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Market Insight: Tough road for Toyota’s new Kluger

Right on: Toyota has no plans to build the Kluger in Australia, but it will be coming Down Under now that right-hand drive production has been confirmed.

After winning fight for new Kluger to come here, Toyota faces a tough landscape

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Market Insight logo4 Feb 2014

AFTER persuading its parent company to make a substantial investment at its factory in the United States to produce the new Kluger in right-hand drive, just so it could be sold in the Antipodes, Toyota Australia now has to prove that the expense was justified.

Late last decade, this third-generation family SUV was the frontrunner to be actually built in Australia as the local subsidiary pursued its long-held plan to add a third model to the Altona production line, next to Camry and Aurion.

This is still considered to be a critical factor in the ongoing viability of Toyota’s manufacturing operations in Australia, although the RAV4 compact SUV is now regarded as the most likely candidate – pending, of course, the outcome of the current review of the business.

Yet the importance of Kluger to Toyota in Australia goes well beyond its initial prospect as a locally built model – and based on the sales performance of the first two generations here, the company was justified in pushing the case for the SUV to continue.

With the go-anywhere Prado alongside it, the gentler Kluger has made a significant contribution to Toyota’s market leadership in Australia, the partnership has succeeded where other similar pairings have failed, combined Prado/Kluger sales have dominated the large SUV segment (previously known as medium) almost every year since the Kluger was released in November 2003, and this segment is currently the highest-volume SUV class in the land.

Since the second-generation model was released in 2007, Kluger’s annual sales volume has risen to an average of 12,830 units – up from around 7000 a year in the first generation – while Prado has soldiered on with an average of more than 14,500 since 2003.

Kluger has never won outright leadership in the segment – Prado has dominated for five of the past six years, for example – but the road-biased model had an unbroken run of four years in second place from 2008 through to 2011, a year in which it even outsold Prado.

The only model to steal any thunder from the Kluger/Prado partnership is Ford’s locally built Territory – a smash-hit from the outset when released mid-2004, though its sales peak of 23,454 in 2005 has never been repeated, pegged back to around 14,200 units today after having rallied with the 2011 SZ series and diesel engine introduction.

As Kluger’s long-running main rival, Territory will lose the sales advantage that comes with local manufacture in 2016 – an imported model, understood to be the US Edge, will replace it – and that should provide further advantage for the forthcoming new Toyota SUV, particularly if the Altona plant is still ticking along.

Government fleet sales, for instance, are still – for the time being, at least – biased towards Australian manufacturers, even if the vehicles chosen are imported.

We hasten to add that regulatory change is in the wind, government sales are spiralling downwards (down 20 per cent last year alone) and the large SUV segment, while gaining popularity at the expense of large sedans and traditional large 4WD wagons such as LandCruiser, is also becoming more competitive and therefore fragmented, testing buyer loyalties and putting pressure on the long-established players.

Consider that in 2008, the first full year of sales for the second-generation Kluger, Toyota sold 13,424 Klugers for a 17.8 per cent share of the segment.

With Prado maintaining good form (14,725, 19.5 per cent), the two SUVs commanded 37 per cent of the large SUV class.

And with Territory (12,882, 17.1 per cent) and Holden’s Captiva (10,097, 13.4 per cent) factored in, that left 14 competitors – some old-school, and others more ‘soft-road’ oriented – making up less than 33 per cent of the segment.

Total volume was 75,485 units for the year, well below the 85,597 sales that went to the traditional compact SUV class (RAV4 et al).

Fast-forward to 2013 and mainstream compact SUVs accounted for 108,050 units while large SUVs were likewise over 108K – to an impressive 108,554.

Only light and small passenger cars and 4x4 utilities outsold large SUVs last year, but within the segment the extra sales were not being won by Toyota (also with FJ Cruiser since 2011) or Ford, but shared among 18 other competitors.

Indeed, Kluger (12,668) was relegated to fifth place for the first time in its decade-long history, and its share was down to 11.7 per cent. Prado (14,568) still led the segment – just – but its share, too, was pegged to 13.4 per cent as Territory (14,261, 13.1 per cent) took second place.

The big movers in the segment came with either fresh or increasingly competitive rivals, in particular Holden’s Captiva 7 (13,282) and Jeep’s Grand Cherokee (12,931), both of which outsold Kluger.

Hyundai is now making major inroads with the Santa Fe, Nissan has a new-generation Pathfinder in the mix, and all-new harder-core off-road wagons from both Holden (Colorado 7) and Isuzu Ute (MU-X) are also leaving their mark.

As a sign of the times, Holden has just reduced Captiva 7’s starting point to below $30,000, Mazda is offering lifetime servicing plans across its range as a redesigned CX-9 makes its way here in about 12 months, and Mitsubishi is doing its level best to keep Pajero punching before a new model enters the ring later next year.

Toyota, meanwhile, has runs on the board – more than 106,000 Klugers have been sold in Australia.

But having won the fight for Kluger to continue in Australia, the company is now facing a tougher market segment in which to launch the third-generation model.

It’s not the make-or-break third model line at Altona many were anticipating a few years back, but the Australian subsidiary now has to prove to its Japanese parent that the investment in retooling for right-hand drive – for the Antipodes alone, as New Zealand is the only other market taking it – was worth it.

The continued absence of a diesel or lean-sipping hybrid engine won’t help its cause, but you can be sure that the Australian market leader will be hell-bent on ensuring there are no question marks hanging over the decision.

Editor’s note: Official VFACTS SUV sales categories changed in 2012 to reflect the rise of light-sized city SUVs and the increasing number of prestige/luxury SUVs. The latter were put into individual categories but, confusingly, light-sized SUVs (eg. Mitsubishi ASX) became classified as ‘small’, traditional compact/small SUVs (eg. RAV4) became ‘medium’, mid-size SUVs (eg. Kluger) were called ‘large’ and traditional large SUVs (eg. LandCruiser) shifted to ‘upper-large’.

As a general rule, GoAuto continues to describe RAV4 as a small/compact SUV but Kluger is now accepted as a large SUV.

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