December 2014 Sales Conference Notes

December 2014 and YE Sales Conference Call
Monday, Janurary 5, 2015

December 2014 Sales Conference Call (Audio Clip)

Toyota Division Group Vice President and General Manager Bill Fay:
Hello everyone and Happy New Year.

I’d like to thank to Mike.

Mike is certainly going out on a high point

As auto industry sales hit 1.5 million last month up 10.2%

For the best December since 2004 (best-ever @1,542,886)
And a Seasonally Adjusted Annual Rate of about 16.8 million

That pushed the industry total for the year

To more than 16.5 million
An increase of nearly a million units
- Or 5.5% over 2013 (15.6)…
And ahead of virtually every forecast at the start of the year as the industry posted its 5th year of YOY gains and returned to pre-recession level

Toyota and Lexus dealers had an even bigger month

With sales of more than 215,000
Up 12.7%
Including a best-ever month for Lexus and a combined best-ever December for light truck sales

That brings our total for the year

To nearly 2,374,000

An increase of 6.2%…
Our best yearly total since 2007 and our third best year ever

In many respects our results reflected industry trends

As light trucks, especially SUVs and crossovers
- Accounted for much of the gains…
Our combined SUV sales
- Set an all-time record last year
- Up 16.5%
- At more than 687,000 vehicles…

Our other big stories from 2014

Include the Camry which repeated as the best-selling car in America for the 13th straight year

In the industry’s largest and most competitive segment

…Which was flat overall last year…
Camry sales were up 5%
At nearly 430,000
It’s best year since 2008 despite transitioning to a new 2015 model in the 4th quarter
And just last month the new Camry hybrid was named the industry’s best new car value by Consumer Reports Magazine

Lexus also was a major reason for our corporate increase

With sales up nearly 15% for the year
- More than double the industry average
And exceeding 300,000 for the first time since 2007
You’ll hear more from Jeff on Lexus in just a minute

For the Toyota Division in December

Sales of 175,178
- Were up 12%
As passenger car sales rose 11%
And light trucks were up 13 ½ percent
SUVs set a new record for the third straight month
- With both RAV4 and Highlander posting new December highs
- RAV4 sales of nearly 23,000 were up 10%
- While Highlander topped 15,000, an increase of 22%
- And 4Runner had its best volume month of the year
  - At more than 8,100, up 60%
Combined pickup truck sales
- Totaled nearly 25,000
- Led by a 12% increase in Tacoma
- To more than 14,000
Camry was our passenger volume leader
- With sales of about 31,600
- Up 5.5%
While Corolla was close behind
- Also topping 30,000
- And up 33.5% for the month

For the year

Toyota Division sold 2,062,000 vehicles
- Up 5% from 2013
And it was the industry’s #1 retail brand
- Leading Ford Division for the year by 157,000 units

RAV4 and Highlander

Paced the record year for SUVs
As both posted best-ever results

RAV4 sales exceeded 267,000

And up 23% in the red-hot compact SUV segment

While the new Highlander

Broke a 10-year old mark
With sales of more than 146,000
Up 14 ½ percent

Combined Tundra and Tacoma pickup truck sales

Were up slightly from last year as we continue to sell everything we can build.
We adjusted our production mix slightly during the year to support the updated Tundra
And that resulted in a 5% increase for that model

The Toyota Division

Also led the industry in passenger car sales last year
And will have best-selling model in 3 different segments
- When the final numbers are in…

In addition to Camry

The Corolla recorded sales of nearly 340,000
A 12% increase from 2013…
And it appears Corolla will regain its position as the best-selling subcompact in America

While Avalon is the best-selling car

In the premium mid-size segment with sales of more than 67,000 for the year

Finally, from a sales standpoint

Hybrid sales came in at 270,000
As we sold more than 200,000 Prius for the third consecutive year
As it continues to be a key volume member of our lineup

Looking ahead at 2015

The economy picked up a nice tailwind at the end of last year
Thanks to better than expected growth improving consumer confidence and increased employment levels

This strength will help carry the auto industry to a 6th straight year of growth in 2015 with analyst projections ranging as high as 17 million.

As you probably know we tend to be a little conservative early in the year
And right now we’re looking at about 16.7 million…
That would be the industry’s best year since 2005 with plenty of room for upside

The growth will be driven by

Stable and historically low interest rates
Strong replacement demand with the average vehicle age now at 11 years
And the continued emergence of Gen Y
- Who bought 10% more cars last year than the year before and now account for more than a quarter of all new purchases

Toyota, Lexus and Scion

Are primed to take advantage of this growth
With 12 new or significantly updated models rolling out in the year ahead…
And as a result we’ll be looking to outperform the industry again in 2015

The Toyota Division and Scion

Will account for eight of those new models to help drive our growth
And we’ll also have a full year of the new Camry

You’ll get your first look at some of what we have planned for 2015

Next week at the Detroit Auto Show where we’ll take the wraps off the all-new Tacoma
And don’t forget to visit us at CES this week in Las Vegas

Thank you again for joining the call today and now I’d like to turn it over to Jeff for a look at Lexus.

Lexus Group Vice President and General Manager Jeff Bracken:

Thank you Bill and Happy New Year everyone.

I’d also like to thank Mike for all his hard work over the years, especially those as head of Lexus PR, and wish him the best in retirement.

Now for Lexus…

We finished the year with our second straight record-breaking month
In fact it truly was a December to Remember
As we posted the best-ever month in our 25-year history
With sales of 39,879
Up nearly 15% from last December
And breaking the previous mark set back in 2006

That pushed our total for the year

To 311,389 vehicles
An increase of nearly 14%

The luxury market as a whole…

Was one of the industry’s bright spots last year
And Lexus was at the top of the segment’s growth chart
Leading the other major luxury manufacturers

And not only was 2014 our 25th anniversary

It also marked a significant turning point for the brand as we completed the transition to the new face of Lexus
Adding new levels of design and performance across the model lineup and bringing new and younger buyers to the Lexus family

Providing an added boost last month

Was the arrival of two all-new products
The RC sport coupes and NX compact luxury utility vehicles
These are two of the most highly anticipated new models to arrive at Lexus in a long time
And they’ll play a big part in our 2015 growth plans that I’ll get to in a minute

In December, our luxury utility lineup

Set a new high for the month of 19,742
Up 26%
And breaking a 10-year old record (2004)

The Lexus RX

Which helped pioneer the market for luxury utility vehicles when it was first introduced easily retained its position
- As the best-selling vehicle in the segment
And when the final results are in for 2014 it may be the best-selling luxury vehicle – period

We sold

13,625 RXs in December
- An increase of 3 ½ percent
For the year that brings us to 107,490
- Up 3.4%
- And topping six figures for the second straight year
And while we don’t know yet how the BMW 3-series sedan did in December it will be very close between the two for luxury sales leadership

The new GX also continued to do well in December

With sales up 48% to 2,700
And topping 22,500 for the year
Nearly doubling its 2013 total

And the NX

Was an immediate contributor to our results last month
With nearly 3,000 sold

Passenger car sales in December

Were up 5.5%
And it should be no surprise that the IS had a big month
With sales of nearly 6,000
- up 10%
And pushing its total for the year above 51,000
- Up 47%

On the market now for over a year

The IS launch is one of the most successful in Lexus history
And not only has it provided a great deal of sales growth
It also has been a major source of younger buyers with a median age of under 45

The GS

Saw sales rise 5 ½ percent in December
- And 12% for the year at more than 22,000
While the CT hybrid sales were up 17% for the year
- A key reason Lexus accounts for about 70% of all luxury hybrid sales
And of course the ES was our volume leader
- With nearly 7,800 sold in December
- And more than 72,000 for the year

Now in addition to our sales growth last year

Lexus also led the industry in key quality and customer satisfaction areas
Lexus was the #1 brand in Consumer Reports’ Reliability Study and the hybrid versions of the ES and RX
Were just named the best overall value in their class
Lexus was the #1 brand in J. D Power’s Vehicle Dependability Study
And the #1 brand in resale value according to Kelley Blue Book…
And we’re honored to be named the industry’s most trusted brand by Kelley for the second straight year

Bill touched on some of the economic reasons

We expect the industry to have another good year in 2015
And we believe the luxury segment will continue to outperform the overall market as it did last year

At Lexus we’re especially excited

About the addition of the two new models I mentioned
The RC sport coupes and NX luxury utility vehicles
Giving us entries into segments we were not competing in
The RC enters the near luxury coupe market
- That showed solid growth last year, up 20%
While the NX will join the compact luxury utility field
- One of the industry’s hottest segments at the moment
Where we believe it will be among the volume leaders
- With first-year sales of about 40,000…