For the last six years, Honda has been reigning as Malaysia’s No.1 non-national car brand. Honda Malaysia is one of the few Honda sales offices to rank ahead of Toyota. However, the tide is now turning in Toyota’s favour.
Big-T's refreshed range of core models namely the Toyota Vios, Yaris, and Hilux are hitting all the right notes amongst consumers. Toyota is now rapidly closing its gap with Honda. Last year, the two brands were separated by just 1,967 units.
This year will see the full-year contribution of the refreshed Vios, Yaris, Hilux padding up Toyota's numbers. Thursday's (tomorrow) launch of the Toyota Corolla Cross will certainly propel Toyota even further ahead.
Toyota have long held the non-national sales crown for more than 30 years. So for Honda to overtake Toyota and hold the leading position here for the last six years has bruised Toyota's ego quite a bit.
It also means that UMW Toyota Motor (UMWT) is one of the few Toyota distributors in the world to sell less cars than Honda. Imagine the embarrassment of UMWT's bosses when they gather and share notes with Toyota representatives from other countries.
Despite having a wider product line-up of 13 Toyota models, including the additional advantage provided by the Toyota Hilux, Innova, Fortuner, Avanza, and Hiace, UMWT’s sales numbers still trail behind Honda Malaysia.
Conversely, Honda Malaysia only has 8 models, none of it aimed at commercial users.
Toyota assumed the title of the No.1 non-national car brand in Malaysia sometime in the late ‘80s, after overtaking Nissan (Edaran Tan Chong Motor), which was the No.1 car brand in Malaysia between the ‘70s and ‘80s, but didn’t adapt very well to the post-Proton era.
At the end of 1990, Toyota's annual sales stood at 24,410 cars, ahead of Nissan’s 23,613 units. More importantly, Toyota was selling more than twice that of Kah Motor’s Honda (10,590 units).
Toyota was also better at adapting to changing consumer demands. When the shift towards recreational vehicles (MPVs and SUVs) began, Toyota had the right product ready – the Toyota Unser, RAV4 (first two generations were sold here), and later the Toyota Avanza, Innova and Wish.
By 2005, Toyota was leaving Honda and Nissan in the dust. Toyota was so far ahead that it didn’t bother looking back at its competitors anymore as neither rivals were putting up a decent fight.
Toyota sold 91,003 units in 2005, nearly four times more than Honda (27,457 units) and Nissan (26,724 units).
For a while, it seemed as if Toyota was an unstoppable train, mowing down anything that was blocking its path.
This was a time when Perodua cars were barely crossing the RM 60k price ceiling, Proton was weak and buyers were taking longer 9-year loan tenures to buy a Toyota Vios, just so they could avoid a Proton Waja.
By 2014, Toyota had done the impossible (for a non-national brand), crossing the 100,000 units annual sales milestone, selling 102,034 units.
But success breeds hubris and after nearly 3 decades of sitting at the top, UMW Toyota Motor has become just another big, slow, slumbering corporate giant.
So when Honda Malaysia overtook them in 2015 (with 94,902 units versus Toyota’s 93,760 units), UMWT didn’t know how to respond. In the following year, UMWT’s performance dropped even further, with sales dropping by over a third to 63,757 units! Toyota’s drop was three times worse than the market average (-13 percent).
What happened to Toyota?
A young Toyota executive once raised concerns regarding recent developments in the Malaysian marketplace only to be told by his bosses, “No need to look at competitors.”
Sounds arrogant? Not at all. There’s a very logical explanation to it, something which the young and naïve executive didn’t know yet – if Toyota’s competitors were doing the right thing, they won’t be selling 4x less than Toyota, so to follow them would be a mistake.
Instead, Toyota's mistake was losing their close tabs on the market’s pulse. The company became overly reliant on third-party survey data but on-paper numbers are only as good as the one who interprets them.
Toyota bosses of the 2000s era had grown too comfortable and too distant from the marketplace, effects of which were only felt by the 2010s - remember that a car's model lifecycle ranges from 5 to 7 years, so the effects of poor product planning are only apparent years later.
One of the most respected core values of the Toyota Way culture are gemba (experiencing something at its actual location – i.e. the factory floor, or the showroom floor) and genchi genbutsu (go see for yourself, as opposed to relying on reports prepared by your subordinates).
Gemba and genchi Genbutsu are management philosophies preached by Taiichi Ohno, the industrial engineer who established Toyota’s vaunted Toyota Production System (TPS), better known in today’s business school circles as Lean Manufacturing.
At the peak of UMWT’s success, their (then) bosses know gemba and genchi genbutsu in theory, but never practiced it. They would send out their lower ranking staff to visit dealers or work sites, instilling in them why these two practices are at the core of the Toyota Way, but they themselves would hardly ever step foot into Toyota showrooms, road shows, factory or showroom floor, at least not without an entourage, who would’ve obviously take effort to steer them away from unpleasant realities.
Even fewer would send their company-provided Toyota cars for maintenance themselves, thus few Toyota bosses know the actual customer experience.
Here's an example of gemba walk by Toyota Motor Corporation's then Executive Vice-President Mitsuru Kawai (as of January 2021, he is now Executive Fellow). English transcripts of the video is available here.
Kawai-san is an important figure when talking about Toyota because President Akio Toyoda regards him as Oyaji, or godfather of gemba walks. Desperate to restore Toyota's leadership ranks to be a gemba-focused one, President Toyoda convinced Kawai to take up a leadership position, for the sake of the next generation.
Ironically in Malaysia, it was Toyota's competitors’ leaders, some even non-Japanese ones who were actively doing their own gemba. All the greatest car industry leaders that I’ve had the privilege to know of often do their own gemba.
I once bumped into the (former) CEO of Mitsubishi Motors Malaysia (MMM), the late-Tetsuya Oda, who was on his own, in casual wear on a weekend, observing the activities of his brand’s road show. The sales advisors there didn’t realize their CEO was in their midst.
This practice is still common among MMM's leaders, who often travel to East Malaysia - the main market for the Triton, to meet with dealers and customers.
Mark Raine, the former Vice-President of Mercedes-Benz Malaysia, also often visits BMW showrooms on his weekends.
The former CEO of Honda Malaysia, Yoichiro Ueno, the one who led Honda Malaysia’s charge to overtake Toyota, would make time to participate in media test drives, as it gave him the opportunity to sample the latest Honda models in real-world driving conditions.
He would then take questions from the press, mull it over with visiting engineers from Honda Motor Japan.
He practiced a healthy dose of skepticsm towards on-paper data. Once while mulling over a decision to rationalize Honda Malaysia's colour offerings and to introduce a new red paint, he didn't want to rely purely on colour demand-trend numbers presented on paper, but guided the local team to make their own gemba simply by holding a hand tally counter and counting the number of red cars driving pass on the highway outside their office tower. Now you know the background story behind Passion Red Pearl colour option.
The people at Honda follow a different variation of genchi genbutsu, which they refer to as san gen shugi, or the 3 realities - Real place, Real parts, Real facts. It basically says to verify facts yourself, experience it yourself, on the actual site.
Unfortunately for Honda Malaysia, the current UMWT is very different from the slow lumbering giant of past. The empire is striking back, and their Jedi Master dons a racing suit.
Today’s UMWT is now led by Deputy Chairman Akio Takeyama, a lean built man who races in the Toyota Gazoo Racing Malaysia’s Vios Challenge one-make race series. Walking the talk and living up to the ‘All About The Drive’ tagline don’t get any better than this.
In between race stints, the boss of Toyota would do his own gemba walk, to observe activities and consumers’ responses to the company sales promotion events there. Upon his appointment 2015, one of Takeyama's first action was to visit dealers all over the country, just so he could understand the market better, not based on what his staff tell him, but what dealers and customers are saying.
2021 will be a tough year for Honda Malaysia because quite a few of their core models are reaching the end of their lifecycle.
The ageing Honda Jazz is due to be replaced by the City Hatchback, and interest has been waning following the launch of the new Toyota Yaris.
The Honda Civic is still holding strong despite its age but it’s not immune to the migration towards SUVs. The Honda HR-V is at its last legs but an all-new model is not expected to arrive in Malaysia until next year.
Right now, Honda Malaysia can only bet on the all-new Honda City, but the B-segment sedan market is under severe pressure from the Proton X50 and Perodua Ativa. Put aside pseudo-academic views that these two models are from different segments, both models are chasing after the same group of customers. The Honda City’s biggest problem is not the new Toyota Vios, but the new genre of sub-80k SUVs.
The Toyota Corolla Cross is technically a larger Subaru XV-class type of SUV, but since Subaru is a slow seller here, conquest sales are inevitably going to come from the smaller Honda HR-V.
Also, the fact that the Corolla Cross is an all-new model will definitely have a big impact on the ageing HR-V. Prices have yet to be announced, but it won’t stray too far away from the Honda HR-V’s ceiling price of RM 118,581 (RS variant).
2021 will also see a new CEO taking over the helm of Honda Malaysia, as outgoing CEO Toichi Ishiyama has completed his tenure and will be returning to Japan. Unfortunately for the new CEO, there will be very little time for familiarization.
The Honda v Toyota battle will get even more intense. With a narrower product line-up and lack of commercial vehicles, it's inevitable that Honda Malaysia will have to cede ground to the resurgent Toyota, but Honda will of course do its best to delay it.
The company had recently celebrated its 1 millionth CKD cars milestone and will be hosting a carnival in Bukit Jalil this weekend. Make no mistake, behind the carnival-like atmosphere is a very intense effort to stall the inevitable.
The Toyota Corolla Cross is exactly what UMWT needs to tip the numbers over to its favour. After that, Toyota is looking to launch the new Toyota Camry, all-new Toyota Harrier, updated Toyota Alphard / Vellfire (final hurrah before the model retires).
Well, competition is good for consumers but for how long more is Toyota and Honda going to wrestle over an increasingly smaller market? The Malaysian car market is now going back to '90s era Proton-Perodua duopoly.