Toyota has had its fair share of problems to contend with in recent years. However, there are now signs that the company is raising its global game to compete with rivals, says Dave Leggett.
The recent announcement from Toyota that it has decided to add plants in China (Guangzhou Toyota Motor JV) and Mexico (new plant wholly owned by Toyota) suggests that the company is moving from the back to the front foot in its desire to grow and remain competitive versus its major global rivals. But there is more to what Toyota is doing than just the latest plants investment announcement; it’s part of a strategy to improve systems and processes to get sustainable growth off a lower cost base and position the company’s global manufacturing footprint and systems for long-term growth.
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The decision to up investment in China and Mexico certainly shores up Toyota’s position in two major growth regions. If you are going to put your chips somewhere, North America and China are two markets that are currently doing well and also look like a very good bet for the future. A failure to invest in manufacturing capacity in these places now could be costly and let others get ahead. It would also send out a negative message to Toyota investors concerned at the progress of rivals as a wounded Toyota apparently eschewed growth, preferring to focus on internal organisation and systems.
Toyota had previously suspended construction of new plants in order to improve capacity utilisation of existing plants and plan for reduced model change-over and new plant construction investment. With manufacturing capacity utilisation now well over 80% (Toyota says over 90%), the time has come to revisit a growth strategy.
After a three-year moratorium on new plants, Toyota is shooting for volume and capacity growth overseas again. However, there’s a more measured feel about the Toyota growth strategy now. Toyota has painstakingly looked at where things went wrong before, examining the systems and procedures that ultimately compromised quality.
Moreover, Toyota claims to have substantially reduced the cost of its new ‘simple and slim’ plants. The plants will feature “simple and slim” production lines which can be easily lengthened or shortened depending on demand.
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By GlobalDataOverhead conveyance devices will also be eliminated, compact equipment installed on top of plant floors, and smaller paint booths used. By contrast, current plants often require large equipment that needs to be suspended from ceilings or fixed into the plant floor. This reduction in required investment frees up resources. It is claimed that a range of measures to simplify and improve manufacturing flexibility can yield Toyota plant costs around 40% lower when compared to 2008. Through these combined projects, Toyota aims to shift to plants that are flexible and “always competitive”, rather than plants that depend on volume. So it would be wrong to see this strategy as simply about scale.
Toyota has also taken a new approach to design, simplifying installation procedures by using parts modules and standardising parts across different models under the Toyota New Global Architecture (TGNA) initiative. This initiative has a number of elements that include implementing an integrated development approach for powertrain components and vehicle platforms. The development of vehicles is being grouped to promote strategic sharing of parts and powertrain components with the goal of reducing resources required for development by 20%. Toyota also claims that it is working even closer with suppliers to further reduce costs and “reinvest the resulting resources into developing advanced technologies and strengthening product appeal”.
Toyota says it is now focusing on joint development of powertrains and platforms together to create a lower centre of gravity, on making components lighter and more compact, and on applying unified design through modularisation. It claims that by improving thermal efficiency in engines and energy-relay efficiency in transmissions, it has increased the overall fuel efficiency of its powertrains by approximately 25% and overall power output by more than 15%. Also, by rethinking drive unit layout and making electric motors, inverters and batteries smaller, Toyota claims that it can improve the overall fuel efficiency of its hybrid vehicle systems by more than 15%. Toyota will begin introducing its new powertrain units this year.
Toyota is also revamping its vehicle platforms as a result of this more integrated approach; it says a repositioning and lowering of the centre of gravity of powertrain components has contributed to a number of product attribute benefits embracing design, safety and driving dynamics. By rethinking body structure, Toyota says it can dramatically improve overall body rigidity by as much as 30-65%, and then further improve rigidity by joining body components using laser screw welding technology. Toyota will begin rolling out its new platforms with the launch of a midsize front-wheel-drive vehicle this year, followed by specific new platforms for front-wheel-drive compact and large vehicles, as well as for rear-wheel-drive vehicles. Toyota expects approximately half of its vehicles sold worldwide in 2020 to feature the new platforms it is developing.
The latest new production facilities in China and Mexico are expected to boost Toyota production capacity by around 300,000 units a year. Does the company need to go much further and faster to compete with its major rivals, especially an uber-aggressive Volkswagen Group that is ahead in China and is eyeing the global number one spot? Arguably, that kind of thinking led to some of Toyota’s structural problems – principally plant proliferation, accelerating set-up expenses culminating in a high cost base – which were brutally exposed when the last global economic crash came. When the company went into loss for the first time in decades, the sense of shock at a company regarded as a global pace-setter was considerable. After a period of consolidation and re-examination, we’re now seeing the response.
Pole position for Toyota: World vehicle production 2013, top twenty OEM groups
(million units)
| GROUP | TOTAL | CAR | LCV | HCV | |
| 1 | Toyota | 10.3 | 8.6 | 1.5 | 0.3 |
| 2 | General Motors | 9.6 | 6.7 | 2.9 | 0.0 |
| 3 | Volkswagen | 9.4 | 9.3 | 0.1 | 0.0 |
| 4 | Hyundai Motor | 7.2 | 6.9 | 0.2 | 0.1 |
| 5 | Ford | 6.1 | 3.3 | 2.7 | 0.1 |
| 6 | Nissan | 5.0 | 4.1 | 0.8 | 0.0 |
| 7 | Fiat | 4.7 | 2.2 | 2.4 | 0.1 |
| 8 | Honda | 4.3 | 4.3 | 0.0 | 0.0 |
| 9 | Suzuki | 2.8 | 2.5 | 0.4 | 0.0 |
| 10 | PSA | 2.8 | 2.4 | 0.4 | 0.0 |
| 11 | Renault | 2.7 | 2.3 | 0.4 | 0.0 |
| 12 | BMW | 2.0 | 2.0 | 0.0 | 0.0 |
| 13 | SAIC | 2.0 | 1.7 | 0.2 | 0.1 |
| 14 | Daimler | 1.8 | 1.6 | 0.2 | 0.0 |
| 15 | Mazda | 1.3 | 1.2 | 0.1 | 0.0 |
| 16 | Dongfeng | 1.2 | 0.6 | 0.2 | 0.4 |
| 17 | Mitsubishi | 1.2 | 1.1 | 0.1 | 0.0 |
| 18 | Changan | 1.1 | 0.9 | 0.2 | 0.1 |
| 19 | Tata | 1.1 | 0.7 | 0.3 | 0.1 |
| 20 | Geely | 1.0 | 1.0 | 0.0 | 0.0 |
Source: OICA
Toyota’s just announced investments for Mexico and China in summary
| Mexico (new plant) | China (GTMC new facility) | |
| Timing | Production to start in 2019 | Production to start as needed after completion of new line 3 in 2017 |
| Location | State of Guanajuato | Nansha District, Guangzhou, on land next to existing lines 1 and 2 |
| Product lineup | Corolla | A model to be announced later |
| Annual production capacity | Approx. 200,000 units | Approx. 100,000 units (with consideration toward capacity expansion in line with demand) |
| Investment | Approx. 1 billion U.S. dollars | Approx. 52.5 billion yen |
| Employment | Approx. 2,000 (new) | Current level of GTMC’s employees |
Source: Toyota
See also: JAPAN: Toyota confirms new Mexico plant, Guangzhou expansion
