Toyota in U.S. and Europe: Reinforcing Lexus and high-performance lines

 This report summarizes Toyota's business in the US and Europe mainly focusing on its model planning in those markets.

 Japanese vehicles have been rated high because of their high quality and reliability. Toyota plans to explore still higher market image for the Toyota and Lexus brands by developing high-performance vehicles with emotional appeal to customers. For instance, Toyota will expand the high-performance Lexus F series and develop all-new Supra and Lexus LF-LC. These plans are one of Toyota's development and product planning pillars other than the adoption of TNGA and major renovation of internal combustion engines.

 Toyota reported record-high operating income in the fiscal year ended in March 2014 (FY 2014) and in the April-June quarter in FY 2015. The high record was largely attributable to solid results in the U.S. and Europe. Toyota's sales in emerging markets in Asia and other parts of the world have been expanding in recent years but their growth is somewhat sluggish partly due to slow sales in Thailand.

High-performance the RC F to be launched in U.S. in fall 2014 (photo courtesy of Toyota)

Driver's seat area of the RC F (photo courtesy of Toyota)

Related Reports: Toyota: Implements strategy to launch fourteen new engines in two years (Sep. 2014)

 Toyota will develop high-performance vehicles including the Lexus F and F SPORT. In addition, a sports car is under joint development with BMW. Toyota is operating under the slogan of "develop ever-better cars" and with the notion that its cars must provide the fun of driving at the same time.

 Encouraged by the recovering profits, Toyota will accelerate its efforts to develop new technologies and "innovation" that will drive further growth. In this regard, Toyota has increased its research and development budgets from JPY 807.4 billion in FY 2013 to JPY 910.5 billion in FY 2014 and further to JPY 960 billion in FY 2015.

Model plans for North America by brand

Source: Automotive News Jul. 28, 2014.

Toyota brand: Launching TNGA-based Prius and Camry, developing successor to Supra

FT-1 Concept that is said to be successor to the Supra (unveiled at North American International Auto Show 2014, photo courtesy of Toyota)

Driver's seat area of the FT-1 Concept (photo courtesy of Toyota)

 Toyota will launch the all-new Prius in the U.S. at the end of 2015 as the first model under the TNGA scheme. Thereafter, TNGA will also be applied for the Camry, RAV4 and other model launches.

 The all-new Yaris is likely to be based on the Mazda2 that is produced by Mazda in Mexico.

 Toyota will develop a successor to the Supra, jointly with BMW, and will launch it in the second half of 2017. It is said that the FT-1 Concept exhibited at North American International Auto Show in January 2014 suggests the direction of the Supra's successor.

Toyota brand

FT-1 Concept

Lexus brand: Launching high-performance models in the LF-LC and F series

 The Lexus brand has established reputation in the US for quality. Now, Toyota is set to provide performance on top of quality that will strengthen the brand's emotional appeal to the customer. Although BMW M, Mercedes-Benz AMG and Audi S/RS are not sold in large quantities, it is said that they are playing a leading role in improving the market image of their respective brands. As for the Lexus brand, the IS F is the only car in its high-performance line. Toyota plans to add the RC F in the second half of 2014 and the GS F in 2015 to the Lexus series. The Lexus F series offers high-performance cars that are suitable for circuits.

 In addition, Toyota will launch the Lexus LF-LC in early 2017 with a price tag of around USD 120,000. It is said that the car will share many parts with the Supra's successor that is currently co-developed with BMW.

 As far as the Lexus brand is concerned, Toyota plans to launch many models that will appeal more to young customers within a few years. The 2.0-liter turbocharged engine used in the NX will be made available on the Lexus IS, ES, GS and RC as well.

Lexus brand

RC Series

(Note) Toyota estimates that the RC series will sell 15,000 units a year, of which nearly a half will be the RC F SPORT and 2,500 units will be the RC F.

Other Lexus models

 Sales of the Scion-brand vehicles declined in 2013 and for the first eight months in 2014 due to a short supply of new models. Even the giant automaker has limited operating resources and Toyota is asking dealerships to be patient.

Scion brand

 Toyota sold 2.24 million vehicles in the U.S. in 2013 resulting in a market share of 14.4%, still lower than the 17.0% share recorded in 2009. However, Toyota prioritizes "making ever-better cars" and "sustainable growth" rather than hastening for a higher market share. Toyota has set the sales goal for the full-year 2014 at 2.3 million units (assuming that sales continue at 6.1% year-over-year growth after the first eight months, Toyota's annual sales will be approximately 2.37 million units in 2014).

 Between sales results as at the end of the first eight months in 2013 and 2014, sales of the Toyota brand models increased by 5.6%, while those of the Lexus brand increased by 16.1% (the partially redesigned IS and GX were the major contributors to increased sales). According to the Automotive News on August 8, 2014, sales in the light vehicle market in the US during the first seven months of 2014 increased by approximately 5% whereas sales of the luxury brands such as the Lexus, Lincoln, Land Rover, Audi, Infiniti and BMW marked two-digit increases. The Automotive News attributes the high growth to introductions of low-priced luxury models, growing popularity of lease sales, and the promising U.S. economy in general.

Vehicle sales by brand and car/truck in the U.S.

Source: Automotive News Sep. 8, 2014

The all-new Aygo launched in summer 2014

The C-HR Concept being exhibited at Paris Motor Show in October 2014

 Toyota reported an operating loss of JPY 143.3 billion in FY 2009 after the global financial crisis. Since then, Toyota switched its operational strategy from seeking unit sales and market shares to seeking higher efficiency. Toyota turned to a surplus in FY 2011 and reported an operating income of JPY 58.2 billion in FY 2014.

 As for model lineup for Europe, Toyota's Aygo, produced in Czech jointly with PSA, was fully redesigned in the summer of 2014 (the first-generation Aygo was introduced in 2005).

 Toyota plans to launch new models in the Lexus NX and RC series in 2014 to 2015. Toyota estimates that the NX will account for one third of the Lexus models sold in Europe in 2015.

 As for production, production of the Auris in the UK and Turkey was consolidated in the UK plant in 2013. Production of the Corolla, which had been exported to Europe from Japan and South Africa, was transferred to the plant in Turkey.

New models planned for launch in Europe

Restructuring production network for Europe

 Toyota reported a record-high quarterly consolidated operating income in FY 2015 first quarter (April to June, 2014).The sales data by region shows an increase in net revenues and operating income in North America and Europe. The quarterly operating income doubled from the previous year in both areas. Asian regions have been expanding sharply during the past few years, but the quarterly net revenues slightly declined in April-June 2014. The operating income in Asia increased only by 6.0%. As a result, North America became the top operating income earner, beating Asia.

 According to the consolidated vehicle sales forecasts for FY 2015, announced in May 2014 simultaneously with the financial results for FY 2014, Toyota's global sales will reach 9.1 million units. This assumes sales growth in all areas other than Japan and Oceania.

 However, the consolidated vehicle sales in April-June 2014 declined in Asia and Africa. The global vehicle sales remained unchanged at 9.1 million units in Toyota's forecasts announced in August. But the sales forecasts by region were revised upward for North America and Europe, and downward for Asia and other emerging markets. The downward revision was due to the weakening demand in Thailand, India and Brazil.

 Toyota forecasts that the sluggish Thai market will start to pick up after FY 2016.

 Based on the Global Automotive Production Forecast (August 2014), Toyota Group's light vehicles production is expected to be 10.7 million units in 2017, up by 7.7% from 2013.

 At present, the majority of Toyota Group's production comes from Japan. However, the long-term domestic market is destined to contract, leaving little incentive to boost exports. LMC's forecast is for a gradual decrease in production which will eventually stabilize at around 3.6-3.7 mn units.

 Production in the U.S., the second largest producer country, will be 1.6 million units in 2017, up by 22% from 2013. The Georgetown facility will expand in 2015 with additional capacity added to produce 150,000 more vehicles by 2017.

 Production in China, the third largest producer country, will be 1.1 million units in 2017, up by 30.6% from 2013. LMC forecasts the negative impact of political issues in China to gradually ease, and for sales in China to start growing in 2014.

 Thailand, Indonesia and India are also expected to gain ground in the longer term. In countries with large populations, such as China, Indonesia and India, production increase will be supported by domestic sales growth. Thailand, however, will gain greater significance as an export base. Production in these countries in 2017 will be 805,737 units in Thailand, 881,904 units in Indonesia and 304,764 units in India.

Toyota Group Light Vehicle Production Forecast by country

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