Toyota GB gets boost from global strength

Tuesday, 05 June 2007

When his predecessor Graham Smith moved on to head up the brand's European operations Fonseca stepped into the roles of managing director of both Toyota GB and Lexus GB in September 2006.

Fonseca: Toyota and Lexus GB chief

In a market where the survival of the fittest is key, Toyota has evolved into perhaps the leanest, most effective operation of all – succeeding in passing on efficiencies honed in manufacturing to its UK retail network which has continued to prosper in a declining market. With its pre-eminent position in hybrid technology emphasised by the Prius' success in the JD Power customer satisfaction survey, Toyota appears to be one step ahead of the competition as environmental concerns increasingly influence consumers' buying habits. The brand has also established an enviable reputation for customer satisfaction and loyalty which promises well for its long term well being. Fonseca has spent six-and-a-half years at Toyota, having previously worked for Fiat, Ford and Citroen.

What is the current size of Toyota's UK dealer network?

There are 192 dealerships for Toyota including 16 outlets with Lexus and Toyota showrooms on the same site. There are 51 Lexus dealerships in total and both networks include a mix of PLCs and smaller groups, it's a balanced blend.

Will the size of the Toyota network increase with sales growth?

We have no plans to increase the number of centres apart from filling six open points. The strategy is to grow volume but not the number of centres. It's an opportunity for the existing network to grow its volume. The centres are our partners on the long journey.

There are 192 UK Toyota dealers

What has driven Toyota's sales growth?

Volume is a consequence of having the right brand, quality and customer service, it is not an objective on its own. In the UK Toyota and Lexus combined sold 140,000 vehicles in 2006 – 14,700 for Lexus and 125,300 for Toyota. In the first four months of 2007 combined sales were up 16 per cent. Profit in the Toyota network was up 32 per cent in the first quarter of this year so volume can deliver profit growth when handled well. It's not volume for volume's sake because pursuing volume can lead to trouble, but we have the room to grow.

What other factors helped profit growth?

Network capacity. It is not only a function of square metres, it's also to do with processes and we want to cascade the Toyota principles into the network. There are opportunities to increase efficiencies rather than costs. For example when you can use two technicians rather than one you don't need new facilities because you can complete a service in half the time with the correct tools and software. However, some dealers may invest in satellite locations where this is justified. Our manufacturing plants use the lowest kilowatts per car built in the industry and the same principles that apply to the plants can be interpreted in the sales and service processes.

What is the sales forecast for 2007?

We plan to grow to 144,000 with Lexus staying the same so the growth will come from Toyota, with sales for the brand approaching 130,000 units. It's not an ambitious growth target but we're not selling niche products any more. You have to remember the Previa, MR2 and Celica have all gone but as we speak we're on track to do better than our planned target. We should reach 146,000 sales roughly, although supply is outrunning demand.

How many dedicated LCV centres does Toyota have now?

There are now 103 Toyota Business Centres. We had huge growth of more than 60 per cent last year on the back of the (facelifted) Hiace. Fleet customers are coming back for repeat purchases and the Dyna and Hilux also did well. We are exceeding the targets agreed with the network and will adjust them. LCV sales reached 6,500 in 2006 and will hit 10,000 this year.

Does Toyota's new position as the world's biggest selling carmaker lend more kudos to the brand?

It develops an internal sense of satisfaction but from a corporate point of view we don't give it too much importance. In general volume represents the acceptance by society of your product, it's wrapped up in good brand image. But we respect our competitors and competition is the essence of progress so being number one is not an objective on its own. Volume growth is a reward for profitability and customer satisfaction.

Was the hybrid Prius topping the recent JD Power customer satisfaction survey at its first attempt a sign Toyota is shaping the future of carmaking?

The inclusion of the Prius in the survey is the fruition of its historical volume growth. Hybrid technology is today's technology for tomorrow, it's not just green and efficient. Customers love the car for its comfort, practicality, reliability and performance as well as its greenness. The survey result is an endorsement from customers. We are very proud, it's a Champions League win for us! One day we see all vehicles being hybrid – maybe with different powertrains. Hybrid is not an alternative to diesel, it can be applied to diesel engines too.

Hybrid power: The Prius is a popular model

How will the choice of hybrid product be extended across the brands?

Lexus is currently ahead of Toyota for hybrids with three products to Toyota's one but as we go forward it will be more evenly distributed. CO2 is the main driver for hybrid at the moment but we must also look at Nox emissions from diesel. Today the petrol hybrid is the best solution but maybe in the future the hydrogen hybrid might be better. Energy management is important. After 2050 we will be forced to look beyond oil – maybe hydrogen will be the only source of energy.

What hybrid model launches are on the horizon?

We will launch a new generation of hybrid models by 2010. The third generation of hybrid engines will be half the weight and half the size of today's units and 50 per cent more efficient. Also the cost of the third generation technology will be significantly reduced – making a more compelling proposition for volume models. By 2010 we will produce a million hybrids a year, 15 per cent of all sales. There's still some time to go to reach an all hybrid parc – it won't happen until 2020 at the earliest.

Will your competitors turn to hybrid engines or stick with other technologies?

Other brands will inevitably come into line with the hybrid technology we have pioneered. But they do have other ways to improve fuel efficiency so we have serious competition. It's only a matter of time before hybrid volume becomes enough for it to be a cost effective market to exploit. Mercedes, Opel and Porsche have all announced hybrid product. It took ABS 20 years to become widely adopted so hybrid will take time but it will get there. We launched the first Prius in 1997 and have now sold 600,000 globally including 350,000 last year.

What will be Toyota GB's best selling models in 2007?

Yaris: Toyota GB's best seller

The Yaris and the Auris. The Yaris will still be ahead with more than 30,000 sales. So far the Auris and Corolla have co-existed and together will reach 27,000 sales this year. In the longer term the Auris and Yaris will balance each other. The next three years of product launches will be very exciting in the quest to achieve 140g/km CO2 by 2009 across Europe. Our new wave of product will help us to grow business, hit the CO2 target and profit the dealer network, without which we don't have a business.

Is the UK the biggest European market for Toyota?

As we speak the UK is the biggest market but in 2006 Germany was number one with 141,000 sales.

How is the UK different to other markets?

It is the most complex market in terms of fleet, retail and the maturity of distribution. The UK is ahead of the others in the way the larger groups have consolidated and through the strength of the plcs. The UK went through a difficult period in terms of its industrial base – the stakeholders turned from manufacturing to distribution. It energised the market, the industry survived the stress and matured.

What pressures have dealers faced and how have they adapted to the changing market?

In the past few years there has been a decline in pricing and an increase in discounts. In four years the average discount to customers across the industry has increased from £1,200 to £2,000. The cost of making sales has risen with overcapacity. The market has seen the disappearance of 300,000 retail customers (since 2003) and increased stability in the fleet market. The market has gone from 60/40 in favour of retail to 50/50. This was the catalyst for the need to evolve and be efficient in distribution. It's a system of survivors. We have contained discount levels to half the industry average due to good management. Brand strength, customer satisfaction and loyalty has helped Toyota manage the cost of selling better than most.

But are customers not drawn to the cheapest models?

No. The well-specced Aygo Black, for example, is the best seller in the Aygo range with 65 per cent of sales so it delivers better profit for dealers. The Auris was launched with the TR. It offered the best value but was not discounted and is mid-range, not the cheapest. Consumers don't buy the lowest spec cars. Toyota does not use discounts to draw customers in because they will be disappointed. We provide a solid foundation for growth, not short-term success. We don't sell on price, we sell the brand.

Where does Toyota GB fit into the brand's global operation?

We vary from being the fifth to the seventh largest market. Other than Japan and the US Toyota's market share is huge in Australia, Thailand and Indonesia.

Which brands are your main rivals in the UK?

The top ten carmakers are direct competitors. Ford and Vauxhall are formidable due to their roots and maturity and then there are VW and Honda with whom we fight for the same customers.

Fact File

Fact file: Miguel Fonseca Age: 46, married with three children First job: Motoring journalist for Portugese magazine Turbo First car: Renault 4 Favourite books: Business and history books Favourite films: Hollywood blockbusters, action and science fiction movies Favourite actors: Robert de Niro, Angelina Jolie Favourite newspapers: The Times and the Daily Telegraph Favourite football team: Benfica

Bookmark

Email This

Comments (2) add comment

Show/Hide comments

Julia lloyd said:

	The most helpful sit... The most helpful site that I have come accross so far, as I am currenly doing an a*signement on market growth and share on Toyota UK. Thank You
	report abuse vote down vote up