Analysis: Oh, what a sinking feeling: Toyota misfires with Chinese buyers

Sun Oct 28, 2012 5:23pm EDT
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By Norihiko Shirouzu

BEIJING (Reuters) - The roots of Toyota Motor Corp's China troubles run far deeper than the anti-Japan protests that have swept the country, stretching back to the 2008 launch of the Yaris subcompact -- a spectacular flop with price-conscious Chinese buyers.

The car, a success elsewhere, was meant to help build brand loyalty and send Toyota hurtling towards a still-unattained goal of selling one million vehicles annually in the world's largest auto market.

However the Yaris missed the mark with China's traditional higher-end customers as well as its new emerging middle class.

To some company insiders and dealers it epitomizes all that does not appeal to the status-conscious, lacking what the Chinese call 'daqi' or 'road presence'. Next to Nissan Motor Co Ltd's pricier Tiida, for example, it feels small and lacks oomph.

But for frugal first-time buyers, the Yaris which is priced from 87,000 yuan ($13,900) was a non-starter, costing some 55 percent more than General Motor's Chevy Sail and putting Toyota at a competitive disadvantage in a must-win market.

"The Yaris is too expensive, way too sleek for its target market. This group of consumers is very, very price sensitive," said an operator of a few dozen Toyota dealerships across China.

Toyota sold an average of just 1,250 Yaris cars a month in China in 2012 data through August, before the territorial row between Japan and China flared up in September. By contrast, Nissan sold 12,000 Tiida subcompacts per month and GM moved 17,000 Chevy Sails.

The Yaris shows how Toyota misread the evolution of China's auto market. Surprised by how quickly the emerging middle class grew rich enough to buy cars, the automaker failed to grasp that the vast majority of those new buyers preferred no-frills models.   Continued...

A visitor walks past a Toyota Motor Corp's car displayed behind a sign in both Chinese (L) and Japanese at the company's showroom in Tokyo in this October 18, 2012 file photo. REUTERS/Toru Hanai/Files