TOKYO/BEIJING: Toyota, which vies with Renault-Nissan and Volkswagen to be the world’s largest automaker, is reported to be in the process of slashing its sales and marketing costs as it seeks to shift resources into research and development.

First reported by Reuters, which spoke to four unnamed sources said to be familiar with the matter, the Japanese car giant has already torn up contracts with the Chinese division of Dentsu, its long-standing communication and advertising agency.

This business was worth about $50m a year, but top executives at Toyota are reported to have become frustrated at the “extravagance” of a ride-and-drive event organised by Beijing Dentsu in the southern Chinese city of Shenzhen in March.

The cost-cutting drive is being led by chief executive Akio Toyoda and chief financial officer Koji Kobayashi, who were also disappointed by a second event organised by Beijing Dentsu – Toyota’s display stand at the Beijing auto show in April.

According to one of the sources, a review by Toyota showed “out of control extravagance in how it executed those events – not over-billing”.

Beyond these immediate concerns, Toyoda and Kobayashi are said to want more discipline in Toyota’s sales and marketing teams and for them to behave more like the company’s highly efficient operational side.

This is likely to mean that a number of sales and marketing jobs that are currently outsourced would move in-house, the four sources revealed.

In addition, Toyoda and Kobayashi are acutely aware of the growing threat posed by tech giants – such as Google, Tesla and Tencent – which are allocating more and more money for automotive technology.

With a profit margin of about 9%, Toyota is one of the most profitable automakers in the world, but even this respectable figure lags behind the tech giants.

As a result, Toyoda and Kobayashi want more sums to be reallocated to innovation and see its “wasteful” sales and marketing expenses – worth $24.66bn in the year to March – as the source for investment.

Commenting on the growing challenge posed by Google and other tech firms, one of Reuters’ sources said: “We may be posting record profits, but we don’t think we are keeping up with their pace of investments.”

Sourced from Reuters; additional content by WARC staff