Cruise control Toyota on Road to Recovery

After a difficult few years, Toyota is hoping that strong sales of its hybrid vehicles and the launch of the world's first mass-produced fuel-cell car will put it back on the road.
Toyota's hydrogen-powered Mirai.

When Didier Leroy became president of Toyota Motor Europe in 2010, he discovered the company sold a record 1.1 million vehicles at the end of the last decade but earned no profit.

Now, although only about 800,000 vehicles are being sold, the business is profitable. Among other things, sales of hybrid vehicles powered by a conventional combustion engine and an electric motor have helped. A third of sales of the compact Yaris and half of the midsize Auris are hybrid models. “That shows we are profitable in this technology,” said Karl Schlicht, Mr. Leroy's deputy.

This year, sales are up 20 percent compared to last year, and the global total may even reach an all-time high.

But with Europe facing a likely slowdown in the coming year, there is no guarantee of further profitability. “We cannot advance with the magnitude of the German premium manufacturers, but if we could sell between 80,000 and 100,000 vehicles in Europe, that would be fantastic,” Mr. Schlicht said, adding that European sales in 2015  might rise by another 20 percent.

Toyota has changed considerably in the past few years, particularly when it comes to design. A striking remodeled front section has scared off some mainstream customers, but improved sales overall. Toyota admits it was too conservative with design in the past.

Toyota has changed considerably in the past few years, particularly when it comes to design.

 

The Japanese firm aims to continue to serve the mass market, with a focus on quality products. Internally, the company calls it “mainstream+,” with models marketed at a price point below the luxury level but above the mainstream sector.

For years, Toyota was considered a leader in quality, but in 2009 more than 15 million vehicles had to be recalled because of defects. This provided an incentive to make improvements, but problems persist. More than 6 million vehicles had to be repaired worldwide this year.

A turnaround is in the offing, however, with U.S. market researcher J.D. Power and Associates now ranking Toyota among the best in car quality and dependability.

Lexus, Toyota's premium division, is also on the up. The brand emerged about 25 years ago in the United States and found great success there, even though it has not really taken off in Europe. In the past year, more than 43,000 vehicles were sold.

Not content with merely building on existing successes, Toyota has now decided to shake things up a little: Earlier this week, it launched the world’s first mass-produced hydrogen-powered car.

The Mirai, which was unveiled in Los Angeles, will be available in Japan from December. It emits only water vapor from its fuel cell and otherwise functions as a normal suburban car.

The technology has been available for decades, but has so far failed to take off in private vehicles because of refueling complications. But Toyota is confident it can overcome such difficulties.

 

076 Toyota



 

“Today, we are at a turning point for the car industry,” said Akio Toyoda, chief executive of Toyota, in a video message. After its debut in Japan, the car Mirai will be available next year in the United States and Europe. About 400 models will built by hand in Japan, with up to 100 reaching Europe.

As the world's largest car manufacturer, producing more than 10 million vehicles annually, 400 is a miniscule number. But Toyota hopes the Mirai will make a marketing splash as big as that made in 1997 by its Prius model, the first car with a hybrid gas-and-electric power system. Four million of the Toyota vehicles have been sold worldwide.

“They want the technical leadership in technology,” said Christopher Richter, an automobile analyst at CLSA Asia-Pacific Markets in Tokyo. His only reservation is whether Toyota can turn its technological lead into a commercial success.

The first problem is the lack of fuel stations: there were just 13 hydrogen gas dispensers in Germany last year, and only about 30 in Europe, according to Frank Meijer, a product manager at Hyundai.

Two years ago, the Korean automaker brought its ix35 model, a small SUV with fuel-cell drive, onto the market. Mr. Meijer thinks politicians and the market will support the new technology, allowing the network of refueling stations to grow. “€18 billion should be invested in the coming six years in hydrogen technology in Europe,” he said. This could see the network grow to 400 stations.

Toyota wants the technical leadership in technology. Christopher Richter,, analyst at CLSA Asia-Pacific Markets

The situation is similar in Japan, which has only 41 hydrogen gas stations. Construction costs are a factor. Mr. Schlicht of Toyota Motor Europe hopes the cost of building one will soon fall to that of a conventional gas station, about €300,000 ($376,000). This would enable adequate infrastructure to be in place in Europe by 2020.

But another problem facing Toyota is the Mirai’s price. The cost in Japan will be about €50,000 per car, but nearly €80,000 in Europe, according to sources at the company’s German headquarters in Cologne. That’s no bargain for a midsize vehicle about the size of a BMW 3 series model.

But this hasn’t deterred other manufacturers. Honda hopes to have a fuel-cell rival to the Mirai on the market by 2016, for example.

German manufacturers, however, are holding back at the moment. BMW is cooperating with Toyota on a fuel-cell drive, while Daimler and Volkswagen are also developing their own technologies. But, given the foreseeable challenges, neither wants to present such a vehicle to the market at the moment.

Elon Musk, chief executive of Tesla, which makes electric cars, is skeptical about the technology. “Fuel-cell technology is extremely energy intensive and not at all efficient,” he said.

The competition will try in the coming year to show him otherwise.

 

Martin Kölling is Handelsblatt's East Asia correspondent. Christian Schnell is a reporter covering the auto industry. To contact the authors: [email protected], [email protected]