Toyota Expands into
Asian Countries
Toyota's first exports to Asia began with 22 Land Cruisers
and other vehicles to Burma (now Myanmar) in July 1956 as a part of war
reparations provided by the Japanese government. Later, 2500 vehicles were
exported to the Philippines and other countries as reparations. These vehicles
acted as pioneers in developing markets, but true CKD production exports to
Asian countries did not begin until 1961.
Twelve Land Cruisers were exported to Australia in August
1957, but exports remained low because of that country's strict trade policies.
The expansion into Australia began in earnest following the establishment of
the Export Department by Toyota Motor Co., Ltd. and the Export Group by Toyota
Motor Sales Co., Ltd. in February 1962. Australian Motor Industries began
assembly production of the Tiara (the export name of the Model RT20 Corona) in
early 1963.
The Bangkok Branch of
Toyota Motor Sales Co., Ltd. (from Toyota Shimbun No. 231)
Toyota Motor Sales Co., Ltd. established a branch in
Bangkok, Thailand on June 16, 1957. Toyota Motor Sales had changed distributors
three times, but each time they were small-scale dealers that did not go far
beyond sole proprietorships, and as a result, sales did not grow. To address
the situation, a directly-managed branch was established with the aim of
establishing a market in Thailand. Supported by ample funding provided with
cooperation from the Mitsui Bank Bangkok Branch, the branch conducted active sales
activities and increased sales in 1957 by eight-fold compared to the previous
year. Performance continued to improve steadily in later years.
During this period, the Thai government repeatedly revised
its Industrial Investment Promotion Law with the aim of supporting industrial
development, and in 1962, the knockdown production industry was made subject to
various benefits including substantially preferential taxation measures for
five years and an increase in entry visas for engineers. In response, Toyota
Motor Co., Ltd. and Toyota Motor Sales Co., Ltd. decided to enter the knockdown
production business in Thailand. Toyota Motor Thailand Co., Ltd. was
established in October 1962 with equal investment from these two companies.
The Toyota Motor Sales Co., Ltd. Bangkok branch merged with
Toyota Motor Thailand in 1967, and production and sales were integrated. These
measures resulted in an increase in exports to Thailand to 10,700 vehicles in
1969, and Toyota captured the top share of the market, with 22 percent.
Assembly Production of the Corolla outsourced to Thai Hino
Industry Co., Ltd. began under a cooperative business pursuant to a tie-up with
Hino Motors, Ltd. in August 1969. The Toyota General Center was established and
import, sales, and after-sales service organizations were reinforced in
December of that year, and the assembly plant was expanded in July 1970.
Local production, particularly of stamped parts, continued
to increase through cooperation between Hino Motors and Toyota Auto Body Co.,
Ltd. As a part of these efforts, Toyota Autobody Thailand Co., Ltd. was
established as a wholly-owned subsidiary of Toyota Motor Thailand Co,. Ltd. in
February 1978 and began manufacturing stamped parts for the Hilux, Corona, and
Corolla.
Toyota's Entry into
the United States
In August 1957, Managing Director Seishi Kato and two others
from Toyota Motor Sales Co., Ltd. traveled to the United States as an advance
team for exporting Toyota vehicles to the U.S. and began the work of
establishing a sales company. A Crown and a Crown Deluxe were sent from Japan
as model vehicles, and they displayed them to dealers and used them for test
rides.
A test track with a two kilometer circuit was completed at
the Toyota Motor Co., Ltd. Technical Center in September 1956, and the Crown
could not very well be sent to the U.S. without performing full-scale
high-speed endurance tests. One of the concerns from the beginning was that
when the Crown was driven on a highway, the engine suddenly began making loud
noises and output dropped. The performance was not adequate for sales in
America.
The decision was made to conduct business in the United
States despite this performance based on the strong reputation of the Crown in
Japan and its success in the previously-mentioned 50,000 kilometer-drive from
London to Tokyo (Section 8). It cannot be denied that there were excessive
expectations concerning its performance. In addition, business was commenced
without investigating issues such as local automotive laws and regulations and
automobile market conditions, and as a result, many unexpected difficulties
were encountered.
In any case, Toyota Motor Co., Ltd. and Toyota Motor Sales
Co., Ltd. reached an agreement and established Toyota Motor Sales, U.S.A.,
Inc., a California corporation, on October 31, 1957 to establish a foothold for
entering the U.S. market. Each company provided one half of the one million
dollar capital, and the new company had six directors: President Taizo Ishida
and Executive Vice President Fukio Nakagawa of Toyota Motor Co., Ltd. and
President Shotaro Kamiya, Managing Director Seishi Kato, Managing Director On
Nakae, and Director Sadazo Yamamoto of Toyota Motor Sales Co., Ltd. President
Kamiya of Toyota Motor Sales served as president of Toyota Motor Sales, U.S.A.
and (First name) Kobayashi, Deputy General Manager of the Mineral Oil
Department of Toyota Motor Sales, served as its vice president. The head office
was located at 6032 Hollywood Boulevard.
Operations in the United States started with investigating
various procedures ranging from automobile imports to retail sales and
obtaining the necessary forms. From these investigations, it was learned that
it was necessary to establish separate import, wholesale, and retail companies
in order to maintain fair pricing between import and wholesale as well as
between wholesale and retail. Accordingly, wholesale operations were separated
from Toyota Motor Sales, U.S.A. and Toyota Motor Distributor was established in
February 1958. At the same time, a dealer named Hollywood Toyota was
established with the aim of learning about retail operations.
It was also necessary to obtain automobile certification
pursuant to the automobile-related laws of each state. In order to sell motor
vehicles in California, it was necessary to obtain certification from the
California Highway Patrol. In California, headlight brightness was set based on
sealed beam lamps (which were common in America) but the Crown was not equipped
with sealed beam lamps and did not meet the standard. As a result, the Crown
was imported without headlights, and lamps manufactured by General Electric in
the United States were installed.
Crowns without
headlights being loaded onto a ship bound for the United States
Following these preparations, 30 Crown Deluxe vehicles
without headlights were loaded onto a ship in June 1958, and exports to the
United States began. The performance and quality issues that had been a source
of concern materialized, and problems including a lack of output while
traveling at high speeds, inadequate high-speed stability, extreme noise and
vibration, abnormal vibration, and breakage of parts due to deformation
occurred. To address these problems, the Model RS22L series and the Model RS32L
series with higher output and improved high-speed cruising performance were
introduced in July 1960.
To counter the increase in sales of imported compact cars,
American automakers launched several compact cars from the autumn of 1959,
including the Chevrolet Corvair, Ford Falcon, and Chrysler Valiant. As a
result, sales of imported European cars plunged, and most dealers that sold
both American cars and the Crown switched from the Crown to these compact cars.
In response, exports of the Crown to the United States were suspended in
December 1960.
Site of a dealer
managed directly by the Toyota Motor Sales, U.S.A., Inc. head office
Meanwhile, exports of the new Corona with the R engine-sold
as the Tiara (Model RT20L)-began in June 1960. Like the Crown, however, the
Tiara suffered from a lack of output at high speeds, vibration and noise caused
by insufficient rigidity of the body, insufficient strength in the suspension,
inadequate brake durability, and other quality-related problems. Exports to the
United States had to be slowed down.
Toyota Motor Sales, U.S.A. increased its capital to two
million dollars and took measures to reinforce its financial standing in 1960,
but accumulated losses at the end of the year exceeded 1.42 million dollars and
were expected to grow even further. Even with financial support from Japan, restrictions
under the Foreign Exchange and Foreign Trade Act did not easily allow for
increases in capital to make up for losses. Consequently, Toyota Motor Sales,
U.S.A. was required to make harsh improvements in management.
The main points of the improvement measures were as follows.
1)Limit sales to the Land Cruiser for the time being and
passenger car sales were temporarily suspended until the development of a car
suitable for the U.S. market.
2)Establish management structures such that the company could
be profitable with monthly Land Cruiser sales of 50 to 60 units.
Based on these basic policies, Toyota Motor Sales, U.S.A.
cut personnel, reduced business sites, and slashed expenses in 1961. The
workforce was cut from 57 to 37, and employees seconded from Japan were reduced
to a bare minimum. The head office was relocated to the building of a
directly-managed dealer to reduce expenses.
In addition to the effects from these management
improvements, sales of the Land Cruiser increased, and the company made a
profit in 1961. As a result, a capital increase of 500,000 dollars was approved
in 1962, and a 250,000 dollar capital increase was implemented. Also, with the
shift in the focus of sales to the Land Cruiser, Toyota Motor Sales, U.S.A.'s
sales of the Land Cruiser increased by more than 10-fold over four years,
jumping from 249 units in 1961 to 2,595 units in 1964. In order to implement
these management improvements, Toyota Motor Sales, U.S.A. officers Sadazo
Yamamoto and Seishi Kato-who also served as managing director and senior
managing officer of Toyota Motor Sales Co., Ltd. respectively-directly managed
local operations. In addition, Toyota Motor Co., Ltd. Executive Vice President
Eiji Toyoda went to America to confirm local management conditions in detail,
learn first-hand information concerning the specifications of the
U.S.-compliant vehicles, and encourage their development.
As Japan entered the era of the highway, the Model RT40
third-generation Corona series was launched in September 1964 and sold well.
The new Model RT43L Corona with a 3R engine (1,897 cc, 90 hp/5,000 rpm) was
developed specifically for the U.S. market and sample shipments began in April
1965. At the end of that year, the eagerly-awaited model with an automatic
transmission was added to the lineup, contributing substantially to the
increase in sales in the United States.
After studying at Ford in the United States in 1950,
Managing Director Eiji conducted research and development of automatic
transmissions with an eye towards easier driving and exports to the United
States in the future. The first practical application of an automatic
transmission in Japan was on the Masterline commercial vehicle in 1959. In the
U.S. imported vehicle market, it was the Corona that acted as the pioneer. The
percentage of automatic transmissions on the Corona in 1965 was just 12
percent, but increased to more than 50 percent in the next and following years.
After an establishment with inadequate preparation and eight
years of difficulty, Toyota Motor Sales, U.S.A. finally had the new Corona, a
vehicle suitable for the U.S. market, and grabbed the opportunity for success.
The number of dealers rapidly increased from 200 in late 1964 to 384 in 1965
and 606 in 1966, and the time for reorganization of the sales network arrived.
Source: Toyota Motor Corporation
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