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TOYOTA in China: The right products?Day 2 Research project

Toyota Global VisionSales goals by market2010Emerging markets Industrialized nations

2015

40% 60%

50%

50%

Toyota Global VisionSales in 2010: 7,308,000 units Emerging markets in 2010: 2,923,200 Emerging markets in 2015: 4,384,800(If the numbers of units sold in industrialized nations stays the same.)

Therefore, forecasted CAGR in emerging markets is 50% over 5 years, i.e. 10% growth per year. Can Toyota do it? Is there a market potential?

Global Automotive Sales Forecast2011 U.S. Japan W. Europe E. Europe Brazil Russia India China Asia Rest of World Total 13 4.7 14.6 2.1 3.4 2.2 3.2 18.7 5.6 10 77.5 2012 14.5 4.6 15.3 2.3 3.6 2.5 3.5 20.7 5.8 10.5 83.3 2013 15.5 4.7 16 2.7 3.8 2.9 3.9 22.4 6 10.3 88.2 2020 15 4.5 14.5 3.2 5.7 5.7 8.4 30.2 6.8 13.1 107.1 CAGR 15.4% -4.3% -0.7% 52.4% 67.6% 159.1% 162.5% 61.5% 21.4% 31.0% 38.2%Average growth per year

1.7% -0.5% -0.1% 5.8% 7.5% 17.7% 18.1% 6.8% 2.4% 3.4% 4.2%

Source: Goldman Sachs Japan through wardsauto.com/ar/forecast_global_demand_110216

How to achieve 50% CAGR in emerging markets over 5 yearsKey markets to succeed - China and India(sales growth and volume)

China - the biggest market in the world, slower growth from now due to government policies but still high Toyota - the largest manufacturer in the world in 2010, now losing its position to VW and GM So, Toyota must succeed in China. What is the reality?

Chinas 10 largest car manufacturers in 20101. SAIC 2. Dongfeng 3. FAW 4. Changan 5. Beijing Auto 6. Guangzhou Auto 7. Chery 8. BYD 9. Brilliance 10. JAC Total of top 10 Market share Grand total Units 2009 2,705,390 2,002,793 1,944,660 1,869,832 1,243,034 636,715 500,330 448,374 348,340 321,845 12,021,312 88% 13,641,918 Units 2010 3,558,400 2,724,800 2,558,200 2,378,800 1,489,900 724,200 682,100 519,800 501,400 458,500 15,596,100 86% 18,061,900 Growth 2010 31.53% 36.05% 31.55% 27.22% 19.86% 13.74% 36.33% 15.93% 43.94% 42.46% 29.74% 32.40%

Source: China Association of Automobile Manufacturers through www.thetruthaboutcars.com/2011/01/china-car-market-101-who-makes-all-those-18-million-cars/

Passenger car sales in China in 20101. SAIC-GM-Wuling 2. Shanghai GM 3. Shanghai Volkswagen 4. FAW Volkswagen 5. Chongqing Changan 6. Beijing Hyundai 7. Chery 8. Dongfeng Nissan 9. BYD 10. Toyota Total Market share Grand total GM VW 2010 2.4 mil 1.9 mil Hyundai Nissan Units 2009 976,776 708,406 728,291 669,179 518,513 570,293 500,334 518,961 448,374 425,126 5,773,037 Units 2010 1,135,600 1,012,100 1,001,400 870,000 710,000 703,000 674,800 661,000 519,800 505,900 ??? 7,793,600 57% 13,672,982 Growth 2010 16% 43% 38% 30% 37% 23% 35% 27% 16% 19% 35%

2010 1 mil 1 mil

Toyota: 846,000

Source: China Association of Automobile Manufacturers through www.thetruthaboutcars.com/2011/01/china-car-market-101-who-makes-all-those-18-millioncars/and Reuters: in.reuters.com/article/2011/01/10/idINIndia-54043220110110

Chinas Best Selling Cars of 2010Model 1 2 3 4 5 6 7 8 9 BYD F3 No.2 Volkswagen Lavida Hyundai Elantra Yue Dong Volkswagen Jetta Buick Excelle Volkswagen Santana FAW Xiali Chevrolet Cruze Cowin Manufacturer BYD Shanghai VW Beijing Hyundai FAW-VW Shanghai GM Shanghai-VW FAW Shanghai GM Chery FAW-VW 16,280 - 22,321 Price in $ 7,821 - 12,200 18,117 - 21,137 16,247 - 18,088 11,440 - 14,912 15,976 - 17,940 11,592 - 12,045 6,626 - 7,532 Units sold 263,900 251,600 233,300 224,500 222,500 210,100 198,700 187,800 173,500 172,500

10 Volkswagen Bora

Source: autos.globaltimes.cn/photo/2011-01/611358.html

Chinas Best Selling Cars of 2010

1. BYD F3

2. Volkswagen Lavida

3. Hyundai Elantra Yue Dong

No.4 Volkswagen Jetta

Chinas Best Selling Cars of 2010

5. Buick Excelle

6. Volkswagen Santana

7. FAW Xiali

8. Chevrolet Cruze

9. Cowin

10. Volkswagen Bora

Where is Toyota?No. 1 world manufacturer is not in top 10 in the biggest market!!! Does Toyota have the right products in China?

Toyota in China - products 17 models (excluding Lexus) Rather luxurious, only 5 of them below $30,000!!! Big difference from the top 10 Camry middle class in the US, high-end in China A new small car designed specifically for China to be launched in 2013 rather late! approximately US$12,000 (Etios in India launched in Dec 2010 also late)

Toyota in China other issues Promotion issues weak in magazines Dealerships relatively luxurious service: check in, greeting by name, automatically playing piano, leather sofas, free coffee, internet access Weak partners for joint ventures with local manufacturers: China FAW Group - state-owned enterprise, difficult to work with Guangzhou Automobile Group not among the top manufacturers GM partnered with SAIC - a premier auto manufacturer with international ambitions

Outlook VW investing $13.8 billion by 2015 GM - current growth of 15% versus the market growth of 5% (rate of growth revision in October) Toyota - Were not going all out to go as fast as we can in China. Weve learned a big lesson. We want to be careful.(Karl Schlicht, head of the global product and marketing division at Lexus)

Toyota is too cautious

Outlook Low-end car market lower growth but still good (tax subsidy was lifted) Middle class more promising Suggestions: Get a low-end car, China specific car quickly. Improve corporate image. New and better joint venture?

SourcesToyota Annual Report 2011 Reuters Bloomberg Businessweek China Association of Automobile Manufacturers Global Times