Toyota to revive sports car offerings

By Christoph Rauwald, Yoshio Takahashi and David Pearson
Last Update: 7:37 AM ET Jun 19, 2006

FRANKFURT (MarketWatch) -- Auto giant Toyota Motor Corp. (TM) is gearing up to revive its sports car line-up in a bid to rival European automakers, Toyota executives in Japan and Europe have told Dow Jones Newswires.

In the latest move by the Japanese car maker to transfer its sales momentum into the lucrative sports car segment, Toyota is seeking to fill a gap in its product line-up as part of its effort to overtake General Motors Corp. (GM) of the U.S. as the world's largest automaker.

The new model is "going to be global project, not one aimed at one region more than another. The concept is a hybrid," said Tokuo Fukuichi, the head of Toyota's ED2 design center in southern France.

With more sporty cars under its brand, Toyota wants to target German luxury car makers such as BMW AG (BMW.XE), DaimlerChrysler AG's (DCX) Mercedes-Benz and Audi AG (NSU.XE), said Shinzo Kobuki, Toyota managing officer in charge of development of hybrid systems.

"We made a proposal to head office for a hybrid sports car. We're not sure that we're going to proceed with that but every time we develop a new car we consider a hybrid system. We have limited resources," Fukuichi said.

In 1967, Toyota produced the first Japanese high-performance sportscar, the 2000 GT model, producing around around 350 until production stopped in 1970. But Toyota and other Japanese automakers have struggled since to gain a foothold globally in the high-margin sportscar segment despite their huge success in the mass-market segment over the past years.

The company's planned launch of a sports car under the Toyota brand within the next few years will see it reap some rewards from its investment in its Formula 1 motor racing team.

"The sports car will come, but I don't know exactly when. Since we stopped production of the Celica and the MR2, there's a gap in that end of our range where we don't get the full impact of our participation in Formula 1," said Masahide Yasuda, president of Toyota France.

Toyota joined the prestigious Formula 1 racing series in 2002 in an effort to spice up the mass market manufacturers' brand image. Like other manufacturers involved in Formula 1, Toyota doesn't officially disclose financial details for its Formula 1 activities, but Toyota's annual budget is believed to be around EUR450 million, among the highest in the competition. But so far the team's performance remains below the company's expectations. Toyota currently lies seventh in the F1 constructors' world championship with eight points. Championship leader Renault (13190.FR) has 106 points.

"Our results this season have not been as good as we hoped," the president of Toyota's European division, Shinichi Sasaki, said during a recent media lunch in Frankfurt. "However, we did not enter Formula 1 for the short term. We will continue to learn from each race ... and hope to get onto the winner's podium very soon," he said.

Currently, European automakers like BMW, Mercedes-Benz and Audi maintain a strong position in the mass-produced sportscar segment.

But the home turf of European automakers is a key part of Toyota's global expansion. Toyota plans to boost production in Europe to 806,000 vehicles this year from 638,000 vehicles in 2005. It plans to increase engine production to 860,000 in 2006 from 588,000 last year.

According to previous executives' statements, Toyota is targeting sales of more than 1 million Toyota vehicles and 45,000 Lexus brand models in Europe this year and the new sports car is expected to contribute to target sales of 1.2 million total vehicles in the region by 2010.

"We've been getting a lot of requests from our sales people for a sports model. It has to be affordable while offering high technology and luxury. We'll be aiming at younger, but affluent customers," Yasuda of Toyota France added.

Future hybrid models like the upcoming Lexus LS hybrid, which is due to come to market in spring 2007, will focus on a sporty character, said Kobuki. "Key technology for Lexus is hybrid," he added.

For the Toyota brand, the company uses hybrid technology to promote it's environmental focus while the Lexus brand uses it as a way of improving a vehicle's performance, Kobuki added. He noted that he's not eager to develop a sporty hybrid car for the Toyota brand.

Toyota currently uses hybrid technology in seven of its models, including the Toyota Prius, the world's first mass-produced hybrid car, and the Lexus RX400h SUV and Lexus GS450h executive saloon.