Why Has Toyota Failed in the Automobile Chinese Market? - Evaluation Essay

Introduction

The Chinese market hit the Japanese automobile company, Toyota with negative records of the specially designed model for the market. This came in at a time when China was busy with anti-Japan protests and at the same time the company fought for brand loyalty and larger market share. Therefore, there are several reasons why the company failed in the Chinese market. Some of them include the overpricing of the Yaris subcompact and the natural epidemic that hit parts of the production points of the company, the Japan earthquake. By taking on the relationship between the Japanese and the Chinese economies, we find that there are major differences that affect the supply and demand curves of major goods and services (Wang & Fang, 2017). In China, there was an emerging larger middle class as compared to Japan. After the earthquake hit hard with significant losses, the Toyota Company, through their boss and the founder members set out to make up for losses. They targeted the larger Chinese market, especially the middle class. However, the company did not make enough inquiries about the market nor did it consider the fact that their plan would fail.

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Toyota Company Analysis

With great enthusiasm, the company went ahead and designed a Toyota brand, Yaris subcompact, specifically for China. The size of the Chinese market happened to have given the company false confidence. It is also possible that the company did not consider the competition brands that had the same specifications as that of the product they were about to release to the market. This is only a result of poor market research and the underestimation of competitors dealing in the same product (Barnes, 2016). It is therefore clear that Toyota Company totally misread the world’s biggest market. Given all the assets of the company and the experience in foreign markets, the company should have considered the option of lowering the prices.

Comparison of Toyota Yaris and Nissan Tiida

According to market analysts, the Toyota Yaris was preferred to the competing vehicle, Nissan Motor, Tiida. One reason is, Tiida had more road presence and had pizzaz as compared to Yaris. In addition, the Yaris was put at a higher price of $13,000 as compared to Tiida which was a little lower. Consumers compared the functionality and the affordability of the two competing brands. Clearly, many of them went for the Tiida (Qin, 2016). As a result, the company failed to meet its target of 1,000,000 sales of vehicles in the Chinese market in one year. Therefore, the competitive advantage fell to Nissan Motors Limited (Harwit, 2016). Considering the fact that a wider middle class was emerging, there existed many first-time buyers. This particular group of buyers is a crucial one. For instance, they have to look at the price and go for one that matches their pockets. For Yaris, many of the first-time buyers found it to be overpriced, As a result, went for the Tiida and the Chevy Sail.

Conclusion

According to Chinese Toyota dealers and marketers, the Chinese market is highly sensitive to price and price changes. One of the reasons behind Toyota Company’s failure is the ignorance of this particular factor. If market research would have been conducted and the right conclusions made, then the overpricing may not have occurred. On the other hand, the company already had overwhelming setbacks as a result of the devastating effects of the earthquake; it had an adverse hit. This might be one of the reasons why they made it rush and blind to penetrate the world’s largest market (Xu & Liu, 2016).

References

Barnes, T. (2016). Industry policy in Asias demographic giants China, India, and Indonesia compared. The Economic and Labour Relations Review, 1035304616656562.

Harwit, E. (2016). China's Automobile Industry: Policies, Problems, and Prospects: Policies, Problems, and Prospects. Routledge.

Qin, Z. (2016). Can PSA Peugeot Citroen Succeed in China?. In Market Entry in China (pp. 45-58). Springer International Publishing.

Wang, Y., Sperling, D., Tal, G., & Fang, H. (2017). China's electric car surge. Energy Policy, 102, 486-490.

Xu, X., Xu, B., Dong, J., & Liu, X. (2016). Near-term analysis of a roll-out strategy to introduce fuel cell vehicles and hydrogen stations in Shenzhen China. Applied Energy.