Good afternoon and thank you for the opportunity to speak with you today. I’m honored to share the story of Prius and talk about Toyota’s commitment to the environment I’m Mary Nickerson and typically when I tell people that sustainability and enriching society is Toyota’s mission, they’re skeptical. But just look around. There’s clearly been a dramatic shift around the world as scientist discover more about Climate Change. In the past, many companies viewed sustainability as good PR rather than a source of profits. But the times are very different now. Consumers today want to do business with companies that care about more than just profits. They want companies to reduce their environmental footprint. They’re rewarding companies that innovate. They expect companies to not just reduce the impact of their products, but the entire way they run their business. [PAUSE] Today I hope to share with you Toyota’s philosophy about sustainability, the birth of Prius and how we believe it has contributed to our growth For better or for worse, we have taken the “customer and society first” approach to our business. We’ve been criticized at times and have made our fair share of mistakes. But in the end, we believe our experiences have made us a better company. For Toyota, sustainability is inherent in our company’s culture. It extends from the top down, across all of our operations. It’s a commitment instilled in all of our employees. It’s exemplified in the way we do our jobs each day. Our view of sustainability and enriching society was born out of ideas developed in the 1930s by our founding fathers. They had a commitment to establish Toyota as one of the world’s most respected companies.
Two forces combined to create this commitment. First , we realized that as an automaker, we have a tremendous responsibility to society. The world already has more than three-quarters of a billion cars and trucks. And our industry is adding nearly 170,000 more each day . So we had to find ways to reduce our environmental footprint. The second force is recognizing that being a good corporate citizen is essential to our business. Building quality vehicles, investing in communities and creating good jobs is key. But to be a valued member of the business community, we have to do more.
In the early 1990s, Toyota’s then-chairman Eiji Toyoda – a man famously concerned about the environment – challenged the company to do business in a new way for the 21st century. So we made a commitment to become a leader in environmental responsibility and established our Global Earth Charter in 1992. This slide outlines the basic policies of the Charter. [Pause] One requirement of the Earth Charter was that every Toyota operation worldwide must create an action plan…. A plan with specific targets for reducing its environmental footprint. These targets were needed to turn ideas into action and concepts into reality.
One of the main projects our engineers began under the Earth Charter involved an all-new powertrain. One that would cut emissions by as much as 90 percent and provide twice the fuel mileage of the average car on the road. Our engineers struggled to meet this challenge – especially in battery development. In fact, in an early media test-drive held in Japan in May of 1996, each participant was limited to two laps around the track because battery performance was so poor. But, in typical Toyota fashion, we were diligent in solving each problem one by one. And, after endless fussing and tweaking, the team finally reached their targets.
The result of their efforts was Prius, the world’s first mass-produced hybrid vehicle. I was in charge of the Prius U.S. Marketing when we introduced the Prius in the U.S. in 2000. To be honest, we weren’t sure what consumer reaction would be. It’s fair to say we had more than a few skeptics back then. Gas was selling for less than a dollar a gallon…remember those days? And consumers were obsessed with SUVs and trucks. Our competition ridiculed us – some even called Prius a “science experiment.” The first generation Prius wasn’t perfect. With its 13 second “zero to 60” performance, it wasn’t exactly fun to drive. Car and Driver magazine reported, “The Prius alternatively lurches and bucks down the road, its engine noise swelling and subsiding for no apparent reason.” No one knew if demand existed for the car or how it would be received.
So, we did a substantial amount of research to identify who the product would appeal to and buyer concerns about new technology. From demonstration programs, focus groups, and research clinics we were able to find out that it would be difficult to find those that are willing to try new technology. High interest with innovators and those who liked to be considered technology savvy led us to the internet. This allowed us to educate consumers and consumers to indicate to us that they were interested in Prius. We also learned that we needed to educate consumers about the benefits and practicality of hybrids and that our best opportunity was for a person to experience a ride to understand how simply the Prius worked.
We identified two key buyer targets…Technology Pioneers and the Environmentally Friendly We developed a niche marketing strategy that involved demonstration, education and dialogue. One of the insights that we gained in learning from our early buyers is that…. Driving a Hybrid is Making a statement
The Prius was very slow to catch on, and the critics felt we had no chance of making a profit. When we unveiled the Prius to Wall Street, the biggest question we got was, “How much money are you going to lose selling those things?” “ And what’s the point?” they asked. It’s not like the laws required it. It was definitely a big gamble, but one we felt we had to take. We set a low sales goal for Prius in the first year - only 12,000.
Despite all of its challenges, that first Prius caught on. Buyers overlooked its sluggish performance and price premium for what they gained in fuel economy and lower emissions. Sales in those first years were higher than we had hoped. And then celebrities discovered the Prius and it really took off. Spurred by early adopters like Leonardo DiCaprio and Harrison Ford…and eventually a debut at the Oscars, the Prius became somewhat of a fashion statement. While the Prius was gaining traction in Japan and the US, our engineers were hard at work on the next generation model. We knew that it needed to be faster and more powerful…and use even less gas and produce even fewer emissions. Again our engineers went through a lot of trial and error but the end result was a success. When the next generation Prius launched in the fall of 2003, we struggled to meet the demand. Customers often waited months to get their new car.
The Prius buying target evolved into Innovators and Early Adopters. These were people with a passion, who wanted to make the world a better place. Prius and our hybrid technology were positioned as a “no compromise solution that gave consumers what they wanted and what society needed”. It was a passionate symbol, some say, a badge of Courage, to tell others that Caring for the Environment was a commitment, and the Choice to buy this odd looking car was a declaration of values.
We focused on developing relationships with celebrities solely based on trust and confidence. Initially, we asked a few celebrities if they would like to be chauffeured in the new Prius. A few celebrities drove their own Prius to the Oscars which definitely made a statement. After the first three years, the celebrities began calling us. Even Charlize Theron wanted to arrive in one of our hybrid vehicles. We nurtured a strong relationship with the Environmental Media Association. This entertainment industry organization recognizes TV and movies with creative and strong environmental messaging. Through this relationship we developed personal relationship with over 100 celebrity owners. As our relationship grew so did the requests, and now celebrities were asking for their movie or TV characters to drive a Prius. This resulted in free product placement which was valued in the multi millions of ad dollars. We are very thankful to celebrities who talked passionately on talk shows and had their picture taken while driving their Prius. It definitely contributed to it’s “cool” image.
With today’s environment of high gas prices and increased concern about our dependence on foreign oil, the Prius is still winning customers. In 2010 we expect to sell 175 thousand Prius and could sell more if we had them. Prius is now the third best-selling vehicle in our lineup. This year we reached a major milestone. – worldwide sales of over 2 million Hybrids We estimate that these vehicles have contributed to over 9.0 million ton reduction in carbon dioxide emissions compared to similar gas-powered vehicles.
And the Prius was just the start. We now have six hybrids in our North American lineup with six on the Way by the end of 2012. In fact, 11 percent of our U.S. sales are hybrids and we’ve sold more than 80 percent of the hybrids in America so far. The hybrid market continues to grow and our industry has taken notice. Our competitors have stepped up their own research and development in this area, which is good for the environment and for consumers. According to a report by AllianceBernstein, by the middle of the next decade, more than half of all new cars sold in developed markets will be hybrids. That’s quite a turnaround. And while sales and profits from our hybrids have been great, they have also provided a significant boost to our reputation as a caring company. Consumers have consistently ranked Toyota as a top company in environmental and social responsibility. This type of brand equity is intangible. It won’t show up on a balance sheet, but it’s clearly a factor in consumer purchase decisions. When we first launched Prius, it benefited from the Toyota brand. Now the Toyota brand benefits from Prius.
Hybrids will remain a core technology for our future power trains, but they are just the beginning. Globally, we’re spending aggressively on R&D - to the tune of a million dollars an hour. We’re developing a variety of promising technologies that deliver high fuel economy and lower emissions. We’ve accelerated our development of plug-in hybrids. We expect to deliver a significant demonstration fleet for research and development by 2010. Go to market in 2012. We will also continue to invest in the exciting potential of hydrogen fuel-cells. You won’t see them in your dealerships for a while, but our test vehicles have accumulated more than 140,000 miles of real-world driving experience. We expect to go to market by 2015
But we’re not just focusing on the cars. We’re also looking at how the cars are built. We’re leading an all-out effort to develop sustainable manufacturing plants and processes worldwide. We’re on track to meet our aggressive targets to reduce energy consumption in our plants 27% by 2011. We’re reducing our vehicles’ environmental impact across their entire life cycle, from design to manufacture to operation and disposal. Today, the plant where we build the 2010 Prius has cut CO2 emissions by 50% since 1990.
And in North America, every one of our 14 plants has achieved “zero landfill” status. We even compost food from our cafeterias! Each of our new plants around the world will build on that model. I am excited to share that our newest plant under construction in Mississippi will feature renewable energy and improved recycling methods. It will also be surrounded by a new 180-acre forested nature preserve. Unfortunately there won’t be any golf courses! And the most exciting news is that this plant in Mississippi has been chosen to build the next generation Prius! We set the same high standards for our business partners as well. We expect our suppliers and dealers not only to comply with all environmental laws and regulations, but also to support our environmental programs. And we work with them to provide the resources they need.
In fact, partnerships are an integral part of Toyota’s environmental commitment. We realize that the amount of intellectual horsepower needed for innovation and progress is not found in any one company. The days of “going it alone” are gone. Whether it’s R&D or implementation, working with experts in the field is key. With R&D costs higher than ever, we’re even working more with other automakers to share expertise and lower the costs of advanced technologies. We now have joint ventures or alliances with GM, Ford, Nissan, Volkswagen, Panasonic…even Exxon. We work together in areas ranging from hybrids to alternative fuels. Our partnerships also aim to address the urban design. In July, we sponsored an event in Portland, Oregon called the “Meeting of the Minds.” We were joined by universities like UC Berkeley and UC Irvine and elected officials and urban planners from all over the world. Together, we discussed future urban design and infrastructure challenges. How, for example, can we make our cities more accommodating to new vehicle technologies or energy sources?
In keeping with this partnership theme, we also support numerous environmental organizations that are promoting education and conservation. We recently partnered with the National Audubon Society to launch Together Green. Together Green funds conservation projects, improves environmental education, and offers volunteer opportunities across the country. Toyota contributed $20 million to the program. We’re encouraging our 36 thousand U.S. employees to join volunteer projects in their communities.
We’ve also worked with the National Arbor Day Foundation since 2001, supporting the annual poster contest and tree planting initiatives at our plant locations. Recently we contributed five million dollars and 23 vehicles to the National Parks Foundation to enhance their environmental leadership and educational programs at parks around the country. The partnership will support youth camp scholarships for inner-city and Native American communities, bilingual Junior Ranger programs, and intern programs. We think it is our obligation to advance these partnerships and will continue to do so.
Customers are looking beyond their wallets. They’re not just looking for responsible products. They want responsible practices - in every area of business. While that has presented a tremendous challenge to Toyota, we believe the opportunities to improve will make us a better company. And, if our experience with Prius is any indication, environmental innovation will be rewarded. And while we’re committed to growing profits over the long-term, we will continue to take a “customer and society first” approach. If we deliver the best products and services and the best value, while reducing our environmental footprint, our profits and stock price will take care of themselves. It’s the perfect way to serve both a higher purpose and the bottom line. Thanks so much and I look forward to your questions about Prius and Toyota. ###
Prius story nickerson sep2010
The Prius Story: Turning Responsibility into Opportunity Mary Nickerson National Marketing Manager Toyota Motor Sales, U.S.A
<ul><li>More Cars on the Road </li></ul>750 MILLION cars and trucks
Toyota’s Global Earth Charter <ul><li>Help enrich society </li></ul><ul><li>Pursue environmental technologies </li></ul><ul><li>Volunteer activities </li></ul><ul><li>Work in cooperation with society </li></ul>
<ul><li>Family demonstration programs in critical U.S. markets </li></ul><ul><ul><li>Provided real world feedback / advocates </li></ul></ul><ul><li>Focus groups </li></ul><ul><ul><li>Uncertainty about Prius benefits /practicality </li></ul></ul><ul><ul><li>Seen as a a risky investment </li></ul></ul><ul><li>Research Clinics </li></ul><ul><ul><li>High interest with innovators / tech. savvy </li></ul></ul><ul><ul><li>Compelled to find out more </li></ul></ul><ul><ul><li>98% of participants used internet </li></ul></ul>Initial U.S. Research on Hybrids <ul><li>Needed to educate consumers about benefits and practicality of hybrid technology </li></ul><ul><li>Pricing critical </li></ul><ul><li>Internet was key method to deliver vehicle information to interested parties </li></ul>
Original Prius Target – Different Mindset <ul><li>Tech Pioneers & Environmental Friendly </li></ul><ul><ul><li>Looking for the latest technology </li></ul></ul><ul><ul><li>Sensitive to environmental issues </li></ul></ul><ul><ul><li>Making a statement </li></ul></ul><ul><li>Demographics </li></ul><ul><ul><li>Older (Baby Boomers) </li></ul></ul><ul><ul><li>Predominantly Male </li></ul></ul><ul><ul><li>Highly educated </li></ul></ul><ul><ul><li>Upscale income </li></ul></ul>
Evolution of Prius Target <ul><li>Tech Pioneers & Environmental Friendly </li></ul><ul><ul><li>Looking for the latest technology </li></ul></ul><ul><ul><li>Sensitive to environmental issues </li></ul></ul><ul><ul><li>Making a statement </li></ul></ul><ul><li>Innovators & Early Adopters </li></ul><ul><ul><li>Eager to test latest technology </li></ul></ul><ul><ul><li>Willing to take risks </li></ul></ul><ul><ul><li>Deeper emotional needs = People with a passion for principle </li></ul></ul>Position Prius and Hybrid Synergy Drive as an exciting, new “no compromise” solution that gives consumers what they want and Society what it needs
Strategic Marketing <ul><li>Celebrity partnerships </li></ul><ul><ul><li>Oscars </li></ul></ul><ul><ul><ul><li>Annually provide Prius vehicles to celebrities to drive to Oscars </li></ul></ul></ul><ul><ul><li>Celebrity owners such as, </li></ul></ul><ul><ul><ul><li>Cameron Diaz </li></ul></ul></ul><ul><ul><ul><li>Leonardo DiCaprio </li></ul></ul></ul><ul><ul><ul><li>Robin Williams </li></ul></ul></ul><ul><ul><ul><li>Ellen Degeneres </li></ul></ul></ul><ul><ul><ul><li>Sting </li></ul></ul></ul><ul><ul><li>Allows them to show their commitment to the environment and provides Toyota with unsolicited testimonials from Hollywood community </li></ul></ul><ul><ul><li>Product placement opportunities </li></ul></ul>
<ul><li>Toyota’s 3 rd best selling car </li></ul><ul><li>Sold more than 80% of hybrids in U.S. </li></ul><ul><li>Over 2.0 million Toyota hybrids sold worldwide </li></ul>Prius
Innovation Plug-in Hybrid Fuel-Cell Hybrid Electric vehicles
<ul><li>Manufacturing Sustainability </li></ul>Logistics Disposal Procurement Logistics Use Customer Dealer Recycling Recycling company Production R&D Toyota Extraction of resources Raw materials Energy Water Fuel Parts & materials suppliers