue the overall strategic objective of becoming the world market leader for passenger cars. They seem to take a step-by-step approach. Put in very simple words – they started from their strong home base and than focused on North America as the worlds largest and homogenous automotive market. This was a logical step, since Europe, on the contrary, is very heterogonous – consisting of several very different countries with different languages and preferences for cars and car promotion.

By now Toyota has achieved a really comfortable position in North America and even scored a big hit with the Prius hybrid car. So it looks to me as if it is time for them to put more efforts on improving their position in Europe and especially in Germany (I am not so familiar with their activities in other European countries). As in North America, they seem to take their time. There is no big bang event, but a series of indicators.

  • In 2000 they opened their European design centre Toyota Europe Design Development (ED2) at Côte d’Azur, France. The primary objective was – as stated at the Toyota Europe website – ‘to help understand the local influences and styles of the customers it wants to buy its cars’.
  • My last two points are personal observations which are by no means objective or representative. Firstly, over the last couple of years I noticed a steady increase in advertising for the Toyota and especially the Lexus brand in Germany. For instance, Lexus is now premium advertising partner on the website of one of Germanys leading newspapers, faz.net. Since about the turn of the century (I am not sure about the correct date) there were several print advertising campaigns for Lexus in high-end magazines.
  • Secondy, I start to see Prius models more often in our streets. This needs a bit of explanation: German customers have a high preference for environmentally friendly technology. However, they are not willing to trade car performance or ease of use for fuel efficiency. Thus cars with alternative power such as gas or fuel cells never really made a breakthrough. The popularity of the Prius in the US may indicate to Europeans, that Toyota is the first one to offer an affordable and practical environmentally friendly car.

So what does all this tell us. I think that working hard on both ends of the market – the small car segment and the luxury segment – Toyota slowly but continuously builds up their reputation in Germany. It may still take some time until they can catch up with European brands but finally it will happen. My feeling is that in a few years (i.e. more than three) Toyota will have significantly improved their market share in Germany and probably in whole Europe.

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