Under the Microscope: We talk to Toyota and Lexus corporate boss Neil Broad
06 July 2017
Author: Debbie Wood
Toyota is a brand that has never been afraid to lead. Arguably the pioneers of hybrid technology when the Prius was launched almost 20 years ago, innovation and the environmental agenda sit at the very heart of the company's DNA.
In fact, Toyota's global ambition is to be zero emissions on everything including the manufacturing and disposal of its vehicles, and although Neil Broad, general manager of Toyota & Lexus fleet, admits it's a lofty ambition and it'll take time and investment to get to that point, he believes it's a vital marker for the firm to have because it's the right thing to do.
The environment isn't the only area that the firm is keen to focus on either. In January, the fleet department had a big shake-up, which saw a number of initiatives introduced that have already resulted in significant growth for both brands. Changes to the business centre programme and a new focus on customer service, alongside removing fleet targets for dealers, have been key. It's no longer about chasing numbers but customer care. The team of area sales managers has also expanded, from 11 to 13.
According to Broad, the role of the dealer is changing and localisation is at the core of Toyota's corporate car planning for 2017 as the firm aims to give fleet a more quality experience akin to retail and to stop business users feeling of secondary importance. "It's all about a proper utilisation of our dealer network," says Broad. "We have a duty of care to our dealers and invested partners to provide a vision of what their role is in the future.
"If the delivery of the vehicle is localised then it makes a huge amount of sense from all perspectives really. We also want the handover process to be more akin to retail and for the local fleet driver to be able to walk into a dealership and test-drive a product and be given a proper customer service."
An area where this is believed will have a significant impact is in the SME market, where businesses, according to Broad, would rather buy locally. "You still want a bit of customer service at the back end, and if the dealer's role is to provide expertise and advice and develop that relationship as you would expect from a retail relationship, then I don't see a massive difference between an SME and a retail customer. They want customer care in the same way."
These changes were introduced in January and the results from quarter one are the best the firm has ever had. Profitability through the network is on the increase, quality is up and costs are down.
Overall, Toyota and Lexus are 14% up in cars and vans for fleet sales in a market that is 1.7% up, so it seems the plans are working. The new C-HR SUV has been a key part of this growth, but there has also been an increase across the firm's product portfolio including the Auris, Yaris and Prius models, and key for the fleet team is the growth in Toyota's true fleet performance, an area that has been a focus for Broad and his team.
"We've made a massive progression in our true fleet performance. The quality of our sales is ever increasing. We sell a real balanced mix across our portfolio and we'd rather grow organically than see peaks and troughs."
The focus moving forwards is very much on customer service and Broad is looking to appoint a number of concierges within his team to be able to take the level of service Toyota and especially Lexus offer their customers to the next level. "If you think of a hotel concierge that looks after all of your needs, like where do I eat? How do I do this? That's what we want - our concierges responding to the needs of the fleet industry, whether that be brokers, rental partners, leasing company partners or dealers. We want to look after the complexities of the fleet market for our customers."
According to Broad, Lexus has the best product range it has ever had but struggles in a hugely competitive volume-hungry segment. What sets Lexus apart is the fact that the cars in its line-up are 100% hybrid with the exception of the LC, which has the F high-performance model.
A great deal of work to separate Lexus from Toyota from a marketing perspective has been done in-house, and the firm is keen to position the brand as a more 'boutique manufacturer'. Initiatives like the concierge-style service mentioned above will be particularly poignant for Lexus.
"Lexus is all about customer experience and that needs to be the differentiation when people come to the Lexus brand. They need to be blown away by the customer care aspect of it and that is what should make us different," Broad says. Say the word 'Toyota' and more than likely the first car that comes to mind is the Prius. It was a pioneering vehicle for the firm when it made its European debut in 2000. Since then, 10 million hybrids have been sold globally and in the UK Toyota and Lexus collectively operates at a 42% hybrid mix, heading towards 50%.
Introducing the C-HR was a step change as it wasn't launched with a diesel version, but also it should be noted that the Auris and Yaris hybrids outsell their combustion-engined counterparts. At the end of May, Toyota's diesel penetration was a tiny 8.8% of total sales versus a market that is at 44%.
"We're not anti-diesel, we're not non-diesel, we're pro-hybrid, and that's the way to look at it," Broad says. "We are ahead of the curve. We're not jumping on a bandwagon, we created it, and we've been in the market for a very long time."
But hybrid isn't the only area where Toyota has a presence, as once again Toyota has pioneered with the Mirai, one of the first hydrogen-powered cars to come to the UK.
"We're ahead of the curve and the money we're putting into hydrogen technology is significant. Unless somebody puts their head above the parapet and starts to drive these things forward then nobody will have the debate on the agenda," Broad says.
"Sometimes you have to say 'it's the right thing to do' and we will take the commercial hit for the short term to drive the agenda forwards. We're not asking for handouts by anybody and without the car there can be no infrastructure."
Fuel-cell vehicles are still relatively unknown here in the UK and with just nine public refuelling stations installed around the UK, it is very much an emerging technology.
However, the UK Government has launched a £23m fund to build hydrogen fuel stations that starts this summer, plus a hydrogen consortium has been created that consists of 13 leading energy, transport and industry companies, including big names like Shell, BMW, Toyota, Mercedes-Benz, Alstom, Total and Engie, which are investing £9bn globally into hydrogen technology.
There are currently big question marks around whether or not the grid would be able to cope with recharging if sales of electric vehicles were to increase, although Broad believes the infrastructure issues around EVs will very soon cause a problem here in the UK.
"Collectively we're sleepwalking into another issue on electric vehicles because they are power hungry to charge on a grid, which is insufficient at storing power. If you've got six cars charging on a street at the same time, without the correct infrastructure that street will have a blackout," he explains.
"We can sleepwalk towards an electric future but we have no way of supporting it. Electric vehicles still require a great deal of investment at a governmental level. Hydrogen is storable, replicable and self-generating. You can't do that with electric."
The Mirai is just one of the ways that Toyota is future-proofing its business in 2017, and among all the innovations, customer service will ultimately remain key to all plans to keep driving growth this year.
"We'd like to see 2017 continue as we've started. We didn't say at the beginning of the year that we needed to be 20% up - that's where we differ - while we do a lot of business planning. The most important thing for me is that we maintain the customer at the core of everything that we do because the day we start forgetting is the day we slide backwards."