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At its peril

Released at: 10:47, 20/03/2014

At its peril

Toyota Motor Vietnam's mantle as the leading motor car producer in Vietnam will be put at risk if it fails to keep up with the times.

by Minh Tien and Hai Bang

The 250,000th vehicle of Toyota Motor Vietnam (TMV) - an Innova - rolled out of its headquarters in northern Vinh Phuc province on October 31. In a tough market like Vietnam a quarter of a million cars would be a dream for most automotive companies in the country, as evidenced by Mitsubishi and Madza actually having left already.

Dominant position

Founded in September 1995 as a joint venture and with investment capital of $89.6 million, 70 per cent of which came from Toyota Motor Corporation, 20 per cent from the Vietnam Engine and Agricultural Machinery Corporation, and 10 per cent from KUO Singapore Pte Ltd, TMV has continually developed in sales, production scale and workforce. With a modest initial output of just two vehicles per day, 140 are produced daily 18 years later, for more than 30,000 a year. “Only two years after reaching the milestone of our 200,000th vehicle in November 2011, we are proud to announce the roll-out of our 250,000th vehicle,” said Mr Yoshihisa Maruta, CEO of TMV. 

Eighteen years has been more than enough time for consumers to recognise the quality of its products. Toyota’s designs may not be overly spectacular but are still attractive, and what consumers really prefer is durability and reliability. “The only thing I have to do with my car is remember to bring it in for a service,” said Mr Tran Han Thanh, the director of a construction company and owner of a Toyota Land Cruiser that ferries him to all parts of Vietnam’s north.

Durability, reliability and appearance are all important but won’t fully satisfy the demands of Vietnamese drivers, and Toyota knows this well. Its vehicles are all energy-efficient, with the lowest fuel consumption in the market even after many years on the road. Toyota also values its service quality, which was illustrated in research conducted by JD Power Asia Pacific on customer satisfaction when buying a car in Vietnam, where Toyota earned a relatively high 852 points on a 1,000-point scale.

TMV has been a pioneer in its time in Vietnam and successfully covered the medium and low cost segments in the market with various product lines and held an overall market share in the vicinity of 30 per cent. Figures for the first ten months of 2013 from the Vietnam Automobile Manufacturers’ Association (VAMA) put TMV’s sales at around 26,400, more than 40 per cent higher than in the same period of 2012, for a 34.7 per cent market share.

Despite having a long list of advantages, TMV may struggle to retain its top position if it fails to consider emerging threats not only from domestic manufacturers but also from regional competitors.

Threats from within

Despite the fact that Toyota has always emphasised the Kaizen spirit, with continuous improvement permeating through all research and development (R&D) and manufacturing activities, it seems that the Japanese manufacturer is falling behind in competing with emerging automakers. Last September Mr Maruta had to admit that TMV faces increasing difficulties and challenges from other manufacturers. Such rivals include two South Korean automakers - Kia and Hyundai.

Having arrived in Vietnam just recently, the two South Korean manufacturers have nonetheless managed to carve out significant advantages with various product lines, ongoing product development, a large number of showrooms and staff, and rapid development regarding product quality and customer service.

In 2009 the Kia Forte was something of a phenomenon in Vietnam. The mid-sized sedan was positioned in the same segment as the Toyota Corolla Altis but was 30 per cent cheaper and with a sleeker exterior and a modern interior equipped with options not found in the Japanese model. The increasing number of showrooms of the two South Koreans over the last few years indicates a new view by Vietnamese customers of the South Korean automobile industry.

And Toyota’s reputation was dented in 2011 when “whistle-blower” Le Van Tach, who was an engineer at TMV, released documents revealing three glitches in the Innova and Fortuner. He said that TMW had sold around 60,000 vehicles in Vietnam with quality defects. TMV initially rejected the figures and announced that a modest 167 vehicles suffered from defects. It took some time for the automaker to finally announce its largest ever recall, of over 65,000 cars, including the Innova, the Fortuner and the Camry, which left major questions over its transparency and sense of responsibility.<