Toyota's Plan to Conquer Europe

As Volkswagen revs to challenge Toyota in the US, Toyota continues its cruise-control growth in the European market. The Japanese giant sold 800,000 Toyota and Lexus cars in the first 10 months of 2007, up 12%. For the full year Toyota forecasts sales of 1.2 million cars, and growth of five percent in 2008.

Break down the numbers though, and Toyota’s position in western Europe is still modest — it ranks 8th while VW reigns supreme. But watch out in eastern Europe and Russia. That’s where Toyota is picking up momentum. It’s the No. 1 foreign brand in the fast-growing region and ranks second in market share only to Russia’s Lada.

Toyota may have an edge in Russia, since Russian car buyers show the same taste for pickups, SUVs and larger cars that Americans have. And Toyota has been far better than VW at tailoring its models to the US market. In Russia, Toyota plans to sell the larger Camry compact and not its sister compact Avensis, which is designed to appeal to Europeans. VW, by contrast, will sell the same Passat sedan in Russia which it sells in Europe. Both companies are ramping up plants in Russia.

The story for Toyota’s luxury brand Lexus is also a tale of two Europes. In western Europe Lexus’ super-heated growth of 2006 went into reverse, slipping 2.6%. In the first ten months of 2007, Toyota sold 31,481 of its luxury brand models, down from 32,321 in the same period a year ago. Just for comparison, BMW and Mercedes sell 550,000 to 600,000 cars in the same geographical turf.

But watch out, Lexus dealers invested some $25 million in Germany this year, and aim to spend $56 million next year. Stronger growth in eastern Europe has boosted total Lexus sales (east and west Europe) this year. The combined goal for Lexus in 2010 is 70,000 cars.

Even Toyota’s hybrid Prius is starting to gain a bit of traction in the Old World, selling 27,300 cars this year to date in Europe, versus 22,000 in 2006. Of course, that’s nothing compared to the 152,000 sold in the US - and Europeans are still more enthralled with fuel-efficient clean diesel cars. If Toyota wins over European car buyers, it won’t be with a Prius.

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