The FINANCIAL -- Tegeta Motors will soon start selling Toyota car brands in Georgia, so far offered mainly by Toyota Center Tbilisi. The company was granted official dealer status by Toyota Caucasus which has worked solely with Toyota Center Tbilisi for the last decade.
Such a move is seen as an aggressive plan by Toyota towards expansion in the region or to replace its old partner who experienced difficulties with the former government and had a drop in sales. The founder of Toyota Center Tbilisi believes the change will affect the income of both companies.
“This is an immature step made by Toyota Motor Europe,” Irakli Gurchiani, Owner of Toyota Center Tbilisi, told The FINANCIAL. He predicted a 20-50% reduction of income for both Tegeta Motors and his own company as a result.
“It’s expected that Tegeta Motors will start selling Toyotas from July 2014. This will have a negative impact not only on our company but also on Tegeta Motors. Both of us will face sales and income reductions of 20-50%. As a result we will both be forced to decrease staff numbers and also salaries,” Irakli Gurchiani, Owner of Toyota Center Tbilisi, told The FINANCIAL.
“Even in five time’s larger cities than Tbilisi, e.g Baku, there is only one dealer,” he said.
Toyota Caucasus trusts that TCT will have no problem maintaining their loyal customers, as well as further expanding their sales through permanent improvement of processes and business practices. “There still remains a part of demand which is not being covered currently, due to natural limitations of operational capacities of any company,” the management of Toyota Caucasus told The FINANCIAL.
Irakli Gurchiani said that Irakli Kodua, former head of the Interior Ministry’s Special Operative Department (SOD) was blackmailing his brother Erekle, who was arrested for the illegal purchase and possession of drugs. The Prosecutor’s Office said that Kodua met with the brothers in his room and promised to sign a plea bargain agreement. In exchange, Gurchiani gave him the car he had bought on credit from Toyota Center. Kodua also demanded another car for the Government that cost USD 41,500. This car Kodua registered in the name of another person, later in his own name and finally sold for USD 27,000.
In the summer of 2013 Toyota Caucasus announced a competition to select a new dealer. Tegeta Motors participated in this competition along with four other Georgian companies and won the deal. Toyota Center Tegeta will offer customers all the models of Toyota officially presented by Toyota Caucasus on the Georgian market: Yaris, Corolla, Avensis, Camry, Prius, Rav4, Prado, LC200, Highlander, LC 70, Hiace, Coaster and Hilux. Until now, Toyota Center Tbilisi has been the only such dealer on the Georgian market.
Tegeta is not yet listed on the website of Toyota Caucasus as an official dealer. The logo of Toyota is also absent at the largest service centre in Tbilisi owned by Tegeta Motors.
“Georgia is a small market. Approximately 60 cars are sold here a month. So, there should not be two dealers. We are talking about cars, not wine or vodka. Unfortunately TME did not take that into account,” said Gurchiani.
“The fact is that the market will not sustain two dealers. Tegeta had to invest a huge amount in this project. I am sure that they will not manage to get it back for ten years,” Gurchiani predicted.
Contrary to Gurchiani, Gega Metepshishvili, Director at Toyota Center Tegeta, is optimistic and thinks that a year on from the beginning of sales, the company will already form an important part of the new vehicles market.
In 2013 Toyota Center Tbilisi sold 1,229 units. During the first three months of 2014, the company sold 213 cars. TCT won the Golden Brand Award for best brand promotion several times. Because of the worsened economical situation however, TCT had 20% sales reduction in comparison with the same period of last year.
“We expect overall Toyota sales in Georgia to increase with the growth of the market, while the expanded network would facilitate greater attractiveness of our brand to customers compared with all other competitors. We believe such “customer conquest” will be the main contributing factor in the further growth of Toyota’s sales,” The FINANCIAL was told by Toyota Caucasus.
“Competition is always beneficial for both customers and companies. It provides for the improvement and development of their products and services,” said Metepshishvili.
“Toyota is a world leading auto brand by size and sales volume. So, for a company of our profile, becoming its dealer would enable us to have long-term, productive cooperation,” he added.
Annual turnover of Tegeta Motors was more than USD 100 million. For the opening of Toyota Center Tegeta, the company invested more than GEL 10 million together with TBC Bank and EBRD.
“Toyota is one of the oldest officially represented automotive brands on the Georgian market. We have been witnessing with much satisfaction and appreciation, how the popularity of the brand has kept increasing along with the development of the Georgian economy. A large part of the credit for this success goes to Toyota Center Tbilisi, which is our long-time esteemed partner. At the same time, Toyota’s ultimate goal is to ensure that all our existing and new customers receive the best product, service and overall ownership experience of the Toyota vehicles. In response to the growing customer base and total number of units in operation, the decision was made to expand Toyota’s network in Georgia, in order to ensure maximum customer satisfaction in all aspects of our business. Candidacies of numerous local companies were considered and after careful and thorough evaluation, Tegeta proved to be the most suitable new partner to implement and uphold all standards and requirements which Toyota sets for any partner,” said the management of Toyota Caucasus LLC.
Thanks to very liberal legislation, governing automobile import, Toyota Caucasus estimated their operations on the Georgian market to be very competitive, offering local customers a very wide range of purchase opportunities. “Although this circumstance creates a number of challenges for individual automotive businesses, the overall business environment is very healthy. So far Toyota has enjoyed the great loyalty of Georgian customers, but we need to maintain the highest performance levels to be ahead of our competitors and keep exceeding the expectations of our customers. Hence the decision to increase our presence in Georgia through network expansion - a process which will continue permanently, in line with the growing demand for our products and services,” management stated.
“Toyota Center Tbilisi is one of the oldest and most experienced car retailers in Georgia. Throughout the years of its successful operation, the company developed probably the largest customer base in Georgia, as compared to other businesses in a similar segment. We trust that TCT will have no problem maintaining their loyal customers, as well as further expanding their sales through permanent improvement of processes and business practices. At the same time, there still remains a part of demand which is not currently being covered, due to the natural limitations of operational capacities of any company. We believe that the new retailer, operated by Tegeta Motors, will utilize this yet unexploited niche,” said the management of Toyota Caucasus.