Section 5. Production and Sales Systems Reinforced
Item 5. Reinforcement of Sales Networks in Europe and the Middle East
Upon entering the second half of the 1960s, Toyota worked to adapt its vehicle specifications to individual regions based on product marketability and began business in automobile-producing countries with fierce competitive conditions.
Toyota began doing business in the United Kingdom in 1965, but sales were stuck at the 1,000 vehicle level until 1970. During this period, Toyota G.B. PLC., the local distributor, worked to develop a sales framework. As demand for automobiles rose rapidly as a result of the reduction of automobile purchase taxes in 1971 and other factors, sales began to rise substantially, reaching 24,000 vehicles in 1972.
In France too, sales remained low following market entry in 1967. The distributor agreement was terminated in 1970, and S.I.D.A.T was established the following year with cooperation from Switzerland-based Toyota AG, resulting in an expansion of sales channels.
West Germany was a world leading automotive market and also had one of the fiercest competitive market conditions. Deutsche Toyota-Vertrieb GmbH & Co. KG, a distributor, finally began operations in January 1971, and Toyota made its entry into the West German market.
By making a full-scale entry into European automobile-producing countries, Toyota steadily increased exports to Europe starting in the 1970s. As previously explained, Knockdown exports to Salvador Caetano I.M.V.T., S.A. in Portugal began in 1968. In 1970, the company received a license from the Portuguese government and began constructing an assembly plant, and a plant with monthly production capacity of 1,250 vehicles was completed in 1972 with equity participation from Toyota, greatly increasing production capacity. Efforts were also put into expanding and reinforcing the sales network by increasing sales sites throughout the country.
Following the oil crisis that broke out in November 1973, major changes took place in the European automobile industry including the nationalization of British Leyland Motor Corporation (BLMC) in the United Kingdom and substantial losses by Volkswagen in West Germany. Confronted with these difficult circumstances, the Toyota sales network, which had a short history and lacked strength, faced further problems.
Sales of Toyota vehicles in European markets took the sharpest decline in West Germany. In 1974, sales were 7,000 units, down 32 percent from the previous year. Deutsche Toyota Fehrtrip, the distributor, saw its inventories rising and its main bank, Herstatt Bank, went bankrupt, plunging the company into a management crisis. In November of that year, Toyota acquired the company, put it under its direct management, and worked to continue operations and rebuild the company. The number of dealers steadily increased from 494 in 1974 to 536 in 1975, 626 in 1976, and 727 in 1977. During this period, Deutsche Toyota Fehrtrip's capital was increased and the name was changed to Toyota Deutschland GmbH in August 1976. The following year, a plan to construct a new head office building was launched with the aim of integrating the head office, parts warehouses, and the service plants-which had been at different locations-and reinforcing management functions. A completion ceremony for the new head office was conducted in May 1979.
In 1975, after the oil crisis, automobile sales in Europe started to recover faster than in Japan and the United States. Sales in West Germany, the Netherlands, Belgium, and other countries recovered in 1975 to 1973 levels, and sales in France too recovered rapidly starting in the autumn of 1975. In the midst of this market recovery, Toyota shifted to more aggressive policies, reinforcing its dealer network, actively introducing products, and conducting advertising and publicity campaigns. In the United Kingdom, attention was focused on improving sales efficiency and replacing existing dealers with new dealers. In France, efforts were also made to enhance sales capabilities and reinforce after-sales service systems, and the number of dealers was increased from 180 in 1974 to 231 in 1977. As a result of this series of active measures, sales of Toyota vehicles in European countries grew at a pace that exceeded the recovery of the market as a whole.
In the Middle East, the epicenter of the oil crisis, automobile demand was growing rapidly as a result of abundant oil income. Automobile imports in 11 Middle Eastern countries soared from 190,000 vehicles in 1973 to 670,000 vehicles in 1976, transforming the Middle East into a major market overnight. In 1973, Toyota's exports to the Middle East were 30,000 vehicles, just 4.2 percent of its total exports. Exports nearly doubled in two consecutive years, reaching 102,800 vehicles in 1975, accounting for 12 percent of all Toyota exports.
Although exports of Japanese motor vehicles slowed in 1976 and 1977, Toyota vehicles continued to enjoy strong growth, reaching 209,300 vehicles in 1977, supported by the overwhelming strength of the Hilux and the Land Cruiser as well as strong sales of the Corona and Cressida (the export name of the Mark II).
Toyota persuaded its distributors to make additional efforts to develop after-sales service systems. One such example was the dispatch of technical advisors to Saudi Arabia in August 1976 and March of the following year to conduct training of local service personnel for two years. Facilities were also steadily expanded, including development of a new vehicle service plant in the United Arab Emirates and a comprehensive automotive center comprising a new vehicle warehouse and a service plan in Oman in 1977 and the construction of a general service center in Saudi Arabia in 1978.