More than half of Toyota's European sales are hybrids and their success is contributing to the automaker's sustained profitability in the region and putting it in a position to achieve the EU's tougher CO2 emissions reduction target that will come into force next year. Toyota will find it difficult to increase profits because the EU plans even tougher CO2 targets, which will push the company to add expensive full-electric vehicles and more plug-in hybrids in Europe. South African Johan van Zyl, who has led Toyota Europe since 2015, discussed this and more with Automotive News Europe Correspondent Nick Gibbs.
Toyota Europe finished the first half of its financial year with a 4.2 percent profit margin. Where would you like to be?
We always strive to be at around 8 percent, but Europe is a really tough market. I am quite satisfied with where we are at in our plan, which is about growing margin on a sustained basis. It's no use having one year at 8 percent and nothing the next year. I would like a steady increase in profitability. We will achieve sales and margin targets set in the 2015 five-year-plan one year early. That plan was ACE1000. The next phase is ACE2000, which goes to 2025.
Does the new plan have an 8 percent margin target?
I can't say what it's going to be, but it's not as high as that. If we achieve that it would be a miracle.
Is this because of the cost of electrification?
That is one thing. As our president, Akio Toyoda, said: The industry is going through huge change.
What is your capacity utilization in Europe?
It's well above 90 percent, including Russia. We are running three shifts in Turkey and France and two shifts in Russia, the UK and the Czech Republic.
In 2021 Toyota takes ownership of a joint-venture Czech Republic plant currently shared with PSA Group. The factory can build 300,000 cars annually. What will you do with it?
I can't tell you now, but we will utilize the full capacity in future.
You build the Aygo minicar there. Can you stay in that segment as CO2 targets get tougher?
We will definitely stay in that segment of the market. It's been a very good product for us. It brings young people to our brand. At some stage we will replace it [the Aygo].
Will you need to electrify it?
We have to think about the future and ask: How will we ensure that we have an electrified version of an A-segment (minicar) or sub A-segment car that we will be able to utilize for cities?