December 2016 Sales Conference Notes

December 2016 Sales Conference Call
Wednesday, January 4, 2017

December 2016 Sales Conference Call (audio clip)

Toyota Motor Sales Corporate Communications Manager Aaron Fowles:

Happy New Year, everyone! Thank you for joining us to review Toyota and Lexus year-end sales results for 2016.
 
Joining us and speaking today will be:

  • Bill Fay, Group Vice President and General Manager of the Toyota Division, 
  • And Jeff Bracken, Group Vice President and General Manager of the Lexus Division.

A recording of the call will be available at pressroom.Toyota.com about one hour after this call and our communications team is available to field any additional questions you may have @ (310) 468-5297.
 
Now I’d like to turn it over to Bill Fay for a look at the 2016 sales results. 

Bill Fay:
Thank you. Good morning and Happy New Year, everyone.
 
2016 looks like it will turn out to be a record year, surpassing expectations

  • With the biggest driver the consumer shift to SUVs and trucks.
  • Three years ago, light truck sales represented 50 percent of the market,
  • And this year, the light truck share will be more than 60 percent.
  • Over the last couple months, that number has grown to nearly 63 percent,
  • Marking one of the biggest shifts in consumer preference we’ve ever seen in the industry.

This shift has led to our record results, along with,

  • An overall stronger economy,
  • An increase in new housing starts,
  • Continued low fuel costs and interests rates,
  • And the highest levels of consumer confidence since 2007.
  • Resulting in an eighth year of growth for the industry in 2016!

To briefly recap December-

  • With five weekends,
  • The month had 27 selling days, one less than 2015,
  • And we expect industry sales of more than 1.675 million vehicles
  • A level higher than last year,
  • For an estimated Seasonally Adjusted Annual Rate of 18.3 million,
  • The first time December has ever gone above 18 million. 

With these strong results for December,  

  • 2016 will exceed last year’s high of 17.47 million,
  • To surpass 17.5 million,
  • For back-to-back record years. 

Toyota Motor North America ended the final month of the year with

  • Combined Toyota and Lexus sales
    • Of 243,229
    • Up 2 percent in volume, compared to last December.

Toyota division sales, for the first time since May 2015,

  • Surpassed 200,000 vehicles, of 202,047,
  • Up 2.6 percent year-over-year.
  • We had our best ever December sales,
  • And our best volume month of the year,
  • Led by our all-time best-ever month in light trucks,
  • Over 15,000 units above our December 2015 results,
  • Ending at more than 116,000 SUVs and trucks.
  • Highlander, RAV4 also set new records with all-time best-ever month. 

Jeff will review the Lexus division results for the month and year in a few minutes.
 
Combined Toyota, Lexus, and Scion sales in 2016

  • Were 2,449,630,
  • A decrease of approximately 2.0 percent from last year.
  • While passenger cars dipped,
  • We had back-to-back record-breaking years in light trucks.

Now, some Toyota division highlights for the year:

  • Toyota remained the No. 1 retail brand,
  • For the fifth consecutive year,
  • And Camry reached a new milestone –
  • Its 15th year as the best-selling car in America.
  • Cars.com also brought further attention to Camry,
  • As it was named the “Most American-Made Car.”
  • Some of the real stars this year were the RAV4 and Highlander,
  • Which shattered their previous annual records
  • As they recorded incredible double-digit growth. 

But that’s not all:

  • Prius maintained its leadership position among alternative powertrain cars for the year.
  • And though consumers are shifting their taste to light trucks,
  • They appear to agree that there remains a place for hybrids with an increase in demand for vehicles like the all-new RAV4 Hybrid,
  • Which accounted for nearly 13 percent of our overall RAV4 sales,
  • And Highlander’s hybrid powertrain is also doing well,
  • As its sales increased almost 50 percent for the year.
  • Toyota hybrid sales lead the market,
  • In fact, in 2016, Toyota hit its 9 millionth sale globally for hybrid vehicles,
  • And with the launch of the Prius PRIME,
  • We are very optimistic that Toyota will continue to lead in alternative powertrains sales.

We are also happy to report that Toyota Certified Used Vehicle

  • Had another record-breaking year,
  • Celebrating the 5 millionth certified unit sold in July,
  • And ending the year with sales of more than 417,000 vehicles,
  • Up 12 percent on a volume basis from last year,
  • Toyota is the first manufacturer to achieve over 400,000 certified used vehicles sales in a year. 

We had a few big changes last year,

  • Such as the sunset of the Scion nameplate,
  • The sell-down and transition was smooth and completed on schedule.
  • We will remember how the brand was able to achieve its goals,
  • Which included developing new products and act as a laboratory to create a stronger Toyota.
  • Scion’s rebranded products, Corolla iM, Yaris iA, and Toyota 86 will continue to be a part of our lineup. 

And in 2016, we made progress in bringing our light truck production in better alignment with consumer demand,

  • As we added production more capacity for Highlander and Tacomas,
  • Thanks to increased output from our plants.
  • We have even more to look forward to later this year,
  • When we’ll see even more Tacoma production,
  • With an additional capacity of 60,000 trucks annually.

With a strong industry forecast for 2017,

  • Expecting a third consecutive industry year above the 17 million mark,
  • We are very optimistic for this year.
  • Toyota will have a better mix to meet changing consumer demand,
  • As the small/midsize SUV and pickup truck segments continue to grow.
  • We are thrilled to launch the all-new Camry in Detroit next week,
  • Where everyone will see what we’ve done with America’s favorite car,
  • Which is sure to turn heads and bring some excitement to the mid-size segment.
  • And, with the new C-HR, our new compact SUV, getting ready to launch into the hottest part of the market,
  • We are ready to get 2017 started. 

Now I’d like to turn it over to Jeff Bracken for a look at Lexus results.  

Jeff Bracken:
Thank you, Bill and congratulations on another year of industry retail leadership for Toyota.
 
As for us at Lexus, our close last night was a blast

  • Our dealers finished out the year with another successful “December to Remember” event.
  • In fact, the last weekend was our all-time-best-ever weekend,
  • With over 11,000 new Lexus vehicles sold – 
  • Ultimately leading to our 2nd best year in total vehicle sales volume.

Like much of the industry, the story for Lexus last year was about luxury utility vehicles.

  • Our LUVs were up double-digits, 12.5 percent,
  • Shifting from about 50 percent of our overall sales mix in 2015,
  • To make up nearly 60 percent of Lexus sales in 2016.
  • This was one of the largest single year shifts we have seen –
  • In fact, the contribution of Lexus utility vehicle sales to our overall volume shifted
  • By more than 15 percentage points just in the last two years. 

Despite starting the year with a sedan versus utility vehicle inventory mix that was less than ideal,

  • We were able to match inventory with market demand by the end of the summer.
  • All four of our luxury utility vehicles were highly competitive,
  • Three of which were virtually brand new – the NX, RX, and LX.
  • All with strong gains in 2016, and GX remained flat,
  • Due to limited availability.

Specifically, NX sales reported through November,

  • Had already exceeded its full 2015 sales number of 44,000,
  • And with December’s best-ever monthly results included,
  • NX set a new annual record with nearly 55,000 sold in the 2016 calendar year. 

We’ve also seen good results with the all-new ‘16 model year RX,

  • Sales volume improved by nearly 9 percent, totaling 109,435,
  • Exceeding the previous all-time-best-ever year set more than a decade ago, in 2005 –
  • Not too bad for the no. 1 volume utility vehicle in the luxury industry.
  • Additionally, our most prestigious LUV, the LX was up more than 47 percent for the year. 

For the month of December, new Lexus

  • Sales totaled 41,182, down by just 198 vehicles from our all-time-best-ever, any month in December 2015.
  • 26,567 was a best-ever month in luxury utility vehicles for us, and
  • Our Lexus Dealers also established a best-ever, any month, for  L/Certified pre-owned –
  • Selling 10,632 vehicles in the month of December –
  • Bringing the annual L/Certified total to 101,781 

And for the 2016 reporting year, Lexus 

  • New vehicle sales totaled 331,228 – second only to 2015.
  • As a result, our Lexus Dealers begin the new year with a 44 day supply of luxury sedans,
  • A 24 day supply of luxury utility vehicles,
  • Equaling a 31 day supply in total availability. 

When you add together our new & L/Certified sales results:

  • The total Lexus Dealer throughput in 2016 was the largest in our history,
  • Totaling over 430,000.
  • So on average, each of our dealers sold over 1,800 vehicles in 2016.
  • To take this one step further,
  • The total dealership volume of all new & used vehicles,
  • Including non-Lexus pre-owned sold,
  • Takes that average to 2,300 sales per Lexus dealership. 

Perhaps like each of you, we closely track our retail volume through Polk registration data,

  • As it is a true report of actual customer new vehicle purchases and leases, sold one at a time.
  • Following last year’s leadership position,
  • And through the latest October 2016 year-to-date registration data,
  • Lexus Dealers lead all luxury competitors in retail registrations,
  • Ahead of the nearest competitor by nearly 6,000 –
  • And ahead of the third place contender by over 10,000.
  • And, as you would imagine, we can’t wait to receive the 2016 year-end results from Polk to confirm the 2016 luxury leader. 

To conclude, we were honored in 2016 to be named

  • By Kelley Blue Book as the top overall and most trusted Luxury Brand,
  • Named to “Ward’s 10 Best UX” list, a new award for user experience in new models,
  • We received the inaugural award for “most wanted” for the RX and the ES from Edmunds,
  • And Forester rated Lexus #1 in overall customer experience. 

We look forward to seeing all of you next week in Detroit

  • During the World Premiere reveal
  • Of our all-new, fifth-generation LS flagship sedan
  • We’re one of the 1st reveals on Monday’s schedule at 8:30 AM –
  • We promise to make your time well spent. 

Thank you for joining the call today – now we’d like to open the call up to any questions you may have.
 

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