Toyotas
Toyota file
Two Toyopet Crowns, Toyota’s first exports to the United States, wait to be loaded on a ship at Yokohama harbor in August 1957. Nearly half a century later, Toyota is on track to surpass General Motors as the world’s No. 1 automaker.
By Roland Jones Business news editor
msnbc.com
updated 5/9/2006 4:34:38 PM ET 2006-05-09T20:34:38

In October 1957, a chrome-finished and tail-finned Toyopet Crown made its debut in a small Southern California dealership. The unremarkable four-door sedan — the first on the U.S. automotive market from a Japanese car maker called Toyota — was at the cutting edge of automotive styling, but only 287 were sold in its first full year in America.

Today, almost 50 years since its North American debut, that same plucky car company is poised to overtake its American rivals, surpassing General Motors as the world’s No. 1 automobile maker by producing an estimated 9.06 million vehicles in 2006 and surpassing GM’s expected output.

As America’s Big Three automakers struggle, Asia is emerging as the dominant force in the international car market, tapping into consumers’ desires for fuel-efficient cars and picking up many of the sales lost by their shrinking American rivals. U.S. giants Ford and Chrysler are downsizing as consumer demand shifts away from gas-guzzling SUVs and they struggle with crippling worker health care and pension liabilities.

By contrast, Asian car companies are thriving. Toyota’s U.S. annual sales have swelled to about 15 percent of the market. Its Camry is the best-selling U.S. passenger car, its Lexus brand is the top-selling U.S. luxury car and, at a time of high gasoline prices, its gas-electric Prius is the most popular hybrid vehicle in America.

Toyota and its Japanese cousin Honda have been at the vanguard of new consumer demand for fuel-efficient cars — just the sort of cars U.S. consumers are craving, as gasoline prices edge worryingly toward $3 a gallon.

In fact, Toyota crept into third place in terms of U.S. auto sales last month for the first time, outselling DaimlerChrysler and helping Asian brands (mainly Japanese and South Korean) to capture a larger share of the U.S. light vehicle market. At the same time, the combined market share of the largest U.S. automakers — GM and Ford — continued to shrink.

“It’s basically a foregone conclusion that Toyota will trump GM within the next few years and capture the title of world’s No. 1 automaker,” said Phil Lienert, associate editor Edmunds.com, an Internet-based resource for consumer automotive information.

“[Toyota’s] business works more efficiently, and it’s giving consumers if not a better quality of car then the illusion of better quality, because GM and Ford’s cars are much better-built than in the past, but they can’t shake the [perception] of Asia’s superiority,” Lienert said.

It’s not just Japan’s automakers taking the U.S. car market by storm. Kia and Hyundai from South Korea also have made significant gains, with Hyundai enjoying record sales of the Sonata sedan it builds at its plant in Montgomery, Ala. The Sonata also scored high marks on the National Highway Traffic Safety Administration’s crash and rollover tests.

“That’s key,” notes Lienert. “It illustrates the remarkable strides these carmakers have made, and I think you’ll see Hyundai will rob some market share from Toyota. And Kia has gone from being a budget carmaker to one with quality that’s close to Toyota.”

Asia’s increasing dominance in the worldwide automotive industry will see firms like Honda, Nissan, Toyota and Hyundai make decisions that impact the rest of the industry, notes Michael Robinet, an automotive analyst with the consulting firm CSM Worldwide. The drift is part of what he calls the “Asian-ification” of the automotive industry.

“Asian companies will be the ones leading the expansion into new countries — that will have an impact on production and distribution,” he said. “And increasingly, a greater part of a vehicle will be built in Asia — that’s a shift suppliers will have to deal with. There are a number of possibilities here, and we may see some mergers, but the industry as we look at it today may have some blockbuster Asian alliance, and we’ll have to deal with what comes from China and India, and also from Thailand and Malaysia.”

The Asian player most feared by Detroit has yet to make its debut in the United States, but its low-cost cars are on the horizon.

Until recently, Chinese vehicle exports were limited to buses and trucks, but Chinese manufacturers have been busy upgrading technology and production to compete overseas. At the 2006 North American International Auto Show in Detroit earlier this year, Chinese automaker Geely Motors unveiled a car that it plans to sell in the U.S. market in the summer or fall of 2008. The silver sedan will be very competitively priced when it goes on sale — below the $10,000 level, according to news reports.

In fact, Geely is one of several Chinese automakers planning to sell vehicles in the United States. Most notably, industry maverick Malcolm Bricklin, who brought Yugos and Subarus to the United States, has said he plans to sell 250,000 cars made by Chinese manufacturer Chery Automobile in the United States beginning in 2007. The competitive pricing of Chinese cars could prove hard for some American consumers to resist, says Lienert at Edmunds.com.

“The big question for U.S. manufacturers is what will happen when China starts selling cars over here,” he said. “China just surpassed Germany as the world’s No. 3 automaker, and if they are already building cars in those volumes, you’ll see them over here in the U.S. in the next 10 years. We’ll see some teething issues, but it took the Koreans 10 years to do what it took Japan 20 years to do over here, and people are anticipating China will learn [to sell cars in the U.S.] even more quickly. I think Chinese will prove right away that they are just as adaptable as the Japanese and Koreans.”

Rebecca Lindland, automotive analyst at consultancy Global Insight, is skeptical that Chinese carmakers are poised to take over the North American market any time soon.

China’s domestic vehicle market is still very far from saturation, she said, and the economy doesn’t support large amounts of car exports. And with carmakers like Mercedes and BMW managing U.S. sales of around 220,000 and 310,000, respectively, Bricklin’s sales target of 250,000 Chinese cars looks unrealistic, she added.

“Japanese and Korean brands are really the ones to watch,” Lindland said. “That’s not to say Chinese brands won’t come to the U.S., because they certainly will, and an argument could be made that they are waiting and learning with plans to do it better, stronger and faster. So they will come, it's question of when. But the logistics can’t be underestimated, and we don’t see it happening until, at minimum, if all the stars align, before 2011.”

Until then, established Asian carmakers will continue to chip away at U.S. global dominance, says Lienert.

Overseas car companies like Toyota and Nissan have built modern manufacturing facilities in Southern U.S. states like Texas and Alabama to avoid labor unions, keeping operating costs low, he notes, although Toyota has assembly lines in union-friendly California and Canada as well. Japanese makers also are adding new products, ramping up production and pushing into the Chinese car market, although Detroit’s Big Three are also growing rapidly in China.

“If you want to see the future of automobile manufacturing in the United States, don’t look at Ford or GM, look at companies like Nissan,” Lienert said. “The Northern manufacturing belt in Michigan can’t be sustained any more. These workers get better benefits than most professional jobs. All of that is going to change now.”

The Associated Press and Reuters contributed to this article.

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