Cultivating auto market in third country with oversea subsidiaries

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Abstract:

Taking advantage of capable oversea subsidiaries may enable multinational OEMs to cultivate third country market further.
Japanese OEMs, including Toyota, have developed almost all platforms at their technical center in Japan. Upper bodies have developed at technical centers both in Japan and overseas. Nowadays, Japanese OEMs have built regional technical centers in several core countries, including Belgium, China, Thailand, the United States and so on, in order to meet local needs. Until 1980s, some KD facilities in developing countries had small engineering department and, in order to meet their products to local market needs or regulations, made some modification from the base model that had developed in Japan. After mid-1990s, these function have been concentrated into regional technical centers. This move increased worldwide efficiency in engineering works and secured their brand images.
However, concentrating such local engineering functions into regional technical centers made a step backward in terms of meeting detailed local needs in developing countries. Needless to say, regional technical centers are closer to local market than Japanese headquarters, however as they handle numerous engineering tasks, they allocate engineering person-hours to each tasks by strategic priorities. That means minor market will be allocated smaller engineering person-hours than before.
The case of Kuozui Motor, a joint venture subsidiary of Toyota in Taiwan, is thought-provoking in analyzing this issue. In Taiwan, in spite of its small and matured market, several manufacturers, including China Motor (Mitsubishi), Ford Lio Ho Motor, Kuozui, and Yulon Motor (Nissan), have competed severely for decades. As a result, manufacturers have conducted major minor change annually in order to attract Taiwanese customers, continuously. This require them to have certain engineering department. For example, Kuozui established Kuozui R&D Center (KRDC) in 2002.
In 2009, Kuozui started major export of Corolla, a global model of Toyota, to Gulf countries. The number of Corolla export is gradually increasing. Now, it counts for nearly half of Kuozui’s passenger car production, and about 70% of its Corolla production. This means that export business has become strategically very important for Kuozui.
Management of Kuozui and several core suppliers jointly visited Gulf countries in 2012 and found that their product were not fully fit to their present and potential customer needs. Until then, Kuozui relied market research and some modification for Gulf countries on HQ in Japan and TMAP-EM, a regional HQ and technical center of the region located in Thailand. As Kuozui has had its own engineering department, Kuozui management decided to send engineers and designers to there and research market needs. And then, Kuozui, together with core suppliers, responded quickly to meet it and, as a result, increased sales and profit.
In this case, Toyota managed to cultivate certain small passenger car segment in Gulf countries by taking advantage of capable oversea manufacturing subsidiary with talented engineers.