Toyota remains optimistic despite 1996 fall

Toyota remains optimistic despite 1996 fall

By Russell Williamson

THE year 1996 may well go down on record as Toyota-Astra
Motor's annus horribilus.

While the volatile nature of the whole automotive sector this
year has taken its toll on sales -- which are likely to fall
short of expectations by more than 50,000 cars and reach only
320,000 for the year -- Indonesia's biggest carmaker has probably
taken the hardest fall.

On paper, at least, the statistics paint a fairly bleak
picture.

Toyota's market share has dropped to a point where Mitsubishi
may take the leadership title from Toyota -- an honor it has held
for the past 11 years.

Sales of the Kijang -- a model which makes up 80 percent of
Toyota's total volume -- fell by about 24 percent to the end of
October compared with the same period last year.

Toyota passenger car sales -- of which Corolla makes up about
65 percent to 70 percent -- fell by 30 percent over the same
period against an industry average fall of only between 5 percent
and 6 percent.

Overall retail sales for Toyota, combining vehicles of all
categories, fell between 15 percent and 17 percent over 1995.

The statistics keep coming and the picture does not get any
brighter.

However, while the company may be down, it is by no means out,
and intends to fight to regain its position as Indonesia's
premier carmaker.

The marketing director for Toyota-Astra, Nobuharu Tabata, said
the whole industry was entering a period of transition and all
manufacturers would need to work hard to survive and prosper over
the next few years as government policy and consumer preferences
were molded to meet the needs of the future.

For Toyota, Tabata said this meant putting the year behind it
and focussing on the prospects for next year with a renewed
vigor.

The cornerstone of this strategy to revitalize Toyota's
fortunes lie squarely with the new model Kijang, which will be
launched sometime next month.

With a wider model range and the most substantial change to
the vehicle since 1987, including the addition of a diesel
engined version, Tabata said he expected the company to be able
to win back much of its lost sales from this year.

Indeed, he said one of the reasons for the drop in Kijang
sales this year were the widespread rumors of the impending
arrival of the new model causing customers put their purchase
decisions on hold.

Tabata said the floods in Jakarta in February also severely
affected sales for about three months because not only did
production cease for two weeks, but also many small business
customers were hit badly by the floods and delayed or canceled
Kijang purchases.

He said a tightening of the finance sector's lending policies
and a relatively high interest rate of about 22 percent had also
had a detrimental effect on sales.

"There is a high interest rate and finance companies have been
controlling their credit since the end of last year and because
of that sometimes the marginal customers cannot get a loan from a
finance company," Tabata said.

However, while he acknowledged that the announcement of the
arrival of a new cheap sedan in the form of the Timor car in
February had slowed sales, since the car's actual delivery debut
in October and the customers' response to it, he was confident
that there was still very much a market for multipurpose family
vehicles like the Kijang.

Tabata said that while some commentators in the industry
pointed to countries like Thailand and Malaysia as indicators of
the increasing preference of consumers for passenger sedans,
Indonesia was a very different country with its own particular
vehicle needs.

"There will be a slight decrease on reliance on Kijang but
there still remains a substantial market for the minibus," Tabata
said.

"For example, in the rainy season there are floods and the
higher ground clearance of the vehicle type is a benefit because
of the bad roads," he said.

He said although the infrastructure was improving, it was not
going to change overnight and there would always be a need for
vehicles like Kijangs outside of the big cities.

He also said the larger size of Indonesian families --
requiring vehicles to carry more than five passengers -- and the
relative ease to maintain the mechanical nature of the Kijang
meant the vehicle was likely to remain on consumers shopping
lists for some time to come.

Although the new Kijang may provide a degree of optimism for
Toyota's prospects for next year, the chances of the company
seeing any significant improvement in its passenger-sedan sales
before at least 1998 remain slim.

Tabata said what the company needed was a car to compete in
the sub-Rp 50 million market to cater for the growing middle
income earners in the cities.

"Corolla is more than Rp 70 million, so the average customer
cannot afford it but once we can provide customers with such a
car at less than Rp 50 million we can expect a substantial
increase," Tabata said.

He pointed to the success of the Suzuki Baleno, Bimantara
Cakra and Honda City as evidence of this as all these cars had
eaten into Corolla sales to some degree.

"Such models have effected Corolla sales and they have dropped
to around 400 per month while we were selling between 600 and 700
last year," he said.

However, he said, when Toyota launched the affordable family
car (AFC) in 1998, it would be able to regain some market share
in this growing market segment.

The AFC is a 1500cc small four-door sedan which has already
gone on sale in Thailand and is tailored to meet the needs of the
urban class.

He said once that vehicle was available in Indonesia, Toyota
could expect to regain its market leadership as it would have a
product lineup to cater for all the needs of local consumers.

"One of our strongest points is that we will be able to offer
both types of vehicles for the Indonesian market," he said.

And in a market that he still expects to reach 500,000 cars a
year by 2000, that should augur well for the survival and indeed,
prosperity, of Toyota.