Toyota's Impact on US Car Industry

14/11/07 Matt Holt's Notes

How has Toyota’s Global Expansion impacted upon the USA’s Car manufacturing Industry?

Toyota is a Japanese company that was founded by Japanese industrialist Kiichiro Toyoda in 1937 as a ‘spin-off’ from his father’s machine engineering industry, ‘Toyota Industries’. To date, Toyota trades in 160 markets worldwide, with a net income of $15.09billion.

Toyota established a second headquarters in the USA on 31^st October 1957; two years earlier in 1955 Toyota had only a single plant in Japan. At this time however, the American automobile market was dominated by American companies (Ford, Chrysler and GM being the ‘Big Three’); in Toyota’s first year, they managed sales of only 288 vehicles. This was due to the fact that the model at the time, the Toyopet Crown, was seen as underpowered yet overpriced. This meant Toyota had to rethink and redesign their cars before they could be taken seriously in the American Market.

The answer to Toyota’s problems was the new Toyota Corona which was specifically designed for the American market; powerful engine, air conditioning and an automatic transmission came as standard. This helped boost Toyota’s sales up to 20,000 vehicles in 1966, which gave them 2% of the American automobile market; although this seems very little, it gave Toyota a foothold in the market, and with competition coming alongside an expanding European market, the ‘Big Three’ had already lost around 10% of the market as a whole.

Toyota’s steady increase of sales was accounted by its reputation of quality and reliability, and this was only boosted in 1973 when the Oil Crisis had devastating effects on Ford, Chrysler and GM; Toyota were able to gain a 10% foothold of the American market. The Oil Crisis saw the Big Three experience huge losses, and so a number of American based factories were closed in preference for cheaper plants abroad. This saw Detroit alone lose over 200,000 jobs, and so this did no favours for the reputation of all three companies.

Toyota’s popularity continued however, and in 1986 they managed to sell over 1 million cars all in one year. This was partially due to the fact that Toyota had opened up almost 10 more plants worldwide, increasing the production of their vehicles. This was also the year that the first Toyota car was built in America, at their new factory in California.

One reason that may account for the success of Toyota is its highly efficient production system. During the manufacturing process, Toyota groups its workers into teams that each have a specific individual responsibility that must be checked before the car is off the assembly line. The graph to the right shows that Toyota has (still to this day) one of the shortest production times compared to the Big Three. On top of this, Toyota is often associated with a strategy known as ‘Kaizen’. This is a Japanese term, which roughly translates to ‘continuous improvement’. With this approach, it is no wonder that Toyota are renowned for producing well built, quality cars.

By 2005, Toyota’s control over the American automobile market has increased to 43%, seeing the American companies losing 48% of the market since 1955. Today, with nearly 30 plants worldwide, and after producing the 2007 Car of the Year in the Family Sedan Category (the Toyota Camry Hybrid) it seems that Toyota are continuously improving their designs to keep up with what the market is looking for (the Hybrid suggests Toyota are looking to produce environmentally friendly vehicles) and so it is no surprise that Toyota have had such a huge impact upon the American car industry.