Pestle analysis of Toyota Motors Corporation. Toyota is a multinational Japanese automotive manufacturing company. Kiichiro Toyota established the automotive company on Aug 28, 1937. Toyota’s headquarter is situated in Toyota City, Aichi, Japan.
Toyota, Ranz, Gazoo Racing, Daihatsu, Scion, Hino, TRD, and Lexus are some of the brands of Toyota Motors Corporation under which the company sells its automobiles. The automotive company has a shared stake in various other brands like; 3.8% in Yamaha Motors Corporations, 20.02% in Subaru Corporation, 2.8% in Panasonic, 5.9% in Isuzu, 5.1% in Mazda, and 4.8% in Suzuki.
Toyota is one of the largest listed companies in terms of market capital both in Japan and across the world. The automotive brand is operating its business in approximately more than 170 countries. Approximately 364,445 people are working for the company to manage its worldwide operations. The brand is the largest vehicle seller and manufacturer after Volkswagen.
Some of the main products and services of Toyota are Lexus, boats, Sports Cruisers, SUVs, Sedan Vehicles, Sports Vehicles, Minivans, Hatchbacks, Busses, Trucks, and Station Wagons.
Today, we’ll discuss the pestle analysis of Toyota. It would focus on the macro-environmental factors like political, economical, social, technological, legal, and environmental issues of the automotive company. For internal factors, check out the swot analysis of Toyota. Here’s the pestle analysis of Toyota as follows;
Political factors impacting Toyota
Toyota is a multinational global brand and operating its business in over 170 countries. The automotive company is subject to various political influences and government regulations. Therefore, the brand has to keep in mind the worldwide influences.
The political environment of any country impacts the decision making of the multinational brand. For instance, Toyota was going to invest approximately over 69 million dollars in Thailand back in 2014. The protests and processions destabilized the political environment of the country. The automotive company changed its expansion plan and shifted its focus to other countries.
Conflict with China
The conflict between China and Japan is no secret to anyone, and Toyota is a Japanese brand. China has become the world’s largest tech and industrial economy of the world. Whenever any political event or rumor happens, it instigates the old rivalry and conflict. It negatively impacts the businesses in both countries. That’s how the political relationship among different countries is also important.
Demonetization in India
When the Indian government declared the demonetization of currency notes back in 2016 and 2017, it created a shortage of cash in the local market. It decreased the sale of many businesses. The sale of Toyota’s automobiles also declined. The automotive market is growing very slowly since then.
Economical factors affecting Toyota
The automotive market has become very competitive in recent years; Tesla, Ford, BMW are some of the major competitors. The high level of competition is financially impacting the sale of the automotive brand. It also puts pressure on the company to increase the research and development budget in terms of innovation. The brand has to perform better in order to satisfy the needs of customers.
According to a financial estimate, Toyota’s annual revenue was 241.196 billion dollars by the end of 2020 and it has declined 13.59%. Out of which the company’s net profit was 13.280 billion dollars and it has declined by 23.47%.
The decline in annual revenue and net profitability of Toyota is because of the pandemic of covid-19. Millions of people across the world lost their jobs during the pandemic months. It created an environment of financial insecurity and uncertainty and dropped the buying power of people. Ultimately, the economic recession impacts the sale of the automobile company.
Electric Vehicles & Oil Price
The economic recession and increasing oil prices have shifted the interest of the people towards fuel-efficient cars. Toyota is already manufacturing hybrid and electric vehicles. Now, the company has to increase the process and make the products available to the customers at a mass scale.
Some countries are even providing the tax exemption on the sale and trade of electric vehicles. Toyota should speed up the process to capitalize on this opportunity.
Social factors affecting Toyota
The vehicles of Toyota contained have a faulty fuel pump, and the automotive brand had no choice but to recall over 700,000 vehicles. It not only hurt the company financially, but it also made people question the credibility of the brand. The company fixed the problem, but it left a bad taste in the minds of people.
As we know that the people across the world have become environmentally conscious and they prefer eco-friendly vehicles. Toyota should shift its focus to the mass production of electric and hybrid vehicles. It would help the company to attract the attention of the eco-friendly customer market.
Safety features are the basic and essential element of any vehicle. When some of the vehicles of Toyota lost safety controls due to the faulty acceleration and pedal system, it endangered the lives of many customers. Many people became outraged because of it and the company has to billions of dollars to fix it. But that wasn’t enough for many customers; they lost the trust in the company.
Economical Indian Market
The “Innova” model of Toyota became so popular in the Indian market that many families started buying the vehicle for their family tours. The brand kept in mind the conditions of the Indian market. It turned out to be perfect because the company offered them the low priced vehicle to the price-conscious market.
Technological factors impacting Toyota
Toyota allocates billions of dollars annually for research and development in order to develop something to gain a competitive. The brand first introduced the hydrogen car in the market. The object was to meet the demands of the market. Hydrogen and electric cars are the current and future trends toward clean energy. Automotive companies like Toyota are working on it to be more efficient.
Toyota has always accepted the latest technological trends. It has helped the company to stay on top of the global market. Most importantly, the brand follows the simple formula of continuous improvement, and technology helped the company to achieve it.
Legal factors affecting Toyota
When Toyota recalled the faulty vehicles, the outraged customers filed a class-action lawsuit against the company. The automotive brand had no choice but to settle the case for 1.2 billion dollars plus fixing the faulty damages.
Prius Auto Industry, an Indian automotive company, filed a lawsuit against Toyota on the trademark. The company lost the legal battle and the Delhi court permitted the opponent to use the trademark “Prius.”
Environmental factors impacting Toyota
Zero Carbon Emission
Toyota is very well familiar with the environmental challenges. That’s why the company is producing electric, hybrid, and hydrogen vehicles to address the environmental issues.
The automotive brand laid out the future environmental plan for 2050 in 2015. It included steps like recycling-based sustainable society, optimizing the usage of water, zero carbon emission, and plant and life cycle zero carbon emission.
After a careful study of the pestle analysis of Toyota, we have concluded that Toyota is the world’s top automotive company. The costly lawsuits, faulty vehicles, and environmental challenges are serious threats to the company. Toyota should capitalize on its brand image and the trend of electric vehicles to increase the market share.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.