Posted on | October 22, 2007 | No Comments
Ecra Creative Group
The green paint on Toyota’s environmental image is starting to fade.
The quintessential “hybrid” car builder – the company that brings you more fuel efficient vehicles than anyone else, the company that popularized the ugly little Prius, the company that made it mainstream to drive clean – has fallen in line with the American Big 3 automakers in opposing higher fuel efficiency standards.
Just in case you missed it, NHTSA defines CAFE standards as:
Corporate Average Fuel Economy (CAFE) is the sales weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 lbs. or less, manufactured for sale in the United States, for any given model year. Fuel economy is defined as the average mileage traveled by an automobile per gallon of gasoline (or equivalent amount of other fuel) consumed as measured in accordance with the testing and evaluation protocol set forth by the Environmental Protection Agency (EPA).
In other words, how does an automaker’s fleet perform on a weighted average of all vehicles they sell in the US?
Developed after the oil embargo in the mid-1970s, the CAFE standards were intended to double average fleet fuel economy by 1985.
Let’s put aside for a moment that as I write this, oil just passed $90 per barrel. And that the global supply of oil is running out. And that poor fuel economy is a major contributing factor to global pollution (and very likely climate change as well). And that there is probably no better time than right now to raise these standards. Dramatically. Put aside all of that. It is not really my area of expertise, and he details of which are not necessary to understand this brand positioning issue.
So why on Earth would Toyota oppose higher fuel economy standards?
Didn’t we learn in business school that when you have a competitive edge, your duty was to drive that stake through the heart of your competition? In this case, Toyota’s competition is Detroit’s legacy builders: GM, Ford, and Chrysler. Each of the three is reeling; Toyota could use the standards as another nail in their coffins. As a competitor, in a free economy, this is what you do? Right?
Of course, Toyota’s stated reason for opposing this latest effort to raise fuel economy standards is that they do not want to see their competitors (naming, the Big 3) in “worse” shape. In other words, it wants it competitors to be bad enough to soak up their business, but not bad enough to fail outright. Sounds like BS to me.
I think what we are really learning is that Toyota, in its quest to get bigger (from a company and vehicle perspective), is becoming what is set out to crush.
Toyota may sell more hybrid vehicles than anyone else, but those are not profitable vehicles.
What vehicles are profitable? Simple: The same vehicles that are profitable for everyone else: Light trucks and SUVs.
With a regular margin on these vehicles of 40 to 50 percent (or better), Toyota is as addicted to the profit from these vehicles as Detroit’s Big 3.
All that aside, what Toyota risks is nothing short of serious damage to its brand.
The Toyota brand is one of the key reasons people buy the company’s cars. They see the company and its products as innovative, dependable, and high quality. Much of which is true, but not necessarily unique. If we remember, the Big 3 enjoyed those same perceptions in the 50s and 60s (and even into the 70s). At the time, the Big 3 had “American made” loyalty on their side as their key point of difference to keep a leg up on new foreign competitors. Toyota doesn’t enjoy that advantage today, but they have another: Environmental Leadership. Or perhaps more precisely: The image of environmental leadership.
When we examine brands, we search for these unique elements that seem to make the difference; that “tip” public perception one way or another. They do not need to be monumental (and they do not even need to be completely accurate). For Toyota, environmental leadership, more than any other pillar of its brand, has been the X factor that has helped Toyota pass GM as the worldâ€™s largest automaker.
The company has worked hard to build that image. It popularized and perfected current hybrid technology. Along with Honda, it has pushed its rivals into doing the same.
But the very public move of opposing CAFE standard increases puts a dent in that armor.
Should Toyota lose one of the pillars that make it unique, especially this key point of difference, the buying public is likely to look under the hood for other issues.
And there are issues. They include: That the company is too big for its own good; that it has too many models; that it is managing too many brands; that it abandoned the industry-revolutionizing master/apprentice training strategy responsible for its remarkable quality in favor of lower cost methods; that it is not an American company (and issue the company has mostly put to bed).
The same thing happened to the Big 3. Once their image started to fall apart in the mid-seventies, they have not been able to get it back (even though, by many independent estimates, they product many quality vehicles – several of which on par with their Japanese and German counterparts). When consumer opinion changes, the results are brutal and long-lasting.
The Toyota brand, like any other, is an interrelated and interconnected reality; chaotic in nature and unpredictable. There are enough factors in the marketplace that could upset the delicate balance of positive buying perception and turn the Toyota’s brand into negative territory. Their brand is simply too important to sacrifice at the alter of short-term profit.
Just ask GM, Ford, and Chrysler. They’ll tell you.