Toyota North America 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 15^th 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 2^nd 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 1^st 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.