Section 6. Strengthening Development and Sales Efforts in the Japanese Market

Item 3. Reassessing Product Strategy

New initiatives in the compact car market, etc.

In the Japanese compact car market, Toyota introduced the Vitz, a new hatchback-style vehicle, in January 1999. With the aim of climbing to the top of the global compact car market of the 21st century, development of the Vitz had begun in 1996 as part of the New Basic Car Project. Toyota had two original development goals: 1) Superiority over other vehicles in the same class both inside and outside Japan in environmental, safety, and driving performance, as well as riding comfort, and 2) establishment of technologies to achieve both performance and price competitiveness.

Sold exclusively through the new Netz channel established in August 1998, the Vitz generated orders for 20,200 units in its first month, more than twice the original goal, becoming the core model for the new sales channel. Outside Japan, production of the model, commenced at Toyota Motor Manufacturing France S.A.S. in 2001 (where it would be named the "Yaris"), firmly establishing the model as a world car.

The compact hatchback market began to expand and diversify in 2000 as other models such as the Honda Fit were launched. Toyota enhanced its product lineup by launching the ist, which was designed to exude an air of luxury, in 2002 and the Porte, with a tall silhouette and affordable pricing, in 2004.

Toyota also actively implemented product development and sales methods specifically tailored to female customers. Focusing the Gaia minivan launched in May 1998 on families with small children, Toyota ran daytime television commercials on weekdays endeavoring to strongly appeal to married women and conducted focus groups in cooperation with women's magazines. Furthermore, for the Duet (supplied by Daihatsu Motor Co., Ltd. on an original equipment manufacturer basis and launched in September of that year), Toyota stressed the car's retro design and ease of use to female drivers, using a tagline that underlined the model's cute looks, as well as its capabilities.

In September 1998 when the Duet was announced, TMC increased its financial stake in Daihatsu Motor to 51.2 percent, further strengthening the link as a consolidated subsidiary. In 2001, TMC also started a personnel exchange program bringing in young staff members from Daihatsu Motor's Product Planning Division. This program produced synergistic effects; for example, the development of new compact cars by Daihatsu Motor, such as the Passo (sold also as the Daihatsu "Boon") and the Rush (sold also as the Daihatsu "Be-go").

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