Market Insight: Holden's road to toppling Toyota

HOLDEN has a huge task ahead of it as it embarks on an ambitious plan to overtake Toyota and reclaim motor vehicle sales market leadership in Australia by the end of the decade.

New chairman and managing director Gerry Dorizas believes the lion brand needs only a 15 per cent share of the new-vehicle market to achieve this goal, and has declared his intention to the reach the target despite the company not having locally built vehicles from late 2017.

This means no unique rear-drive Australian Commodore as we know it, no replacements in sight for derivatives such as the Holden Ute and Caprice long-wheelbase sedan, and none of the kudos and benefits that come with the territory as a local manufacturer.

The latter include government and private fleet purchasing policies that require Australian-made cars to be given precedence over imports, and the individual buyer loyalty and favouritism that stem from its Australian heritage and ‘Made in Australia’ status.

Holden lost market leadership to Toyota in 2003 – after a two-year reign – and since then has never come close to regaining top position. Its market share has steadily eroded from a 21.6 per cent peak in 2002 (with 178,392 sales) to less than 10 per cent last year (9.9), when new registrations slipped to 112,059.

Toyota stole market leadership from Ford in 1998, and although Holden had the upper hand in 1999 and 2001/02, the Japanese brand enjoyed a share of between 20 and 24 per cent from 2003 until the devastating Japanese earthquake and tsunami, and Thai flood disaster, in 2011 curtailed its market share and sales volume to 18 per cent and 181,624 units respectively.

Up until then, Toyota had routinely posted more than 200,000 sales a year, climbing as high as 238,983 units in 2008 for a 23.6 per cent market share.

While Mr Dorizas is adamant 15 per cent will be enough for leadership given new entrants and increasing competitiveness in the market, Toyota Australia – as recently as last year, albeit prior to its decision to follow Holden and Ford in pulling out of local car manufacturing – has made clear its intention to secure a 25 per cent share.

Since 2011, Toyota has clawed back sales to well beyond 200,000 – it posted 218,176 and 214,630 in 2012 and 2013 respectively – and although its share has recovered since the 2011 natural disasters, the brand has not returned past 20 per cent, managing 19.6 and 18.9 per cent over the period.

Giving Mr Dorizas confidence is the fact that Holden’s market share has risen to 10.3 per cent after the first quarter of this year – compared to Toyota’s 18.1 per cent – although the American General Motors subsidiary’s sales increase is entirely down to the doomed Adelaide-built Commodore and Caprice, and just one other model: the Colorado ute produced in Thailand.

There is a replacement for Commodore in the works at General Motors, but it is hard to see its transition into a global GM product bringing much, if any, sales volume improvement in the underwhelming, and increasingly niche, large-car segment.

As Australian buyers respond positively to the acclaimed VF series and show a marked preference for Japanese small cars (that is, the Toyota Corolla and Mazda3) over the locally built Cruze, Holden is, as much as ever, still trading largely as the ‘Commodore Car Company’.

GMH is currently selling twice as many Commodores as any other model across its range, and the large car accounts for 30 per cent of the brand’s overall sales.

Throw in the equally ill-fated Ute and Caprice, and that figure climbs to 36 per cent.

Without Holden’s future model program and strategy out to 2020 at hand, we cannot accurately gauge whether the target of 15 per cent market share – and outright leadership – set by Holden’s new boss is realistic.

But losing models that currently account for more than a third of its sales volume clearly makes the ambitious goal – which based on today’s market, equates to around 170,000 sales – a difficult one to achieve.

Holden has not passed the 170K mark since 2005, with more than 93,400 of those going to Commodore or derivatives.

As VFACTS figures show, Toyota’s dominance in Australia is plain for all to see – even in what is already a fragmented marketplace.

It, too, will lose benefits that come with being a local manufacturer, but there is not the same degree of major model loss or change to its line-up that Holden is facing, and virtually all Toyota’s vehicles will be imported here tariff-free.

The recent trade deal struck with Japan adds to others already in place with countries such as Thailand and the US that already benefit Toyota Australia.

The latest trade agreements should create a fairly even playing ground for most full-line vehicle importers in Australia once local manufacturing ends in 2017 – the South Korean pact helps balance the equation for Holden – and will serve to increase the competitiveness of all the major brands, most notably Mazda and Hyundai but also Nissan, Mitsubishi and Ford.

In declaring his intention to overtake Toyota, Mr Dorizas made it clear earlier this month that while Holden will never lose the historical ties it has with Australia, the company’s focus was now on repositioning itself as a multinational brand.

“We have what we need we just need a product strategy for the future products,” he said.

“We’re covered well for products, we just need a little bit of time to focus and we will get there.

“At one particular time we wanted to save the factory, but now we have to refocus. It will take time and a lot of work. The notion of ‘no worries mate’ is not the idea of how we work – we need credibility back.

“The mindset has already started changing.”