Andrew Winston; the co-author of Green to Gold; blogs about a disturbing story about Toyota’s hybrids.
This past weekend, The New York Times published a scathing, but fair, article about the new Lexus hybrid (cover of the Automobiles section, titled “Conspicuous Consumption with Green Illusions“- ouch).
However, what caught my attention was this statement by Andrew.
From a strategic perspective, none of this makes much sense to me. A big part of Toyota’s rise to world’s #1 was what it did right on green issues – mainly the Prius. I hope this won’t happen, but Toyota may find out that brand good will can be destroyed much faster than it’s built.
Andrew’s assertion that a big part of Toyota’s rise is due to the Prius is in my view a great simplification of what Toyota as a company does. Andrew does suggest other aspects of Toyota’s success “The combination of the most successful eco-product every (Prius), the leanest manufacturing, and top-notch marketing make the company extremely hard to beat.” However, the focus on Prius is what I think is wrong.
Toyota’s lean manufacturing, quality controls, marketing skills, good leadership and financial management are all known. The stock market believes that Toyota is worth around $200B while its competitors like Honda (67B); GM (20B); Nissan (44B); Ford (16B) together are worth less.
Remember that Toyota surpassed GM in worldwide sales just recently. Sales are only one part of the equation. Because in terms valuation; Toyota was worth a lot more than GM a long time back.
Now lets look at the sales of Toyota and its sales of Hybrid vehicles. While Toyota sold 4.716 million cars around the world in the first half of 2007; in the same time it sold about 1.33 million cars in the US.
Of this; Toyota’s hybrid cars (Prius, Camry Hybrid, Highlander Hybrid) have sold a total of 135,075 through to May 2007. Based on these numbers we can forecast sales of around 170,000 Hybrids for the first half of 2007 for Toyota in the US. Hybrids make up 8% of Toyota’s US sales (first half of 2007) and this share has been increasing over the years.
However, in no sense we can ascertain the gains Toyota has made in sales, profits, quality, and other parameters to its green focus.
Do not get me wrong here. I think that Hybrid engines have a great future. In the coming years and decades hybrid engines will be standard like air-cons, high quality, safety standards etc have become part of modern cars. If Toyota leads this in comparison to it’s competitors in this area then; in the coming decades the Hybrid component can help propel Toyota’s future leadership.
At this time the green lens for Toyota is the birth of a fast selling new product line.
To clarify; I have seen some people make this point about Toyota’s green focus but when Andrew made the point I thought it was important to present a more balanced view on this.
Green lens are important for business but not the overwhelming answer to all business issues.
