Toyota Europe Plans Profit Growth on Hybrid-Car Sales

Dec 20, 2013 7:18 am ET

(Updates with sales in Russia in 11th paragraph.)

Dec. 20 (Bloomberg) -- Toyota Motor Corp., the world’s biggest carmaker, is targeting sales and profitability gains in Europe and Russia next year on the strength of its increasingly popular hybrid models.

The Japanese manufacturer’s plants in France, the U.K. and Turkey are at full capacity, putting the company on track for its European production to account for 75 percent of the cars it sells in the region by 2015, Didier Leroy, head of the Toyota Motor Europe division, said in an interview. The focus is on ensuring that strategy serves to boost earnings, he said.

“The real challenge for us is to be permanently asking ourselves whether we’re on track with profitable growth,” Leroy said at his office in Brussels. “There’s absolutely no doubt about the fact that we’ll be making more sales and profit next year than this.”

Toyota, which ranks 10th in car sales in Europe, boosted deliveries in the region by 6.9 percent in November, contributing to a car-market gain of 0.9 percent for the month, according to industry figures. Growth has been propelled by the gasoline-electric-powered Lexus IS sedan, as well as hybrid versions of the Yaris subcompact and Auris hatchback.

Market Contraction

The combined car market of the European Union, Switzerland, Norway and Iceland is approaching its sixth annual contraction, declining 2.8 percent in the first 11 months of this year. Unlike U.S. competitors General Motors Co. and Ford Motor Co., Toyota is profitable in Europe, more than doubling operating profit to 20.1 billion yen ($193 million) in the quarter ended September from a year earlier.

“In 2008, Toyota Europe was losing money selling 1 million vehicles, while it made money last year with a volume of about 838,000 units,” Leroy said.

Hybrid models’ proportion of Toyota Europe’s sales have jumped to 20 percent this year from 13 percent in 2012, Leroy said. “We’ve never sold as many hybrids as we’re selling today,” he said. “If we fail in terms of profitability on these cars, we can’t move forward.”

The manufacturer’s 11-month European sales decline was less than half the pace of the industrywide drop, the regional carmakers lobby said on Dec. 17.

Industrywide Forecast

Including deliveries in Russia, other former Soviet states, Turkey and Israel, Toyota Europe’s market share gained 0.2 percentage point to 4.7 percent, putting a 4.8 percent goal for this year in reach, Leroy said.

That wider market will probably expand next year by a range of 0.5 percent to 1.7 percent to as many as 17.9 million vehicles industrywide, with “a very, very, subtle growth in western, southern and central Europe and no growth in Russia,” he said.

Toyota and its Lexus premium brand held a 6.1 percent market share in Russia, the manufacturer’s No. 1 market in Europe, in the first 11 months of 2013, according to the Moscow- based Association of European Businesses. Its sales were about unchanged from a year earlier at 154,364 vehicles, while the market contracted 6 percent to 2.51 million deliveries.

Returning to annual European deliveries of 1 million cars and sport-utility vehicles, originally targeted for two years from now, will be difficult to achieve before 2016, given the current economic situation, Leroy said. Regional production currently supplies 62 percent to 65 percent of European sales, he said.

Toyota, already the biggest Asian carmaker in Europe, has no intention of getting into a race with Seoul-based Hyundai Motor Co. or Yokohama, Japan-based Nissan Motor Co. to maintain that ranking, Leroy said.

“It’s not a subject for us,” the executive said. “At Toyota’s executive committee, it’s never a subject. The key is to have profitable growth.”

--Editors: Tom Lavell, Chris Reiter