Toyota has been exporting vehicles to the African market for decades; the most popular cars sold are the Toyota Carina, Corolla, Hi-Lux, Land Cruiser, and Hi-Ace. Toyota’s strategy to date has been to export used vehicles from its European production companies, which have been traded in for a new car, and sell them through dealers in various African countries.
This vehicle trade is often in the form of a system with the European affiliates of Toyota and its African dealers, trading new vehicles for used vehicles to be sold in Africa. This strategy has been successful in vehicle sales. Still, with the recent increase in Toyota’s production in Europe and the company’s strong focus on quality and brand-new vehicle sales, Toyota is looking at alternative methods to enter the African markets more logically.
Toyota Motor Corporation is a multinational corporation headquartered in Japan and is currently the world’s largest automaker. In 2002, Toyota began its quest to become the leader in global automobile sales and produced 8.5 million vehicles annually. It moved to a more cohesive organization structure across the continent to mirror this growth in Europe.
In 2003, Toyota sold its five millionth vehicle in Europe and began producing its first European-built model, the Corolla. Currently, the company has manufacturing companies in the United Kingdom, Turkey, France, Poland, Portugal, Russia, and the Czech Republic. With nine manufacturing companies and an extensive marketing and sales network, Toyota employs around 80,000 people in Europe. In 2005, Toyota sold 1.22 million vehicles in Europe, 4.8% more than the previous year.
With such a large base of operations and booming sales in Europe, Toyota is now in a position to concentrate on expanding into the emerging markets of Eastern Europe, Russia, and countries associated with the Commonwealth of Independent States.
Increased globalization has resulted in the dramatic rise of the automotive industry. Companies continuously compete to develop and market cars, S.U.V.s, trucks, and expensive high-performance vehicles. In this vast industry, many companies are viewing the African markets as potentially very lucrative.
The prices of vehicles in some African countries are very high because of heavy taxation, making owning a car a status symbol of wealth.
The company will benefit from exporting Toyota cars to Africa for several reasons. The first is greater demand for Toyota cars in Africa than supply. Africa is a vast continent with a growing population and a deep need for motorization, especially in the Sub-Saharan region. And the evidence shows that there is substantial demand for Toyota cars.
For example, when U.M.W. Toyota Motor, the assembler of Toyota cars in Malaysia, began exporting its cars to South Africa last year, it aimed to ship 2,000 units but sold 5,000.
The second example is Toyota Zambia, whose manager noted that orders for Toyota vehicles comprise a wait of several months, demonstrating the strength of demand.
The significance of this high demand is that it will take too long for local production to satisfy it. That means Toyota cars from abroad are needed to fill the gap, and our company can do this.
The second benefit is the competitive pricing of the African auto market. The prices of Toyota cars can be flexibly adjusted for greater or lesser cost, depending on the market’s economic conditions and the inflow of products. The financial situation of Africa is generally unstable, with many of its countries experiencing declining GDP levels. However, in the long term, the economic conditions are expected to improve, and there is a solid determination to keep trying to satisfy those improved financial conditions for each African nation.
As mentioned, motorization is a deep need for Africa, and our company sees it as a chance to contribute to the motorization of an entire continent, beginning from the present and reaching into the future. This makes it highly likely that a market for Toyota cars will always exist in Africa. And because secondhand vehicle imports are under solid regulation due to environmental conservation and road safety concerns, the new vehicle market is expected to be the main arena of competition for the next 10 or 20 years, with new vehicles representing a long-term investment. All this translates to a stable long-term demand and a solid chance to seize the market. Our company, by grasping the demand mentioned in ordinary.
Taking the case of CFAO Kenya Limited, where the importation of Toyota and Yamaha vehicles has had a significant favorable impact, the demand for Toyota cars in the African market has shown an increase in the number of units sold each year, with a remarkable 1700 units more from 2005 to 2006. This increase in demand is mainly due to large projects such as the Konza city project, which will grow businesses and institutions, hence creating a market for company vehicles. Also, consumer preferences have made a significant impact. For example, Kenyans prefer vehicles with an engine capacity 1800cc for saloon cars and 2700cc for off-road vehicles.
The Toyota brand is well known for durability and efficiency, with most models meeting this specification, hence a shift from alternative vehicle selections. Civil servants have also been an influential group in Toyota vehicle purchases. With the increase in demand, the availability of more models has a higher potential of increasing sales.
Step up the Toyota brand range to propose vehicles. As of 2007, the purchase of spare parts and vehicle components is exempt from customs duty. Hence, producing vehicles in SKD form is more viable than importing a fully built unit. With the increase in demand for vehicle purchases and the efficiency of the cost of vehicle production, this may be a viable project for future Toyota business in Kenya.
The next step to systematically evaluate exports to each country would be to use the theory of price discrimination. The aim would be to compare the expected proceeds using different feasible pricing policies and calculate the effect of tariff or quota imposition by a second country on the sales volume in the third country.
After evaluating the approach of exporting pallets of different models of Toyota motor vehicles, from totally liberated to wholly sheltered plus agreed, we can confidently say that it is nothing more than a shift of the placement of the marginal analysis curve to the left, at least to maintain the local sales volume of the same models while continuously exporting a few units.
When analyzing Toyota, we were able to conclude that although the excess production cost for Corollas was around $400 compared to the transportation from Japan, the decrease in production cost by $431 per unit of Land Cruisers and no refund of intra-provincial duties and tariffs, along with the increasing domestic sales and aggressive market tone of customers in Singapore’s car market, throughout our attempt to enter the export of Singapore-built automobiles, had a higher probability of profitability compared to the experiences in the trailing case study. Therefore, we could evaluate and proceed with our export of Land Cruisers.
This means that Toyota may see an increase in vehicle sales continuing through 2025. There has been a significant increase in secondhand vehicle imports to Africa, where the average age of a vehicle is 8-9 years. This shows that the vehicle market in Africa is large and has the potential for growth and replacement with many new cars.
A potential free trade area in East Africa by 2012 should also increase growth and demand for Toyota vehicles in the region.
This is due to an increase in levels of competition, where Japanese imported cars will no longer have a price advantage due to high import duties on other vehicles. This will lead to a substantial increase in Toyota’s market share as the leading non-African brand.
Exporting Toyota cars has the potential to significantly expand and grow the Toyota market in Africa. Kenya is the largest car market in East Africa, with approximately 250,000 vehicles on the road. Kenya also has the best-developed credit finance system in East Africa, which should help stimulate vehicle sales. It has been quoted by the GM of Toyota East Africa that “for every twenty vehicles on the roads in Africa, we may expect them to purchase two Toyota vehicles.
If this statement holds for Kenya, it would allow for massive growth in the market share of Toyota about today, where only one of every fifty vehicles in Kenya is a Toyota. Because Tanzania has a vehicle market three times the size of Kenya, Toyota should expect similar growth and expansion, if not more. With the economies of both these countries showing promising signs, there is evidence to suggest that this growth will be maintainable over the next ten to fifteen years.
This gives us the impression that goods sent via sea freight to many ports in Africa (especially the less developed ones) are not guaranteed to reach their destination. Much of the shipping industry in these target regions is a lottery.
This is a concern, and seeking a higher reliability standard may result in Toyota choosing to ship specific products by air if it is an economically viable option.
A similar incident occurred with a recent attempt to ship a car from Durban to Mombasa for the Safari Rally. The car was never seen again, and the shipping agents in South Africa and Kenya could not provide concrete information about what had happened. Air freight was considered an alternative resolution in both instances, but the significantly high costs rendered the idea implausible.
A well-documented example is the ongoing struggle faced by award-winning New Zealand documentary maker and journalist Greg Miller.
While shooting an investigative documentary in Africa, Miller attempted to ship research and footage materials across various destinations from the South African port of Durban. Numerous tapes and other relevant filming materials never arrived at their destinations, and all attempts to track and recover the items were in vain.
The shipping industry in Dubai is one of the most varied and competitive in the world. With so many nationalities residing and working in the country, targeting an industry or market sector on a personal level is relatively easy. This makes breaking into new shipping markets in developing African nations especially difficult.
The challenges and considerations will be different depending on the countries that import using Dubai as a connecting port.
While some countries may face difficulties in shipping, others may not have the proper importing regulations. This section will examine the challenges primarily faced when exporting to the East and South Africa regions.
The next challenge is to decide which African port to ship to. The location of the port will undoubtedly affect the cost of shipping and transit time, but this must be balanced with finding a destination that will not present security risks to the vehicles.
Depending on the situation, it may be necessary to use a more expensive shipping method to a safer location. An example of this would be shipping to Mombasa in Kenya rather than Dar es Salaam in Tanzania.
The first challenge is to identify a reliable and cost-effective shipping service. There are many shipping companies operating out of Dubai, and the sheer number of choices available can be overwhelming. Furthermore, care must be taken to differentiate between shipping Ro-Ro (Roll-on-roll-off) and shipping in a container.
Although Ro-Ro shipping is usually cheaper, the risk of damage or theft to the vehicles is significantly higher.
Container shipping is more secure but can also be substantially more expensive. It is common practice to bring cars to Africa using the Ro-Ro method, but in some of the more politically unstable regions, this may not be the best idea.
The decision to source vehicles from Dubai was made due to its strategic location relative to the African continent, as well as its reputation as a critical trans-shipment hub.
The geographical proximity of Dubai to Africa means that shipping is the most viable mode of transport. Despite this, there are a number of challenges that need to be addressed.
Before attempting to export to your chosen market, it’s imperative to know the precise regulations and rules surrounding importation. Not knowing the targeted market’s import regulations has been the downfall of many exporters.
Luckily, the information age has made this process substantially more accessible than before with the advent of online databases and customs consulting. Gaining the most current and accurate information about your prospective export market’s import regulations can’t be stressed enough. With the likely chance that new businesses will purchase on a strictly limited budget, the last thing they want would be to have a product held up in customs clearance because they have failed to adhere to regulations. This can incur fees far beyond the cost of simply conforming to import rules and, in the most severe of circumstances, can lead to impounded products.
In researching your chosen market’s import regulations, you will find a number of people and institutions from which you can seek information. The consular office or embassy in your home or targeted country is an excellent place to start, followed by the numerous information resources offered by governments and private institutions online.
Also, not a bad option would be to consult a customs broker in the target country, although this will obviously incur added costs.
Toyota will need to initiate the process of screening countries to exclude the less desirable markets. Screening will involve a preliminary search to determine key indicators that measure market attractiveness.
Once the desirable countries are pinpointed, Toyota can begin an initial ranking of the countries to get an idea of the potential long-run market attractiveness and select target countries. At this stage, Toyota will be looking at a general market assessment since it will focus on specific segments only in the later stages.
In Africa, a land with a vast diversity of cultures and a linguistic divide, one size cannot fit all. There are fifty-plus nations in Africa, which means fifty different sets of governmental policies, standards, and regulations.
Languages, religious affiliations, population density, GDP, and economic growth rates all serve to complicate Toyota’s task of selecting target countries. Africa is composed of two primary regional clusters: upper Africa with North African nations and sub-Saharan Africa.
Toyota announced increased interest in exporting cars from Dubai, so car exports will likely target the ports on the eastern coast of Africa. Certain North African nations will also become targets due to legal factors involving preferred trading options. Toyota will need to utilize thorough research in order to determine which countries will best fit its product and company.
This will require the utilization of a large amount of resources and personnel to gather and process information.
In support of this, there is a possibility for a joint venture to be established between Toyota and a major corporation in Africa to assemble vehicles in the newly developing country.
An established motor vehicle assembly plant can contribute significantly to an economy by creating job opportunities and enhancing technology and skills.
This method has been successfully implemented in all areas of the globe by Toyota and might be a consideration in the distant future when Toyota vehicles become more established in a particular African nation.
This idea of service is not only crucial for vehicle maintenance but must also be made a transferable skill to the local African mechanics to aid them in developing skills and long-term improvement in their own respective countries.
Duration and ease of parts availability will also be taken into account, as Toyota will aim to still stock a wide variety of parts and ensure they are readily available.
Toyota will be more involved in the process of servicing the vehicles, offering training to local mechanics for work such as servicing brakes and doing engine tune-ups. This will be done to a higher level of servicing where major work could occur.
The goal for Toyota is to still maintain the vehicles’ long-lasting ability for durability, but should something go wrong, they want to ensure that the service provided does the vehicle justice.
After-sales service is definitely a catchphrase used in business-to-business relationships. For Toyota, the concept is just as important in trying to export vehicles to Africa.
The main issue with CKD is setting up new assembly lines for vehicles in African locations and if the cost and tariff rate comparisons are similar to the cost of producing automobiles in Dubai. Taking duty rates and taxes into effect, if the price is higher, it would be wise not to continue with the assembly lines and just continue with CBU.
However, if there are minimal cost differences and the assembly line in Dubai has already overworked itself to its potential, it would be good to expand the company and market and begin production in select locations in Africa.
This would seem to be the best move, and it would significantly decrease inventory costs due to customer needs and make widespread products available instantly. It may even be possible to hire more skilled laborers for Toyota with possible new job promotions and offers to relocate them to Africa. This would significantly increase the quality of work and give reassurance to these employees on job stability.
Helping Toyota as a whole and the people transported to these locations in positive spirits help the public by pushing community auto mechanic training programs and specialty tooling loans to increase areas of local auto repair.
At the current market situation in Africa, the prospects of the automobile industry have shown that it is growing. Hence, it would be a prospective market for the launch of a new CBU. Looking at the best transport mode, based on the long term and the short term, the best transport modes would be container vessels and RORO vessels.
The key is to work with customer needs and first discuss with an agent as to what types of automobiles would be best to export at what time. Then, Toyota can decide from the long term to the short term to switch off the kinds of autos to export. And again, as the company progresses and volume increases, switching to CKD becomes essential.
The main point of looking at all the aspects and understanding the various strategies and problem-solving methods that go into exporting Toyota cars to Africa from Dubai is to see if this move would be financially beneficial.
