Section 2. European Operations Become Autonomous

Item 2. Introduction of Products Tailored to European Tastes

Products introduced to the European market included products developed for the Japanese and American markets with modifications for the European market, including the Carina E produced by Toyota Motor Manufacturing UK Ltd. (TMUK). When the Carina E was redesigned in 1998, the name was changed to the Avensis, and at the time of the redesign in 2003, it was developed into a model specifically for Europe. Other models optimized for the European market such as the Yaris (sold in Japan as the Vitz), launched in 1999, were also developed and introduced.

Active marketing was conducted for the locally designed Yaris. At the first European Dealers Conference held by TMME in Barcelona, Spain in 1999, Toyota Motor Corporation (TMC) management called for higher Yaris sales. In Italy, which had considerable market potential for the Yaris, a large-scale advertising campaign was conducted including a new vehicle launch press conference held in Milan with opinion leaders in attendance. Marketing programs with an emphasis on test drives were also conducted in various countries. As a result of these initiatives, sales of the Yaris greatly exceeded initial plans, and in 1999 the Yaris won the 2000 European Car of the Year, becoming the first Toyota vehicle to win the award. Five years later, the hybrid Prius also won this award, contributing to Toyota's environmental image in Europe.

In contrast, when Lexus was introduced to the European market in 1990, the line struggled as a result of declining sales of passenger car sedans in the premium market and its inability to adapt to market characteristics including the increased use of diesel-powered vehicles. In response, the Lexus brand was reorganized by implementing the Lexus Challenge Plan from 2005 to 2007 with three priorities: reinforcing the sales network, raising brand recognition, and increasing customer satisfaction. In order to raise brand recognition, focus was put on innovative technologies centered on hybrids, "L-finesse"1 designs with reflections of Japanese culture, and the joy of driving, and integrated advertising and publicity were conducted throughout Europe. The result was a jump in brand recognition from three percent in 2004 to six percent in 2006. These assertive sales promotion measures led to steady increases in sales following the introduction of the Lexus IS and Lexus RX, and sales skyrocketed from 3,500 units in 1997 to 50,700 units in 2006.

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