Toyota Europe shifts focus to hot SUV segment

November 8, 2018 06:01 CET

Toyota’s European sales are heating up, as demand for its hybrid models soars in response to the diesel backlash. Last year, ahead of schedule, the automaker hit its 2020 target of 1 million Toyota and Lexus sales across its European region, which includes Russia and Turkey. The surge moved the automaker closer to matching its record of 1.2 million units sold in 2008. This time, however, the growth is profitable and has been since 2011, except for a loss in 2017. Matt Harrison, who joined Toyota from Ford in 2000, has been steering the European sales operation since 2015. He talked with Automotive News Europe Correspondent Nick Gibbs about SUVs, plug-in hybrids and where next to take Toyota’s key conquest car, the youthful Aygo.

You have the new Corolla compact coming next year, replacing the Auris. Will it be the highest split between hybrid and nonhybrid?

It will come close. C-HR is actually the highest at 87 percent hybrid in Western Europe year to date. Today Auris is 77 percent, and we expect about 85 percent with the Corolla’s two hybrid powertrains.

When the Auris was launched, you wanted a more upmarket name. Now you have reverted to Corolla. Did the Auris not connect with customers?

This is not really as a result of the Auris failing. With the Auris we have managed to get our compact into the top five, commanding more than a 5 percent share. What has changed is Toyota has become a much more coordinated brand globally. We shouldn’t have the same cars running around in different regions with different names. It lacks integrity.

The Supra sports car is coming next year. What sales volume do you expect in Europe?

The role of the car is absolutely not about volume or profit; it’s about brand. It’s a halo to bring emotion and excitement to life. I expect [to sell] a couple of thousand units — the segment is very small. I expect demand to outstrip supply.

Word is that the new model coming to your French plant is a small SUV.

We haven’t said that, but it’s fair to say that the way that segment is booming hasn’t escaped our attention.

Customers have reacted well to the bold design of the C-HR. Would customers of small SUVs react in the same way?

We have done it [the C-HR’s design] very successfully. It has more or less a 10 percent segment share and is actually playing at the very top end of the compact SUV segment. With a smaller SUV, you have probably got some of the same dynamics.

Around a quarter of your sales are SUVs. Where would you like that to be?

We were a bit slow into the compact SUV segment, and we are not present in small SUVs. There is no doubt there is opportunity. Probably toward 40 percent is about right.

Toyota Europe boss Johan van Zyl spoke about needing to quickly finalize the next Aygo minicar with PSA Group to determine whether to stick with the partnership. Where is that segment heading?

There are quite a few questions about electrification, powertrain, body-type choice. That segment survives on accessibility. It’s about entry price — 99 euros a month — so it’s very sensitive to a cost increase. That’s quite a challenge to electrification.

You have said it’s a profitable segment, so it’s obviously important to you.

The Aygo is a major asset for the brand. It’s where we conquest our youngest customers. It’s the entry point to the brand. And it brings personality and character, more than the average Toyota range, so we need to find the right balance between protecting and leveraging it and also making it fit for the next decade.

Meet the sales boss

NAME: Matt Harrison
TITLE: Toyota Europe Sales and Marketing Vice President
AGE: 50
MAIN CHALLENGE: Ensuring supplies of key hybrid models are coming fast enough to satisfy demand

You have said you are launching more plug-in hybrids, without being specific. When are they coming?

We are trying to watch the legislation carefully because one minute plug-ins are very hot because of the incentives on offer; the next minute they are not hot at all. Without incentives in place today, the walk upward in terms of price premium for plug-in hybrids versus our full-hybrid system is a barrier for customers. Used demand is also a little bit low today because there are no real benefits for used-car customers to have them. But when the opportunities change, our TNGA platform is engineered in such a way we can bring out plug-in derivatives.

Have you fixed a schedule?

We don’t really need plug-in hybrid technology to comply with 2021 CO2 targets. A number of our competitors need it. They almost have no choice but to accelerate the delivery of those cars to market, but we see the bigger opportunity later than that. For us, supply is a much bigger headache than demand. The demand we have for hybrid cars right now is more than we can cope with. It’s a global issue for Toyota. It’s about prioritizing and deciding how best to use the battery capacity.

Have you given any thought to launching an access brand to rival the likes of Dacia?

In Western Europe, you would say Aygo is that. When you look at what’s happening in Russia and in particular in the emerging markets, you can definitely see some opportunity below where Toyota is positioned, a mid-to-high subpremium brand. There is space beneath us. Whether we think we can profitably fill that space, I don’t know. I would never say never. But there’s a lot of challenges for Toyota in terms of our technology standards.

AUTOMOTIVE NEWS EUROPE MONTHLY MAGAZINE

This story is from Automotive News Europe‘s latest monthly magazine, which is also available to read on our iPhone and iPad apps.You can download the new issue as well as past issues by clicking here.

You can reach Nick Gibbs at ngibbs@crain.com.

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