February 7, 2024 • 25 mins
Meet Ken Parkman, General Manager of Retail Market Development with Toyota North America
In this episode of the EV Ready podcast, special guest Ken Parkman, General Manager of Retail Market Development at Toyota Motors North America, joins host Chris Nihan to discuss Toyota's unique approach to electric vehicle readiness. With a concentration on partnerships, education, and seamless dealer experiences, Ken sheds light on Toyota's strategic plan for electric vehicles, including their Toyota BZ4X and Lexus RZ models. As the world shifts towards electric mobility, this episode offers insight into Toyota's contributions to this green transition.
The Power of Strong PartnershipsAlthough Toyota acknowledges its limited expertise in the expanding electric vehicle space, its commitment to forming alliances with electric battery specialists stands out. Through this approach, the automaker aims to deliver a supportive program for its dealers and a positive customer experience. Ken takes us through the hurdles Toyota is leaping as they transition to electric cars, highlighting issues with permitting, city codes, and the existing electric grid system. Within the complexity lies Toyota's drive to recommend an optimal charging infrastructure at dealerships, always prioritizing excellent customer service without overburdening their dealers.
Toyota and Lexus' Electrification PlanThe discussion pivots to the electrification plan of Toyota and its luxury brand Lexus, revealing the faster adoption of electrified models in the high-end auto market. Ken points out Lexus' ambitious target of hitting 100% EV production by 2035 and Toyota's more gradual transition strategy. Furthermore, the podcast episode explores the 1-6-90 rule, a unique Toyota initiative that supports the environmental efficiency of hybrid and plug-in hybrid vehicles.
A Commitment to SustainabilityThe episode rounds out on a high note as we anticipate new product releases from Toyota and Lexus slated for 2024. Breaking down the importance of the comprehensive dealership environmental excellence program, D.E.E.P., listeners gain insights into Toyota's commitment to modern facilities, increased energy efficiency, and reduced environmental impacts. This episode reaffirms Toyota's dedication to environmental sustainability.
See the full episode:https://evreadyenergy.com/podcast/ken-parkman-on-toyotas-unique-approach-to-ev-readiness/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:03):
Welcome to the EV Ready podcast, featuring industry leaders and their perspectives
on electrification, hosted by EV Ready Energy.
Hey, everybody, this is Chris Nye, and welcome to the EV Ready podcast.
With me today, I have General Manager of Retail Market Development,
(00:24):
Ken Parkman of Toyota Motors North America.
But Ken, thanks so much for taking the time. No, I'm happy to be here.
So obviously, we have a relationship working previously.
And in this space, I think it's so hard to find companies who really value partners.
I think sometimes it's said out loud, but it's not necessarily acted on and
(00:46):
just been grateful for our relationship so far.
And I'd love if maybe you could kick off the podcast talking about Toyota's
approach to having partners.
Yeah, no, I'd be happy to. I mean, I think a lot of it starts with just the
culture of Toyota here in North America.
I mean, we have a really long standing relationship and partnership with our dealer network.
(01:13):
And I think that's really where it starts. Our top management many,
many years ago really valued the importance of the dealers and the importance
of working closely with the dealers to support them because ultimately they're
the ones that, you know, take care of the experience for the customer.
So, you know, over the, you know, 60 plus years Toyota's been here in North
(01:36):
America, you know, that, that culture exists, you know, today,
you know, every, everything that we do as a company that impacts the dealers,
we get the dealers involved in what we're working on or we're developing because
we want to make sure that, that it's something that's going to help them.
And, you know, I, again, that, that partnership that we we have,
(01:57):
I would say, and knowing a lot of dealers that have other brands,
the relationship with Toyota and Lexus is a great one.
It's special and it's very different from some of the other OEMs.
And, you know, that's...
That culture that we have of the relationship with our dealers,
I think, extends, as you were asking, to the dealer partners that we work with.
(02:21):
In my case, in retail market development, we're responsible for dealer facilities
and supporting our regions and supporting our dealers.
And that's one of the things that when we were trying to figure out how to get
our dealers ready to start selling the BZ4X and RZ on the Lexus side,
(02:42):
we first started by looking at what the other OEMs were doing in the space of BEV readiness.
And, you know, as people that work for Toyota, we are definitely not experts in the EV space.
And we quickly knew that. And the one common thing that we found in all the
(03:02):
other OEMs is they had partnered with a company that does specialize in battery
electric, not just in automotive space and other spaces.
And that's really where we started to work closely with Lane Valente and then
also ChargePoint to be able to try to put together a program that we could offer
(03:23):
our dealers to make it as seamless as possible.
But the last thing I'll also add on this partnership is one of the things that
early on that we communicated to both LBI and ChargePoint was that we're all
working together and we all need to kind of be one when we're communicating
and supporting our dealers.
(03:44):
Because any third-party company that we partner with to support our dealers
and we go and we visit the dealers, the dealers really look at obviously Toyota,
but also the business partners as a part of Toyota.
And, you know, we, we want the experience that the dealers have to be as, as good as it could be.
(04:06):
So, you know, it's, it's, I know it's a long-winded answer, but,
you know, I, I think we just have a culture that we built on many,
many years of the importance of a partnership.
It's great that it continued, you know, today. day it's just
interesting because i think in the automotive space people
people know that like toyota's reputation
(04:26):
is that they are great to work with toyota and lexus
are two great companies to work with very very
unique in how they go about doing business but
i don't think like the general population knows that you know they more understand
like some of the values that toyota has tied to the cars that you're selling
and the reliability of the cars but the approach to business i think I think
(04:49):
is just like so unique and not fully understood outside of the automotive space.
At least I personally didn't know.
Yeah. Until Toyota and I developed a good relationship.
So tell me this, and this isn't just an EV question. And my apologies,
I'm going to open this door in a second, but keep going once I do.
So your role of manager of retail market development, what are like the biggest
(05:13):
challenges that you face on a daily basis?
Well, it's a great question because obviously we all know in the automotive
space how BEV is the number one thing that everyone wants to talk about.
And I think over the last couple of years, there's been a lot of questions internally
by dealers in terms of dealership of the future. What should the dealers be doing?
(05:37):
You know, we have our current facility program, which we call Image USA 2,
and it's been around for 20 years.
And, you know, we feel strongly that the look and feel of our Toyota dealerships
has many more years to come with the, you know, the white portal and the gray ACM.
So that's the exterior of the facility, but, you know, we're internally trying
(06:01):
to work and figure out what should that facility of the future be now that you've got,
you know, dealers starting to sell BEVs in terms of,
you know, should there be more space internally in the dealership for people
to come and hang out and charge and have a lounge or those are all things that
we're still trying to figure out.
(06:22):
Our hope is that over the next probably six to nine months,
that we'll have a better idea of some more solid recommendations for our dealers
as volume will increase for us over probably the next two, three years.
But the other challenge that I've learned
over the last couple years in trying to work with dealers to
(06:44):
get them just with the minimum number of
chargers to take care of the launch of BZ is just how complex and there's so
many factors outside of the dealer's control in terms of permitting and city
codes and the current electric grid in a specific dealer's town or whatever.
(07:05):
There's so many factors that are out there.
And again, trying to figure out what that future recommended guideline to our
dealers is something that we know is going to be impactful.
We know our dealers, we got to have them be ready, but what's realistic to ask of them?
I think that's something that, you know, if you ask me what keeps me up at night,
(07:29):
I would say it's that, you know, not really knowing exactly what we should offer
our dealers because we want a good customer experience,
but we also don't want to ask too much of our dealers.
Yeah, so that's a great transition to the next question.
You've seen different auto manufacturer strategies tied to progression around
(07:51):
how many plugs to install at dealerships.
And there are some OEMs that have acquired a million dollars in investment,
and that's had a certain response from the dealer body. Scotty,
Toyota took a much more conservative approach.
Tell us a little bit about how you came to that approach and what do you think
the response has been from the dealership?
(08:12):
Yeah. So yeah, our approach was definitely unique and it was a little bit different
for Toyota and Lexus. So I'll start first with Toyota.
From a government regulations, we needed to ensure.
We were selling the BZ4X in the ZEV states that are out there,
mainly California, the Northwest, and the East Coast.
(08:36):
So we took the approach that we were going to, from a company standpoint,
take 85% of the volume initially was going to go to the ZEV states and then
15% to the non-ZEV states.
Well, for us, we have 1,237 Toyota dealers. And if you look at the ZEV states,
there's only 375 dealers that are in the ZEV states and the over 850 or so are non-ZEV.
(09:03):
So knowing that that was going to be the allocation and volume that those dealers
could expect over the first couple of years. And our volume for last year, we sold 8,800 BZ4Xs.
And our volume for this year and even in 25 is still relatively low. It's in the low T.
So knowing that and looking again, as you mentioned, at what some of the other
(09:29):
OEMs had required dealers of adding a lot of level three chargers and a pretty
significant investment.
You know, we worked with our dealers, got feedback and said,
you know, hey, as a minimum, what would we recommend?
And really it was simple. We wanted to have one charger Toyota branded in the
(09:49):
front of the dealership to create awareness.
We wanted the dealer to have one charger in service.
And then we wanted to have one charger that the dealers would be selling in
delivery for an at-home charger. So those three chargers, and they were level two chargers.
Again, in the ZEV states, if dealers wanted to opt for level three GC fast chargers,
(10:10):
they could, but that was not a requirement.
So if you look at average dealer investment in our ZEV states for Toyota,
it was roughly average dealers spent $36,000. On the non-ZEV side, it was about $21,000.
So it was a very minimal investment.
But again, knowing the volume being minimal for these first couple years.
(10:35):
We didn't want to have the dealers overinvest because, again,
the technology in level three chargers is changing.
So I would hate, you know, we didn't want the dealers to invest in technology
and equipment today that three years from now they needed to upgrade.
And Lexus was a little bit different just because the volume of Lexus was a
little bit was higher and there there's only 244 Lexus outlets. it.
(11:00):
So the throughput and volume for Lexus was higher for Toyota.
So Lexus, their average was about three level two chargers for each of the respective stores.
Obviously, ZEV states add a little bit more. So again, that was really our strategy.
We wanted to be realistic.
We didn't want the dealers to over-invest, but we knew it was also a short term.
(11:23):
It was really a strategy that was going to get us the first three years.
Preston Pyshko, MD, PhD, PhD, PhD, PhD, PhD, PhD, PhD, PhD, PhD,
PhD, PhD, PhD, PhD, PhD, PhD,
And then now, as I mentioned earlier, these next six to nine months is our plan
to develop that next phase pair of the dealers, really for the volume that's going to come in 26th.
And just for folks that aren't in the industry, ZEV is a zero emission vehicle
state where there's a requirement to sell a certain amount of electric vehicles
(11:45):
at a dealership in those states. Right. So Ken, generally what we see in the
marketplace is luxury models electrify first.
And then as the cost of the gas vehicle gets a little bit lower,
those take a little bit longer to electrify.
Talk to us a little bit about the strategy of Alexis electrification and Toyota.
Yeah. As you mentioned, the cost of EVs is much higher.
(12:07):
So I think mainly the luxury luxury industry is certainly seeing more of a focus.
And really, we're seeing that on Lexus when it comes to their future product.
And that's why, as I mentioned, for example, RZ launched this year and there were sales of 5,300.
The next year's volume is going to be around 14,000 and then it's going to go
(12:30):
up to about 40 plus thousand.
So the Lexus volume over the next couple of years is certainly going to increase.
And on a by-dealer basis, again, Again, that put through a much smaller number
of stores is a significant amount of the volume.
And, you know, the current plan right now from a company standpoint is by, you know, 2035.
(12:50):
So 12 years from now, roughly that 100% of Lexus volume will be.
Obviously, you know, there's a lot of things that could change.
I mean, you know, we're all banking on, you know, BEVs are what people want,
but there's also a cost associated with it.
So that's really the focus, you know, from a product standpoint has really started
(13:13):
more on the luxury side for Lexus.
And then obviously on Toyota, you know, we've got our BZ model,
there's plans, you know, we're
going to get a minor change, some minor changes to that vehicle in 2025.
So it's going to be another year. And then the future product cadence after that on Toyota.
So really our focus getting into the world of BEVs, I know many would say that
(13:37):
we're a little late to the party, but we're going to focus on the Lexus side to compete on luxury.
And then obviously now that we've got a TWID offering.
So to your point, you know, there is a reputation sometimes for Toyota of electrification
being a little bit more slower than some of the other brands,
but you also have a heavier mix of hybrids and plug-in hybrids as a part of
(14:03):
your strategy, I think, than other car manufacturers are focusing on.
And I think part of that story is a little bit misunderstood,
you know, in the general public,
but it's part of it's about the idea of like decarbonizing the world and what's
What's the strategy and is the best thing to decarbonize to have fully battery
electric vehicles, or is it to have a mix of different types of electric vehicles?
(14:25):
Can you talk to us a little bit about how Toyota thinks about that?
No, it's a great point. And again, with all the focus on BEV,
we've been selling hybrids for 20 plus years with the Prius launching in the mid-90s.
And we've sold millions of hybrids over the years.
It's been a great vehicle for us. and it
(14:45):
you know it's the environmental impacts of
of hybrids and you know now that we
also have plug-in hybrids and we also have hydrogen we've got the mirai which
is sold in california obviously in small volumes so you know when you look at
our product offering we've got you know ice engines we've got plug-in hybrids
we've got hybrids we've got bevs now and then we also have hydrogen rye.
(15:11):
We call our approach a portfolio approach, and we're not putting all of our
focus just on BEV or just on hybrids because we know that there's people out
there that want certain things.
But when you look at the carbon footprint, and I'll share something with you
that you may have heard of or not, but it's something that we're trying to communicate
(15:33):
out to a larger audience,
is with so much focus on EVs, and if you look at the raw materials that are
needed to build one BEV, we have this 1-6-90 rule that's out there.
And really what that's saying is the raw materials that it takes to make just
(15:54):
one battery electric vehicle, you could actually build six plug-in hybrids.
And if you look at those same resources for one battery electric.
You could build 90 hybrid vehicles.
And if you look at the carbon footprint and the impact of those large number
of vehicles that are out there that are much better for the environment, it's very positive.
(16:19):
But I know a lot of people are just focused on BEV and there's some OEMs out
there just putting all their chips into battery electrics today.
So, you know, again, we're taking a more conservative approach.
We've come out and said by, you know, 2030, you know, roughly 30% of our sales will be just BEV.
(16:39):
But again, we're going to continue to focus on hybrids.
You know, we've got over the last couple years, you know, we've actually started
to transition where we've launched new models to fully hybrid.
You know, we used to have a nice engine option in a hybrid. I think Sienna was
a great example that when that new model launched.
(17:01):
Just comes into hybrid. And that's really, you'll continue to see that over
the next several years when we've come out with some of our new products,
they're going to start transitioning.
Even some of the higher volume vehicles are going to transition into just hybrid
offering, which from our standpoint, again, we feel is much better for the environment.
(17:21):
It's just, I think, unfortunately, most people are just focused on,
they just hear VEV. That's all anyone talks about.
It's like Like the only way to help the environment is to have more battery
electrics, but we just need to help educate people a little bit more on the
fact that hybrids and plugins are very impactful in a positive way.
Yeah. I just thought it was so interesting to hear this is like,
(17:44):
you know, I developed a relationship with Toyota because look, I'm a BEV fan.
I will never drive anything but a battery electric vehicle. I love the performance of it.
I'm addicted to it and all those different things. But there's so many discussions
about the environment as it relates to electric vehicles, and it's turned into a political thing.
And I think the way that Toyota speaks about it is very unique in the industry
(18:08):
and is worth people listening to.
So I'm just happy to hear you kind of explain that.
And just out of curiosity, if people wanted to learn more about Toyota's decarbonization
plans, where would you go? There's information on toyota.com.
I'd be happy after this, I'd be happy to forward you the document that our government
(18:30):
affairs document put together to help educate not only our team members that
work for Toyota and Lexus, but all our dealers as well.
I'd be happy to forward some material that we've developed. It's public information, but...
I think, again, if you look at it from an environmental standpoint,
(18:51):
you can go on twitter.com and it'll talk about a lot of the things that we're
doing. There's a lot of environmental programs.
I mean, Twitter has this 2050 environmental global plan.
Obviously, BEVs are one part of it. And in speaking about environmental efforts,
one thing I'll just touch on real quickly is two years ago, we know a lot of
(19:13):
our dealers are reinvesting in their facilities.
And many, when they originally built, were focused on lead, environmentally
friendly dealership and facility.
And there's a lot of lead environmental facilities, non-automotive,
that are out there in cities and towns.
But we just created a program called DEEP, which is our dealership environmental
(19:34):
excellence program that is starting to gain some traction.
You know, we've got about 65 dealers signed up.
Our hope is to get to maybe 200 by the end of the year.
But that's a program that we've partnered with, you know, a company called Altura
that goes out there and sits down with the dealer and looks at all,
(19:54):
you know, they're from electric to water to, you know, all their utilities,
talks about solar, talks about LED light.
I mean, there's so many things that a dealer can do to modernize their facility
to make it more environmentally friendly.
And, you know, it's a program that Honda had been doing for quite a few years.
They also have used Altura, but, you know, it's something that we've started
(20:17):
and it's been really well received from our dealers.
The savings that dealers have been able to recognize over just the first year
or two years on the program have been really, really positive.
So again, from an environmental standpoint, Toyota is very environmentally friendly, very conscious.
So we've got our focus on our future product, but we also are looking to figure
(20:41):
out how can we help our dealers with their facility and being more environmentally
friendly. Yeah, obviously so many dealerships out there, there's a big opportunity there.
And as Korean economics become more economic, I imagine that more dealers will jump on board. Yeah.
And the investment for the dealers, there's a fee associated.
(21:03):
I mean, obviously, Altura works closely with the dealer. And on average,
the dealer investment from the dealer standpoint is about $3,000 a year.
But the dealers that have been on the program, the average savings has been
anywhere between $15,000 to $20,000 per store. So to spend $3,000 to save $15,000
(21:25):
to $20,000 or so, I mean, that's a pretty good deal.
And we've had many other dealers that have even saved more.
So it's definitely gaining traction.
Some of our larger dealer groups
and some of the public companies have definitely seen it as a benefit.
We're excited about it. So my final question for you is electric,
(21:46):
non-electric, what's the most exciting thing about Toyota and Lexus in 2024?
Most exciting thing, 2024. That's a great question.
What are you most looking forward to? You know, I think the dealer,
the dealers have done really, really well over the last few years.
I mean, inventory, both Toyota and Lexus, you know, since, you know, pre-COVID.
(22:07):
So let's just say last three years, you know, inventories have been in the single digit day supply.
And, you know, I think a lot of customers may not have necessarily got the vehicle that they wanted.
You know, they took what they could. it. We end in the year now,
Lexus has a 20-day supply, Toyota's now at 13, 14-day supply.
(22:27):
We're going to see inventory continue to grow, not grow.
To pre-COVID levels. I mean, pre-COVID, our dealer stock for 1,237 dealers was
around 300,000 units at any given time. Today, we're still less than 100.
I think we see that getting back to maybe 15, maybe 20 days supply throughout
(22:48):
the year, but we also have a lot of exciting new product that's coming.
And I think there's nothing that gets dealers more excited and customers Then
the new product, the all-new 2024 Tacoma is just arriving in dealerships now.
We have an all-new Camry that's going to be coming out this year.
(23:09):
On the Lexus side, they launched the TX, which has been just a home run of a
vehicle. The new GX is coming out.
Again, over the next couple of years, our BEV lineup, it's going to be 25 until
we start looking at changes to our current product.
(23:29):
But I'd like to see inventory improve.
I think that's going to make it a better customer experience for people out
there looking for vehicles.
I mean, I got to tell you, I've had so many family and friends over the last
couple of years that are, you know, wanting this vehicle or wanting that vehicle
and they're going reaching out to dealers and they can't find it.
And it's, it's frustrating for a lot of people, especially if they need to,
(23:53):
or have to change their vehicle.
There's just such a, there's been such a limited inventory. So, I mean, that's.
It'll create a better customer experience and dealers are going to continue
to provide the customers with what they want.
So it should be a great year. Dealer profits continue to go well.
I think one other thing that you talked about earlier, kind of wrapping up on
(24:17):
this kind of partnership is we have a history of many, many years where we haven't
added a lot of stores to our dealer network, both Toyota and Lexus.
Again, we've got 1,237 to 244 Lexus, and that's really the way it's been for the last several years.
And we have the mentality that we want to grow with the dealers that we have.
(24:38):
We want them to have the highest sales per hour.
We want them to be the most profitable. If they're profitable.
They can reinvest in their facility.
They can reinvest in their customers and their own people. So that close partnership
mentality that we have, again, we want our dealers to be really successful.
The dealers appreciate that.
And again, I think it goes back to trying to, that winning combination is us
(25:01):
working closely with them, us providing them the best product that customers want,
and them doing their job, which has given the customer a great experience.
Experience yeah well said well said a good
year ahead well ken thanks for taking the time to join the podcast and telling
us a little bit more about toyota and lexus and i you know i encourage people
(25:23):
to go to toyota's website and read their sustainability program it's just you
know it's unique it's interesting and thanks again for the time and for everybody joining the podcast.
Music.
Welcome to the EV Ready podcast, featuring industry leaders and their perspectives
on electrification, hosted by EV Ready Energy.
Hey, everybody, this is Chris Nye, and welcome to the EV Ready podcast.
With me today, I have General Manager of Retail Market Development,
(00:24):
Ken Parkman of Toyota Motors North America.
But Ken, thanks so much for taking the time. No, I'm happy to be here.
So obviously, we have a relationship working previously.
And in this space, I think it's so hard to find companies who really value partners.
I think sometimes it's said out loud, but it's not necessarily acted on and
(00:46):
just been grateful for our relationship so far.
And I'd love if maybe you could kick off the podcast talking about Toyota's
approach to having partners.
Yeah, no, I'd be happy to. I mean, I think a lot of it starts with just the
culture of Toyota here in North America.
I mean, we have a really long standing relationship and partnership with our dealer network.
(01:13):
And I think that's really where it starts. Our top management many,
many years ago really valued the importance of the dealers and the importance
of working closely with the dealers to support them because ultimately they're
the ones that, you know, take care of the experience for the customer.
So, you know, over the, you know, 60 plus years Toyota's been here in North
(01:36):
America, you know, that, that culture exists, you know, today,
you know, every, everything that we do as a company that impacts the dealers,
we get the dealers involved in what we're working on or we're developing because
we want to make sure that, that it's something that's going to help them.
And, you know, I, again, that, that partnership that we we have,
(01:57):
I would say, and knowing a lot of dealers that have other brands,
the relationship with Toyota and Lexus is a great one.
It's special and it's very different from some of the other OEMs.
And, you know, that's...
That culture that we have of the relationship with our dealers,
I think, extends, as you were asking, to the dealer partners that we work with.
(02:21):
In my case, in retail market development, we're responsible for dealer facilities
and supporting our regions and supporting our dealers.
And that's one of the things that when we were trying to figure out how to get
our dealers ready to start selling the BZ4X and RZ on the Lexus side,
(02:42):
we first started by looking at what the other OEMs were doing in the space of BEV readiness.
And, you know, as people that work for Toyota, we are definitely not experts in the EV space.
And we quickly knew that. And the one common thing that we found in all the
(03:02):
other OEMs is they had partnered with a company that does specialize in battery
electric, not just in automotive space and other spaces.
And that's really where we started to work closely with Lane Valente and then
also ChargePoint to be able to try to put together a program that we could offer
(03:23):
our dealers to make it as seamless as possible.
But the last thing I'll also add on this partnership is one of the things that
early on that we communicated to both LBI and ChargePoint was that we're all
working together and we all need to kind of be one when we're communicating
and supporting our dealers.
(03:44):
Because any third-party company that we partner with to support our dealers
and we go and we visit the dealers, the dealers really look at obviously Toyota,
but also the business partners as a part of Toyota.
And, you know, we, we want the experience that the dealers have to be as, as good as it could be.
(04:06):
So, you know, it's, it's, I know it's a long-winded answer, but,
you know, I, I think we just have a culture that we built on many,
many years of the importance of a partnership.
It's great that it continued, you know, today. day it's just
interesting because i think in the automotive space people
people know that like toyota's reputation
(04:26):
is that they are great to work with toyota and lexus
are two great companies to work with very very
unique in how they go about doing business but
i don't think like the general population knows that you know they more understand
like some of the values that toyota has tied to the cars that you're selling
and the reliability of the cars but the approach to business i think I think
(04:49):
is just like so unique and not fully understood outside of the automotive space.
At least I personally didn't know.
Yeah. Until Toyota and I developed a good relationship.
So tell me this, and this isn't just an EV question. And my apologies,
I'm going to open this door in a second, but keep going once I do.
So your role of manager of retail market development, what are like the biggest
(05:13):
challenges that you face on a daily basis?
Well, it's a great question because obviously we all know in the automotive
space how BEV is the number one thing that everyone wants to talk about.
And I think over the last couple of years, there's been a lot of questions internally
by dealers in terms of dealership of the future. What should the dealers be doing?
(05:37):
You know, we have our current facility program, which we call Image USA 2,
and it's been around for 20 years.
And, you know, we feel strongly that the look and feel of our Toyota dealerships
has many more years to come with the, you know, the white portal and the gray ACM.
So that's the exterior of the facility, but, you know, we're internally trying
(06:01):
to work and figure out what should that facility of the future be now that you've got,
you know, dealers starting to sell BEVs in terms of,
you know, should there be more space internally in the dealership for people
to come and hang out and charge and have a lounge or those are all things that
we're still trying to figure out.
(06:22):
Our hope is that over the next probably six to nine months,
that we'll have a better idea of some more solid recommendations for our dealers
as volume will increase for us over probably the next two, three years.
But the other challenge that I've learned
over the last couple years in trying to work with dealers to
(06:44):
get them just with the minimum number of
chargers to take care of the launch of BZ is just how complex and there's so
many factors outside of the dealer's control in terms of permitting and city
codes and the current electric grid in a specific dealer's town or whatever.
(07:05):
There's so many factors that are out there.
And again, trying to figure out what that future recommended guideline to our
dealers is something that we know is going to be impactful.
We know our dealers, we got to have them be ready, but what's realistic to ask of them?
I think that's something that, you know, if you ask me what keeps me up at night,
(07:29):
I would say it's that, you know, not really knowing exactly what we should offer
our dealers because we want a good customer experience,
but we also don't want to ask too much of our dealers.
Yeah, so that's a great transition to the next question.
You've seen different auto manufacturer strategies tied to progression around
(07:51):
how many plugs to install at dealerships.
And there are some OEMs that have acquired a million dollars in investment,
and that's had a certain response from the dealer body. Scotty,
Toyota took a much more conservative approach.
Tell us a little bit about how you came to that approach and what do you think
the response has been from the dealership?
(08:12):
Yeah. So yeah, our approach was definitely unique and it was a little bit different
for Toyota and Lexus. So I'll start first with Toyota.
From a government regulations, we needed to ensure.
We were selling the BZ4X in the ZEV states that are out there,
mainly California, the Northwest, and the East Coast.
(08:36):
So we took the approach that we were going to, from a company standpoint,
take 85% of the volume initially was going to go to the ZEV states and then
15% to the non-ZEV states.
Well, for us, we have 1,237 Toyota dealers. And if you look at the ZEV states,
there's only 375 dealers that are in the ZEV states and the over 850 or so are non-ZEV.
(09:03):
So knowing that that was going to be the allocation and volume that those dealers
could expect over the first couple of years. And our volume for last year, we sold 8,800 BZ4Xs.
And our volume for this year and even in 25 is still relatively low. It's in the low T.
So knowing that and looking again, as you mentioned, at what some of the other
(09:29):
OEMs had required dealers of adding a lot of level three chargers and a pretty
significant investment.
You know, we worked with our dealers, got feedback and said,
you know, hey, as a minimum, what would we recommend?
And really it was simple. We wanted to have one charger Toyota branded in the
(09:49):
front of the dealership to create awareness.
We wanted the dealer to have one charger in service.
And then we wanted to have one charger that the dealers would be selling in
delivery for an at-home charger. So those three chargers, and they were level two chargers.
Again, in the ZEV states, if dealers wanted to opt for level three GC fast chargers,
(10:10):
they could, but that was not a requirement.
So if you look at average dealer investment in our ZEV states for Toyota,
it was roughly average dealers spent $36,000. On the non-ZEV side, it was about $21,000.
So it was a very minimal investment.
But again, knowing the volume being minimal for these first couple years.
(10:35):
We didn't want to have the dealers overinvest because, again,
the technology in level three chargers is changing.
So I would hate, you know, we didn't want the dealers to invest in technology
and equipment today that three years from now they needed to upgrade.
And Lexus was a little bit different just because the volume of Lexus was a
little bit was higher and there there's only 244 Lexus outlets. it.
(11:00):
So the throughput and volume for Lexus was higher for Toyota.
So Lexus, their average was about three level two chargers for each of the respective stores.
Obviously, ZEV states add a little bit more. So again, that was really our strategy.
We wanted to be realistic.
We didn't want the dealers to over-invest, but we knew it was also a short term.
(11:23):
It was really a strategy that was going to get us the first three years.
Preston Pyshko, MD, PhD, PhD, PhD, PhD, PhD, PhD, PhD, PhD, PhD,
PhD, PhD, PhD, PhD, PhD, PhD,
And then now, as I mentioned earlier, these next six to nine months is our plan
to develop that next phase pair of the dealers, really for the volume that's going to come in 26th.
And just for folks that aren't in the industry, ZEV is a zero emission vehicle
state where there's a requirement to sell a certain amount of electric vehicles
(11:45):
at a dealership in those states. Right. So Ken, generally what we see in the
marketplace is luxury models electrify first.
And then as the cost of the gas vehicle gets a little bit lower,
those take a little bit longer to electrify.
Talk to us a little bit about the strategy of Alexis electrification and Toyota.
Yeah. As you mentioned, the cost of EVs is much higher.
(12:07):
So I think mainly the luxury luxury industry is certainly seeing more of a focus.
And really, we're seeing that on Lexus when it comes to their future product.
And that's why, as I mentioned, for example, RZ launched this year and there were sales of 5,300.
The next year's volume is going to be around 14,000 and then it's going to go
(12:30):
up to about 40 plus thousand.
So the Lexus volume over the next couple of years is certainly going to increase.
And on a by-dealer basis, again, Again, that put through a much smaller number
of stores is a significant amount of the volume.
And, you know, the current plan right now from a company standpoint is by, you know, 2035.
(12:50):
So 12 years from now, roughly that 100% of Lexus volume will be.
Obviously, you know, there's a lot of things that could change.
I mean, you know, we're all banking on, you know, BEVs are what people want,
but there's also a cost associated with it.
So that's really the focus, you know, from a product standpoint has really started
(13:13):
more on the luxury side for Lexus.
And then obviously on Toyota, you know, we've got our BZ model,
there's plans, you know, we're
going to get a minor change, some minor changes to that vehicle in 2025.
So it's going to be another year. And then the future product cadence after that on Toyota.
So really our focus getting into the world of BEVs, I know many would say that
(13:37):
we're a little late to the party, but we're going to focus on the Lexus side to compete on luxury.
And then obviously now that we've got a TWID offering.
So to your point, you know, there is a reputation sometimes for Toyota of electrification
being a little bit more slower than some of the other brands,
but you also have a heavier mix of hybrids and plug-in hybrids as a part of
(14:03):
your strategy, I think, than other car manufacturers are focusing on.
And I think part of that story is a little bit misunderstood,
you know, in the general public,
but it's part of it's about the idea of like decarbonizing the world and what's
What's the strategy and is the best thing to decarbonize to have fully battery
electric vehicles, or is it to have a mix of different types of electric vehicles?
(14:25):
Can you talk to us a little bit about how Toyota thinks about that?
No, it's a great point. And again, with all the focus on BEV,
we've been selling hybrids for 20 plus years with the Prius launching in the mid-90s.
And we've sold millions of hybrids over the years.
It's been a great vehicle for us. and it
(14:45):
you know it's the environmental impacts of
of hybrids and you know now that we
also have plug-in hybrids and we also have hydrogen we've got the mirai which
is sold in california obviously in small volumes so you know when you look at
our product offering we've got you know ice engines we've got plug-in hybrids
we've got hybrids we've got bevs now and then we also have hydrogen rye.
(15:11):
We call our approach a portfolio approach, and we're not putting all of our
focus just on BEV or just on hybrids because we know that there's people out
there that want certain things.
But when you look at the carbon footprint, and I'll share something with you
that you may have heard of or not, but it's something that we're trying to communicate
(15:33):
out to a larger audience,
is with so much focus on EVs, and if you look at the raw materials that are
needed to build one BEV, we have this 1-6-90 rule that's out there.
And really what that's saying is the raw materials that it takes to make just
(15:54):
one battery electric vehicle, you could actually build six plug-in hybrids.
And if you look at those same resources for one battery electric.
You could build 90 hybrid vehicles.
And if you look at the carbon footprint and the impact of those large number
of vehicles that are out there that are much better for the environment, it's very positive.
(16:19):
But I know a lot of people are just focused on BEV and there's some OEMs out
there just putting all their chips into battery electrics today.
So, you know, again, we're taking a more conservative approach.
We've come out and said by, you know, 2030, you know, roughly 30% of our sales will be just BEV.
(16:39):
But again, we're going to continue to focus on hybrids.
You know, we've got over the last couple years, you know, we've actually started
to transition where we've launched new models to fully hybrid.
You know, we used to have a nice engine option in a hybrid. I think Sienna was
a great example that when that new model launched.
(17:01):
Just comes into hybrid. And that's really, you'll continue to see that over
the next several years when we've come out with some of our new products,
they're going to start transitioning.
Even some of the higher volume vehicles are going to transition into just hybrid
offering, which from our standpoint, again, we feel is much better for the environment.
(17:21):
It's just, I think, unfortunately, most people are just focused on,
they just hear VEV. That's all anyone talks about.
It's like Like the only way to help the environment is to have more battery
electrics, but we just need to help educate people a little bit more on the
fact that hybrids and plugins are very impactful in a positive way.
Yeah. I just thought it was so interesting to hear this is like,
(17:44):
you know, I developed a relationship with Toyota because look, I'm a BEV fan.
I will never drive anything but a battery electric vehicle. I love the performance of it.
I'm addicted to it and all those different things. But there's so many discussions
about the environment as it relates to electric vehicles, and it's turned into a political thing.
And I think the way that Toyota speaks about it is very unique in the industry
(18:08):
and is worth people listening to.
So I'm just happy to hear you kind of explain that.
And just out of curiosity, if people wanted to learn more about Toyota's decarbonization
plans, where would you go? There's information on toyota.com.
I'd be happy after this, I'd be happy to forward you the document that our government
(18:30):
affairs document put together to help educate not only our team members that
work for Toyota and Lexus, but all our dealers as well.
I'd be happy to forward some material that we've developed. It's public information, but...
I think, again, if you look at it from an environmental standpoint,
(18:51):
you can go on twitter.com and it'll talk about a lot of the things that we're
doing. There's a lot of environmental programs.
I mean, Twitter has this 2050 environmental global plan.
Obviously, BEVs are one part of it. And in speaking about environmental efforts,
one thing I'll just touch on real quickly is two years ago, we know a lot of
(19:13):
our dealers are reinvesting in their facilities.
And many, when they originally built, were focused on lead, environmentally
friendly dealership and facility.
And there's a lot of lead environmental facilities, non-automotive,
that are out there in cities and towns.
But we just created a program called DEEP, which is our dealership environmental
(19:34):
excellence program that is starting to gain some traction.
You know, we've got about 65 dealers signed up.
Our hope is to get to maybe 200 by the end of the year.
But that's a program that we've partnered with, you know, a company called Altura
that goes out there and sits down with the dealer and looks at all,
(19:54):
you know, they're from electric to water to, you know, all their utilities,
talks about solar, talks about LED light.
I mean, there's so many things that a dealer can do to modernize their facility
to make it more environmentally friendly.
And, you know, it's a program that Honda had been doing for quite a few years.
They also have used Altura, but, you know, it's something that we've started
(20:17):
and it's been really well received from our dealers.
The savings that dealers have been able to recognize over just the first year
or two years on the program have been really, really positive.
So again, from an environmental standpoint, Toyota is very environmentally friendly, very conscious.
So we've got our focus on our future product, but we also are looking to figure
(20:41):
out how can we help our dealers with their facility and being more environmentally
friendly. Yeah, obviously so many dealerships out there, there's a big opportunity there.
And as Korean economics become more economic, I imagine that more dealers will jump on board. Yeah.
And the investment for the dealers, there's a fee associated.
(21:03):
I mean, obviously, Altura works closely with the dealer. And on average,
the dealer investment from the dealer standpoint is about $3,000 a year.
But the dealers that have been on the program, the average savings has been
anywhere between $15,000 to $20,000 per store. So to spend $3,000 to save $15,000
(21:25):
to $20,000 or so, I mean, that's a pretty good deal.
And we've had many other dealers that have even saved more.
So it's definitely gaining traction.
Some of our larger dealer groups
and some of the public companies have definitely seen it as a benefit.
We're excited about it. So my final question for you is electric,
(21:46):
non-electric, what's the most exciting thing about Toyota and Lexus in 2024?
Most exciting thing, 2024. That's a great question.
What are you most looking forward to? You know, I think the dealer,
the dealers have done really, really well over the last few years.
I mean, inventory, both Toyota and Lexus, you know, since, you know, pre-COVID.
(22:07):
So let's just say last three years, you know, inventories have been in the single digit day supply.
And, you know, I think a lot of customers may not have necessarily got the vehicle that they wanted.
You know, they took what they could. it. We end in the year now,
Lexus has a 20-day supply, Toyota's now at 13, 14-day supply.
(22:27):
We're going to see inventory continue to grow, not grow.
To pre-COVID levels. I mean, pre-COVID, our dealer stock for 1,237 dealers was
around 300,000 units at any given time. Today, we're still less than 100.
I think we see that getting back to maybe 15, maybe 20 days supply throughout
(22:48):
the year, but we also have a lot of exciting new product that's coming.
And I think there's nothing that gets dealers more excited and customers Then
the new product, the all-new 2024 Tacoma is just arriving in dealerships now.
We have an all-new Camry that's going to be coming out this year.
(23:09):
On the Lexus side, they launched the TX, which has been just a home run of a
vehicle. The new GX is coming out.
Again, over the next couple of years, our BEV lineup, it's going to be 25 until
we start looking at changes to our current product.
(23:29):
But I'd like to see inventory improve.
I think that's going to make it a better customer experience for people out
there looking for vehicles.
I mean, I got to tell you, I've had so many family and friends over the last
couple of years that are, you know, wanting this vehicle or wanting that vehicle
and they're going reaching out to dealers and they can't find it.
And it's, it's frustrating for a lot of people, especially if they need to,
(23:53):
or have to change their vehicle.
There's just such a, there's been such a limited inventory. So, I mean, that's.
It'll create a better customer experience and dealers are going to continue
to provide the customers with what they want.
So it should be a great year. Dealer profits continue to go well.
I think one other thing that you talked about earlier, kind of wrapping up on
(24:17):
this kind of partnership is we have a history of many, many years where we haven't
added a lot of stores to our dealer network, both Toyota and Lexus.
Again, we've got 1,237 to 244 Lexus, and that's really the way it's been for the last several years.
And we have the mentality that we want to grow with the dealers that we have.
(24:38):
We want them to have the highest sales per hour.
We want them to be the most profitable. If they're profitable.
They can reinvest in their facility.
They can reinvest in their customers and their own people. So that close partnership
mentality that we have, again, we want our dealers to be really successful.
The dealers appreciate that.
And again, I think it goes back to trying to, that winning combination is us
(25:01):
working closely with them, us providing them the best product that customers want,
and them doing their job, which has given the customer a great experience.
Experience yeah well said well said a good
year ahead well ken thanks for taking the time to join the podcast and telling
us a little bit more about toyota and lexus and i you know i encourage people
(25:23):
to go to toyota's website and read their sustainability program it's just you
know it's unique it's interesting and thanks again for the time and for everybody joining the podcast.
Music.
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