Toyota, the largest automotive company in the world, sold 10.5 million vehicles last year. The Japanese car company has topped the global vehicle sales charts for seven of the past ten years, only losing to Volkswagen in the remaining three.
Toyota has long been considered the best automotive company in the world. Few automakers can match Toyota’s combination of vehicle reliability, product and manufacturing innovation, safety record, environmental reputation, global reach, customer loyalty, and profitability.
However, as Hans Greimel of Automotive News recently described, Toyota is now suffering “Tesla trauma.” This trauma is impacting Toyota on two competitive fronts. The first challenge is a weakness in Toyota’s lack of electric vehicles as Takaki Nakanishi described in the Financial Times. Until recently, the company has resisted calls for it to fully embrace EVs. Yet Nakanishi suggested that Toyota will face a dire future if it cannot make a serious commitment to an EV future.
The second challenge is the real possibility that Tesla is beating Toyota at manufacturing capability. This is significant for a company that invented the lean manufacturing process that many automakers now mimic. Greimel believes that Tesla has shown the creator of the Toyota Production System “that low-cost, ultra-efficient, outside-the-box production engineering is the secret sauce for making modern electric vehicles.”
”Akio Toyoda, the great-grandson of the company's founder, recently announced that he was stepping down as president and CEO. Toyoda will become chairman of the company, and stated that his departure from the CEO role is because he is an “old-fashioned car person” limited by the rapid industry transition to EVs and connected cars.
While other volume legacy automakers were making massive capital expenditures to transition to EVs, Toyoda was stating as recently as December 2022 that a “silent majority is wondering whether EVs are really OK to have as a single option…because the answer is still unclear.”
However, Greimel believes Toyota leadership was shocked when the Tesla Model Y became the world’s best-selling vehicle in the first quarter, beating out the Toyota Corolla. Thus, while Toyota remains the top-selling automaker in the world, there should no longer be any doubt (even if only measured by Akio Toyoda relinquishing the CEO role) that the company has a newfound recognition concerning the disruptive threat it is facing.
Will Toyoda’s successor, Koji Sato, be successful at driving the required product development and manufacturing process transition? Is Sato fully committed, given how Eri Sugiura of the Financial Times described him as a “close disciple” of Akio Toyoda? Has Toyota waited too late? This is clearly a game of “catch-up” for the company, not just catching up to Tesla, but also catching up to other legacy automakers that have a significant head start over Toyota in the transition to an EV future.