The market share doesn't fill a refrigerator

The market share doesn't fill a refrigerator

Despite Corona, we were able to have a detailed live interview while adhering to all safety aspectsHeiko Twellmann, CEO of Toyota Austria, and were surprised at the new approaches the traditional Japanese brand wanted to assert itself with.

Mr. Twellmann, after almost 50 years, Toyota has been taking care of the import of its vehicles since 2019. The Frey family previously did this as a private importer. Business relations with the Frey family will be completely discontinued at the end of the year. How did this come about? 

The Frey family has positioned the Toyota brand very successfully and sustainably in the Austrian market and has done a very good job. But after almost 50 years, we decided together to organize the vehicle import ourselves. Frey became our largest trading partner. At the end of March, Frey closed the Amstetten and Vienna-Auhof locations at its own request. As a result of a cost reduction and restructuring program developed by Frey Automobile, three additional locations (Wien Arsenal, Salzburg and Wiener Neustadt) were closed at the end of September. The continuation of the last two locations Vienna-Inzersdorf and Vienna-Donaustadt in a resized form did not meet with approval because they did not meet our requirements for the greater Vienna area. Of course, this presents us with enormous challenges because the Frey Group was our largest trading partner and we are therefore faced with the question of how we can compensate for sales. We have now signed three new partner contracts, including with the AVAG Group with locations in Salzburg and Vienna, the Ebner car dealership in the south of Vienna and in the Amstetten area with the Öllinger car dealership. Thanks to our new partners, we currently expect to be able to compensate for the losses caused by the loss of the Frey Group in 2021. 

Then we let the past rest and look to the future. What plans do you and Toyota have for the Austrian market in the medium and long term? 

Europe is an important market for Toyota, we produce cars for Europe in Europe. Our market share in Austria has been between two and 2.5 percent over the last few years. Our average Western European market share is 5.5 percent – ​​which puts us in sixth place among all manufacturers. Now the Austrian market is somewhat similar to the German one, i.e. the VW Group and German cars in general are disproportionately popular. We create rolling three-year plans that provide for a significant increase in sales. Specifically: We should achieve over 10,000 units per year in the next three years, which should give us a market share of around three to 3.5 percent - depending on the size of the overall market.

And how do you do that? 

We are solidly positioned in the private customer business. However, we see growth potential in the commercial and fleet sectors. To do this, we will have to approach the business a little differently in the next few years, as business customer business is not always very popular for our dealers, with low margins on vehicle sales because the market is highly competitive. We therefore want to expand in both the private and fleet markets in order to be able to offer an attractive model for every dealer. Of course, almost every manufacturer says that at the beginning of the year - so far so little new. What will help us – across Europe – are our products. Hybrid is a huge topic because it has low consumption and lower CO₂-Emissions means. That is what is required. The fact that especially in Austria with the NoVA and the new motor-related insurance tax CO. plays in our hands₂-Sinners will be punished even more harshly. This will make our hybrid models cheaper – that will help us. For our Yaris (B segment) that’s immediately a tax advantage of 240 euros per year.

Is the early hybrid focus now paying off?

Yes. How scolded we were when we canceled the diesel in the RAV4, for example. What an outcry. But in the long term it was good and right because Toyota addressed the issue of CO early on₂ were brought into focus. Changes – especially changes like this – hurt. But from today's perspective it has been shown that it was right. 

Because Toyota is thus meeting the EU fleet target of 95 grams of CO₂ will create. 

Yes, we are sure we will achieve the goal as Toyota and Lexus. This is a result of our long-standing corporate strategy to reduce emissions.

Let's come back to the Austrian market. How is this year's financial year developing for Toyota?

We currently have a market share of 2.3 percent; two tenths above the previous year. So we were able to grow in a shrinking market. Whereby: In the end, the market share doesn't fill a fridge, the return fills it. In retail, what matters is the number of sales at attractive conditions. We will sell around 6,500 vehicles this year, compared to around 7,000 in 2019. This is manageable when you consider that the overall market has collapsed by around 20 to 25 percent and our largest trading partner (the Frey Group) has reorganized.

Toyota now has its own credit bank. In an interview you said that in the future the focus should be on monthly costs rather than promotional prices. Does this mean Toyota is working on a subscription model? And what does that mean for trade? 

To put it bluntly: For us, the topic of financing and leasing is of incredibly important strategic importance. Because we have two big goals: Vehicle Lifetime Value – to keep the car in the organization for as long as possible during its lifetime. Because we now know that the vehicle margins for purely electric cars are extremely low. At the same time, we know that the proportion of electric cars will increase. Therefore, the goal must be not to lose the car in order to secure the income. It's best to sell the car on a lease for three years. Then after three years you get a used car back that you know, which you can then sell on a lease for the next few years and then get back again. This means you can sell the car three times, provide the services for it and keep the added value within your own ranks. That's why we push for financing and leasing and ideally with our own bank because we focus precisely on this business area. That's why we're talking very intensively to our dealers about it, because we can't lose the cars anymore. The second goal: keep the customer loyal to us for as long as possible. Even if he gets rid of his current car, he should remain a Toyota customer. 

Does this mean: In order to compensate for the low sales margins and the significantly lower maintenance costs, you have to be able to sell the car several times? 

Correct. Look at the accident claims business: massive decline. Why? Because we are having more and more safety systems in cars in order to avoid any more accidents in the long term. Expanding all of these systems again will not work - and is not the right way. We have to protect the future reduced business. The idea that a car dealership lives from new car profits has been gone for many years. The aftersales business is the pillar of income. Therefore, monthly rates can also be attractive for end customers, for example combined with a service package. But we don't have to kid ourselves: There will also be customers who don't want to lease but want to buy and own. 

But the customer will then pay more than the person financing, right?

The customer who finances will receive a wider range of services for the same price, which may not be available to a cash payer. And in addition, the financing customer has their savings for emergencies, especially in times of crisis.

Will Toyota offer car subscription models?

I don't rule out at all that this will happen here one day. We are already recognizing the trend among end customers to demand fixed monthly rates for mobility. Our goal must be to secure the business for our dealers so that the customer stays for as long as possible. This can also be a subscription model. At this point I would like to make it very clear: We continue to expect brick-and-mortar retail. There are no Toyota-owned dealerships across Europe – and that will remain the case. We believe in doing local business with independent retailers. To do this, we prefer to look for the top dogs on the local market – across Europe. But sooner or later we will definitely launch a car subscription for the Austrian market. 

Keyword end customer trends. Toyota relied on hybrid models very early on. The second version of the Mirai hydrogen car is now coming onto the market. What will be the drive concept of the future?

I believe that end customers will always feel the need for individual mobility. Which drive it will be in the future depends primarily on usage. If I need to move light loads, such as a small car, over short distances (within the city, commuting), battery-electric models (BEV) come into their own. For longer journeys and slightly higher loads, for example fully loaded station wagons for a holiday trip, hybrid models or classic drives can score points. Hydrogen will establish itself in international heavy-duty comparisons. (see graphic). Our strategy is to have a suitable model for every area of ​​application. But only when the markets are strong enough and the products become established even without significant subsidies. 

Speaking of subsidies: Do you think that the sometimes very high state subsidies are driving the residual values ​​down?

Albert Einstein once said: Predictions are difficult, especially when they concern the future. (laughs) No, seriously: The problem with residual values ​​is that you do a calculation today, but you often only see the results years later. A lot can happen in the meantime. We have been able to gain experience with our hybrid models and the residual values ​​are increasing because demand is high. But that's exactly why we want to try to keep the vehicles in the organization for as long as possible, because over the years the residual value risk can be determined more easily and possibly minimized. When it comes to the connection between subsidies and residual value, I think that used car customers will definitely take an original new car subsidy into account when making their purchase.

Finally: Was the decision to abandon the Corolla model name perhaps the biggest mistake in Toyota history? 

(hearty laugh) Let's put it this way: I joined Toyota in 2007, when Corolla was abandoned and the new name Auris was established. We invested a lot of money and had great expectations that were not met. In this respect, I am very happy that we have the Corolla again. (smiles)