Section 1. The Post-bubble Japanese Economy and Domestic Market

Item 2. Recreational Vehicles and Compact Cars Take the Lead

Hard times for Toyota vehicles

At the time of the bubble collapse, vans such as the Hiace Wagon and the Estima were the mainstay of Toyota's recreational vehicle lineup, which lacked variety. To catch up in the recreational vehicle market, Toyota released a series of vans, sport utility vehicles, and similar vehicles in a range of sizes including minivans and compact vehicles. For example, 1994 saw the launch of the first generation of the RAV4 sport utility vehicle, creating a new vehicle genre that was not only suited to off-road driving but also to stylish cruising in town. The RAV4, together with the Ipsum minivan launched in 1996, won popularity among a wide range of consumers from its inception.

In 1994, in response to the increasing demand for compact cars and to coincide with the redesign of the Corolla II, Tercel, and Corsa, an advertising campaign was rolled out that gave prominence to the vehicle's low price of under 900,000 yen. The 8th-generation Corolla, which came out in 1995 similarly emphasized outstanding economy with a price set at below 1 million yen.

Meanwhile, Toyota also worked to reestablish the sedan, which for many years had been its mainstay. To coincide with the redesign in 1996 of the Mark II, Chaser, Cresta and Windom, and Carina, a campaign entitled "Sedan Innovation" was launched. However, the move away from the sedan continued unabated, and although Toyota managed with much effort to retain a greater-than 40 percent share of the overall domestic market in 1995, subsequent challenging conditions saw its share fall below 40 percent from 1996 (39.7 percent) to 1998 (39.4 percent).

The Japanese non-minivehicle market returned to growth in 1995-96, but the consumption tax rise of April 1997 triggered another setback, and sales fell to just over 3.99 million units in 1999. Although Toyota's market share of 41.7 percent for that year represented a return to the 40 percent-plus range for the first time in four years, the sales figure of 1.66 million units was below target. It was clear that market shrinkage was no longer a temporary blip; in a market in which vehicles went through several owners, Toyota recognized the need to begin serious efforts to reinforce profitability and develop new sales methods.

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