Toyota Europe has reached its target to have hybrids make up 50 percent of its sales. Now a new challenge has emerged: offering full-electric vehicles. Toyota Europe's sales and marketing boss, Matthew Harrison, discussed this and more with Automotive News Europe Correspondent Nick Gibbs.
Toyota's hybrid technology took four generations to get to a sustainable profit. Will full-electric vehicles be profitable faster than that?
The whole industry is counting on being able to do things faster. If it's going to take 20 years for electric to be profitable, there would be a lot more concern among everybody. There are many different dimensions to this. Scale is one, but also how quickly you can put renewable-energy capacities in place and how you can make this affordable and convenient for consumers. That's a bit of an unknown. I don't think our hybrid model is a perfect example because we didn't have an infrastructure to worry about. With BEVs (battery electric vehicles), you can have the best battery density and affordability. But if you can't offer the consumer the infrastructure they need to be able to refuel quickly without any inconvenience, then you will not deliver. It's not solely in manufacturers' hands.
How did you cut hybrid costs?
Global economies of scale; some components are now assembled locally in Europe. It has been a learning process. Also, we have put a huge amount of development into reducing rare earths [metals such as neodymium], which plays into cost reduction.
Hybrid is Toyota's brand positioner, but you are also launching the Supra non-hybrid sports car. How does that fit together?
Products such as the Supra are not about volume or profit or CO2 contribution. It's about the excitement and the emotion it generates. Being strong in hybrids doesn't mean we have given up dreaming about having extremely exciting performance products to drive.
What message does the Supra give to a hybrid customer?
We call it GR Supra, for Gazoo Racing. We are trying to build more of an obvious link to the GR brand, which is why we are establishing for each of our core models a GR Sport derivative. Some of the hybrid models will have a GR grade. When we started with the first-generation Prius, the design was fairly rational to say the least, and the driving experience was a bit uninspiring. So, we invested hugely in core hybrid models to make them the best-looking derivatives in the range.
The Prius is strongly linked to Uber in some cities such as London. Do you worry about that?
I don't see it as a bad thing. Before the Prius, Mercedes for a long time had a significant success in the taxi business, and a lot of these drivers are fantastic ambassadors for the brand. It makes a hell of a statement about the reliability of the technology. To drive to 300,000 km without anything failing with the battery is a hugely powerful marketing message.
Toyota is one of the few automakers that will keep offering a minicar, the Aygo, in Europe. What happens when emissions requirements increase the price of models that size?
Our presence in this segment is very strong. In some of the key markets, we have a double-digit share in the segment. The Aygo has some of the youngest drivers in our lineup, so we are very positive about our presence in that sector. Going forward, a big challenge is how to make electrification accessible.
Will the Aygo ever be unviable?
The only time we would say, 'This is not for us,' is if we felt that was the voice of the customer. If you have the right vehicle and appeal and you keep it accessible, then you will generate demand. We are still doing well with the Aygo, but we notice that one or two [competitors] are facing a struggle in that sector.
Is the SUV boom ending in Europe?
The overall market was weaker than we expected, running about 3 percent down to the end of April when we expected it to be flat. But the weakness is not in the SUV segment. We launched the RAV4 in the first quarter, and demand is significantly ahead of what we expected. There are some markets that we are sold out of the hybrid powertrain [for the RAV4] for the rest of 2019. In Western Europe, nine out of 10 RAV4 sales were hybrid. CH-R demand is also still strong, so the RAV4 is not pulling sales from CH-R.
What is the RAV4 supply problem?
We have a short-term battery supply issue. Our capacities were aligned to a three-year plan, but the volume has been higher. It's a good problem to have.