Q&A: Toyota wants to make the brand more emotional

Hybrid models are planned for all segments

Munich. With a sales increase of 6.7 percent, Toyota was one of the winning brands on the German automobile market in 2003. Toyota Germany Managing Director Markus Schrick discussed strategic plans for the market this year.

Q: VW boss Bernd Pischetsrieder calls hybrid models, such as the Toyota Prius, "an ecological catastrophe." What do you think about that?

A: We believe that hybrid technology is economically friendly and therefore an important cornerstone for the future. Toyota works with a long-term hybrid strategy and, as world market leader is far ahead of everyone else.

Q: How do German automobile buyers react a second-generation Prius?

A: We are filled with enthusiasm. In 2004 we hope to sell 2,000 vehicles and in January we already had more than 300 orders. The feedback from customers and dealers alike is absolutely positive. By 2010 we want to offer a hybrid model in each segment.

Q: So you will have to order a few more Prius from Japan?

A: We have already thought about that. However, that might not be easy, as the car is also selling very well in Japan and the U.S.A. The Prius gives the Toyota brand a proper tail wind.

Q: Your total sales also increased. Does that also apply to revenue and profit?

A: Our financial year ends on March 31. However, I can already tell you that we will have a clear increase in both revenue and profit.

Q: Will the increase have one or two figures?

A: The tendency is towards two figures.

Q: Peugeot's sales increase in Germany is nearly twice as high as Toyota's. Does that annoy you?

A: No, because in 2003 we grew more than planned and in 2004 we have a very strong start.

Q: In what way?

A: In January the market slowed down significantly but with 8,748 new registrations we were 64 percent above the same period last year. The January market share of 4.2 percent is a new record.

Q: How about February and March?

A: The results will probably be as forecast or better.

Q: What are your most important new models this year?

A: The new Corolla Verso and the Lexus RX 400 H. We will introduce this hybrid model with 300hp at the end of the year and it will be available at the beginning of 2005.

Q: Is the current increase enough in order to reach the planned annual target of 200,000 units by 2010?

A: Yes. This year we hope to be selling 118,000 cars, 2,400 of which will be Lexus. Within the next few years the growth rate will increase as we strengthen the whole brand image. Not enough people know yet that besides quality and reliability Toyota is good in many other aspects. We need a more emotional relationship with our potential buyers. We have to give the brand a soul.

Q: How are you planning to do that?

A: We will communicate our successes and strengths more intensely and emotionally. For customers who don't know us much yet, we hope to increase their knowledge of Toyota so we can climb higher in their preferences. That is why we will organize more events, for example within auto sports.

Q: Does that mean more money for marketing?

A: Last year we increased our marketing budget by 20 percent and it will remain on the same level in 2004.

Q: Which type of new clients would you like for Toyota?

A: We are already strong in regard to older clientele -- our very loyal customers' average age is approximately 50 years. We hope to win over more young customers. That is why we have introduced a leasing program for the Yaris, especially for young people. From spring 2005 we will specifically target younger customers with our new low-end model range.

Q: Are you considering introducing the Toyota's Scion brand in Germany?

A: We are focusing on Toyota and Lexus. If it should be considered at all then only a long-term solution would be worth thinking about.

Q: What about luring customers away from other brands?

A: That's going well. The Avensis has a conquest rate of 50 percent, which is a first for Toyota. Some of the new customers increasingly change over from German premium brands.

Q: What are your plans in regard to the development of your dealer network?

A: Today we have 630 locations: 180 group dealers, 90 branches and 360 partners. In the medium-term we hope to have 120 group dealers and 110 branches, which means we want to expand strong groups. On top of that we want to be more present in large cities and increase our market share there from 2.5 to 4 percent.

Q: What can the dealers earn with Toyota?

A: Last year the average return on investment was 1.9 percent, the large and strong dealers should manage 3 percent in the medium-term.

Q: How do your sales partners deal with incentives and discounts?

A: Carefully. In comparison with other dealers we are relatively far down on the scale. We only give 20 to 30 percent of what those at the top of the scale give.

Q: Regarding the Lexus: How are you planning to increase your sales there?

A: Those who have driven a Lexus once are thrilled. However, the brand does not yet have the image it deserves. We will soon introduce several new products. The number of financially strong dealers will be increased from 40 to 50. And we will raise the Lexus' profile on the German market.

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