Toyota manufactures, sells, leases, and repairs passenger cars, trucks, and buses, as well as the related vehicle parts. The company also operates financing services through its subsidiaries. Automotive operations are Toyota’s most significant business segment, accounting for approximately 90% of Toyota’s revenues in fiscal 2013.
The combustion of fuels, such as gasoline and diesel, to transport people and goods accounted for 16.5% of global carbon dioxide (CO2) emissions in 2010. Transport fuel demand is expected to increase nearly 40% by 20351. Noting this, improving fuel economy is a significant opportunity for managing rising CO2 emission levels on a global basis.
Toyota has a goal to improve its global vehicle fleet average fuel economy by 25% by 2015 against a 2005 baseline.
By 2015, global sales of hybrid electric vehicles, currently the most common alternative vehicle, will hit 4.3 million units and that number will double by 20202. This market share is a notably growing percentage of global passenger vehicle sales, which in 2012 totaled approximately 60 million3.
Toyota is the world’s biggest hybrid vehicle company by sales. On a cumulative basis, since Toyota’s first hybrid sale in Japan in 1997 until the end of March 2013, Toyota has sold five million hybrid vehicles. In 2012, 14% of Toyota’s global vehicle sales were hybrids. In Japan, hybrid vehicles accounted for 40% of sales.
Strict fuel economy regulations in the European Union and Japan, and the likelihood of more stringent CO2 future emissions requirements in the United States and China, are driving auto manufacturers to invest in emissions-lowering technologies and to improve the emissions performance of their products.
Toyota has committed to significant investments in research and development (R&D). The company’s R&D is largely focused on improving fuel efficiency of gasoline and diesel cars and the development of alternative vehicles. As of May 2013, Toyota had 20 commercialized hybrid vehicles with plans to launch 19 new and fully redesigned models between 2013 and 2015.
Toyota has implemented environmental management systems at all of its production companies, however, not all of those facilities have been certified. Portfolio 21 would like to see all company-wide ISO 14001 certification of environmental management systems.
Toyota produces regional environmental reports on its operations. Portfolio 21 has asked the company to integrate its reporting into a company-wide sustainability report that sets group-wide targets across specific key performance indicators.
The Auto Manufacturer sector is highly exposed to product safety recalls and Toyota is not exempt. To minimize exposure to litigation costs, reputational damage, and warranty payments, Portfolio 21 has encouraged Toyota to further invest in the necessary resources and management to limit its risk.
To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 12/31/13 and may not reflect current opinions or subsequent events.