Last of five parts on problems Toyota Motor Corp. faces in China

Toyota Motor Corp. gained a foothold on the Chinese mainland in 2002 via a comprehensive tieup with China FAW Group Corp., the nation’s biggest automaker.

It started producing Corollas there this year, but still lags behind European and U.S. rivals that are active in joint ventures with a number of Chinese carmakers.

Germany’s Volkswagen dominates the market, holding a bigger share than the others. In June, the Chinese government chose Volkswagen as an official partner for the 2008 Summer Olympics in Beijing.

In a show of appreciation for “digging a well” — referring to behavior considered helpful to China — the German automaker will benefit from an Olympic platform and will draw the eyes of the world.

Volkswagen retreated from some operations in the United States in the 1980s, following an oil crisis and its failure to work out energy-conservation measures.

With China looking for foreign capital, however, Volkswagen transferred its plant facilities from the United States to Shanghai.

The “well” dug by Volkswagen was bountiful beyond expectations, and the firm now generates 37 percent of its global profit from the Chinese market.

Toyota Chairman Hiroshi Okuda, 71, met with a senior Chinese government official in Tokyo last spring, and, during their conversation, the official reportedly said: “You didn’t come when we invited you. It is hard (for China) to remove the sense of distrust.”

Okuda is said to have replied: “(China’s) environment was not yet right (for Toyota) to go there. There is a (needed) sequence in auto production.”

Toyota operates by what it describes as the “royal road to management” — first exporting assembled vehicles to a country, and then fully studying the market where the vehicles are shipped.

Regarding the vehicle-production situation in China at the time, Okuda was preaching this Toyota management mantra.

Nevertheless, by trying to adhere to this practice, Toyota fell significantly behind Volkswagen, which instead opted to jump into the Chinese market.

Numerous people in Japan’s auto industry saw in Volkswagen’s conduct the flexibility of European corporations in adapting to foreign markets.

Chinese Vice Premier Zeng Peiyan, who has striven to nurture the auto industry as vice minister of the State Planning Commission, once said while having dinner with Toyota executives, “I wouldn’t be needed if China ever becomes Wimbledon.”

This comment was apparently a reference to the dominance of foreign tennis players at Wimbledon, with Zeng’s words possibly indicating concern in China over whether its choice of foreign capital has been correct.

China’s auto industry has more than 120 manufacturers, though all of these are either foreign firms or joint ventures with domestic companies. It is as yet unclear when a wholly Chinese automobile will be produced.

In respect of a new auto policy that the Chinese government announced shortly before he arrived in Beijing in June, Toyota Senior Managing Director Akio Toyoda, 48, said it was like the government telling Toyota to “hang in there.”

The new policy included items such as a call for a 15 percent improvement in fuel consumption by 2010 and the development of hybrid automobiles. Toyota has led the world in these measures, attaching great importance to environmental technologies.

It has a track record of coping well with emissions regulations in California, considered among the world’s toughest.

The era of prioritizing the scale of production has seemingly come to an end in China in favor of quality, services and the environment.

The chance to take on Volkswagen in China now appears to be at hand.

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