NAGOYA, Japan -- Toyota Motor announced on Thursday that it will launch a service that lets customers try various car models for a fixed monthly fee.
Widely known as the "subscription model," Toyota will become the first Japanese automaker to offer the service in the country early next year. The company also will debut car-sharing services for customers who need automobiles for just several hours. That service will begin on a trial basis within the year and be fully launched by mid-2019.
Together, the new services represent an effort by Japan's largest automaker to establish alternative revenue streams, as the current one relies heavily on new-auto sales. As millennials shift away from car ownership, Toyota understands that it cannot continue down the same path to sustain growth.
"We need to deliver services that customers want, quickly," Yasuhiko Sato, senior managing officer of Toyota, said at a news conference.
Toyota will provide the tools needed for car-sharing to its network of 5,000 dealerships in Japan, including apps for sharing, drive recorders and payment systems.
The subscription service, named KINTO, will allow customers to drive automobiles such as the flagship Lexus for several months or switch to a sport utility vehicle. Insurance, maintenance fees and taxes will be included in the monthly fixed price.
The car-sharing service, meanwhile, will draw upon the 40,000 existing autos that dealerships use for test drives, reducing the need for initial investment. Users will reserve and make payments through smartphones.
A survey by the Japan Automobile Manufacturers Association found that only 12% of single Japanese intend to buy a car. Paying millions of yen to own a car is losing its appeal, especially as youngsters are burdened with additional mobile phone and data fees.
A key player in the new services will be the dealerships, which are managed by local businesses rather than being operated directly by the automaker.
"They possess land that can be used for parking," Sato said, and employing a smart-key system "will decrease tremendously parking fees and labor costs, the principal costs required for a car-sharing business."
The launch of car-sharing services goes in tandem with Toyota's review of its decades-old dealership strategy. Traditionally, four dealership chains each sold a different lineup of cars, catering to separate price ranges.
By 2025, Toyota intends to let all four chains sell every Toyota model. While doing so, Toyota will reduce the number of models to 30 from its current 40.
This will allow the dealerships to also offer an abundant choice of shared autos.
Toyota Motor announced plans for car-sharing and subscription services on Thursday, as the automaker looks to transform its sales strategy.
"We need to respond to any demand for cars, be it corporate customers or family use," Sato said. "Having the full lineup is essential to satisfy customer needs in car-sharing."
While the car-sharing service targets temporary users, the automaker assumes its subscription service will draw drivers seeking arrangements of two to three years, mostly younger customers or workers on temporary assignments who will leave the region after several years.
At a briefing to store managers before Thursday's news conference, Toyota warned that the company's sales "will likely decrease to 1.2 million units per year by 2025," down from the current level of 1.5 million, "if the situation does not change," Sato said.
The company told dealers it aims to maintain 1.5 million, partly by stimulating reuse and leasing services.
Nobuhito Massimiliano Abe at A.T. Kearney, a management consultancy, says that Toyota will be reviewing its relationship with dealerships as car-sharing becomes central to its operations.
"The network of dealerships will become a burden if all they can do is sell cars," Abe said. For dealerships to stay relevant, "automakers need to take actions to develop the role of dealers before sharing becomes a major market."
