The Corolla is now the No. 2-seller in the compact segment after the Volkswagen Golf and closing that gap fast. What is driving this success?
Although this category is shrinking overall, the Corolla is performing incredibly well with a share close to 15 percent. The Corolla's private versus fleet sales are stable. And those fleet sales are not being heavily discounted. We made the right choice to build more Touring Sports [wagons] than the hatchback variant. Today the wagon accounts for about 65 percent of Corolla sales. Having extra wagons to sell is a valuable weapon against the competition. In addition, we are probably a bit less supply constrained than our rivals. Another advantage is that hybrids are in strong demand.
Are you seeing evidence that customers are spending less per new car?
We haven't seen much evidence of this. However, I think there will be a slight slowing of the pace of the market because of inflation. The success of the Aygo X shows there is strong demand for entry-level models. Is 15,000 euros the right entry price? It's difficult to say. A lot depends on the monthly payment. Residual values are pretty solid, which help cover the monthly payment against rising prices.
Won't rising interest rates offset the residual value help on monthly finance costs?
Yes. This will naturally go up. That is why we are transitioning more into asset management, whereby we look at the total cost of ownership for the consumer. Of course, the financing component is there, but the overall bundle will ultimately drive customer choice. We can be extremely competitive here because we have some control over extras such as insurance. This allows us to mitigate that increase.
If you go to asset management won't having cars on your books cost you more? How will you offset that?
It might also be an opportunity. If I look at [Toyota's mobility and finance brand] Kinto, it's still a small volume player, but it's growing fast and will generate more profitability. So, having the car on the books can be a liability, but it can also be an asset and an opportunity.
What opportunities do you see?
It is a matter of governance. Who's making the money on the used car? If retailers can retain as many cars as possible -- not just for the first owner but a second and a third -- they are going to make a lot more than they do today.
Will you control these second-life vehicles through a different dealer model? Would that be the agency model?
We don't want to substantially alter the model we have today. We want to make it more efficient. This is not about cutting intermediaries out of the pipeline. We really want to make sure the same stakeholders extract more value by maximizing the opportunity that comes from properly managing the vehicle from day one to nine years later or whenever it reaches the end of its life cycle.
What is your sales outlook for next year for Toyota and the overall market?
First of all, we along with most other automakers have a robust order book. This will have an effect. The market lost somewhere between 6 and 8 million cars over the last two years so at a certain point we expect to see some rebound. Also, less profitable channels such as rental cars, which were abandoned for the last couple of years, will have to come back to some level or normality. Supply constraints will continue next year, but they won't be as severe, so overall volume could rise.
For Toyota as well?
Yes. Largely because we expect there to be a positive impact from new models such as the Yaris Cross, Aygo X, and the launch of the Corolla Cross next year. We also will add BZ4X [electric midsize SUV].
When will we start to see a strong supply of the BZ4X in Europe?
At the moment our colleagues in Japan are deeply investigating [a wheel problem that led to a recall], so we don't have a firm date for the car's arrival here.
Do you need the BZ4X for CO2 compliance?
We will need BZ and electric vehicles when the target tightens. At the moment, we are within targets [without it]. I believe that we reach out targets with our hybrids.
How many more years can you be compliant only with hybrids?
Hybrid will be the backbone of our compliance for many years to come, but I cannot tell you exactly how many.