Caution and ambition define Toyota’s long-term strategy

Zero emissions products and production, electrification, styling and a new corporate structure will be some of the features of Toyota’s strategy over the next several decades. By Martin Kahl

The safety scandal which struck Toyota at the turn of the decade resulted in the recall of around ten million vehicles worldwide. A smaller, weaker company might not have been able to withstand the resultant scrutiny, cost and reputational damage.

For any automaker, in the space of a few short years, to have apparently repaired and glossed over any lingering negativity related to the recall scandal is a remarkable feat; for Toyota to have retained its status as one of the world’s largest vehicle manufacturers by sales, as well as becoming the wealthiest and the most valuable, speaks volumes not only about its brand equity, but more specifically about its management and leadership.

A scion of the company’s founding family, Akio Toyoda assumed the company’s presidency in June 2009. Since then, he has quietly and successfully steered the company through the global financial crisis and the aforementioned sudden unintended acceleration scandal, as well as the difficulties resulting from natural disasters and geopolitical tension, to a point where – without conforming to the industry’s tendency towards consolidation and M&A – it sold just shy of nine million Toyota, Lexus and Daihatsu vehicles in the 2017/18 fiscal year. Include non-consolidated affiliate sales, and the figure rises to over 10.4 million units.

For Toyota to have retained its status as one of the world’s largest vehicle manufacturers by sales, as well as becoming the wealthiest and the most valuable, speaks volumes about its brand equity, management and leadership

The automaker’s long-term strategy is an ambitious one, based on reducing the environmental impact of its products and the way they are made; platform manufacturing, electrification, enlivened vehicle styling and a new corporate structure will be some of the defining characteristics of Toyota’s strategy over the next three decades and beyond.

As outlined in a new Automotive World automaker strategy report, Toyota’s simple model strategy – reliable but often unexciting – has proven highly effective, although it is making a conscious effort to give its vehicles more character. Most of Toyota’s future high-volume models will be underpinned by the Toyota New Global Architecture (TNGA), and the production of those vehicles will eventually take place only in zero-emission factories.

The word conservative applies to much of the way the company has evolved, notes the report author, Jonathan Storey. “Toyota has long been a conservatively managed company making cars which are also mostly conservative,” he says. “This approach has served it well, and today it’s the world’s most valuable carmaker, with a market capitalisation of US$172bn and cash or near-cash of around US$50bn on its balance sheet.”

However, its conservative approach does not negate innovation, adds Storey. “The company is not afraid to be radical nor to plough its own furrow. From the launch of the first Prius hybrid in 1997, it’s become the world’s leading producer of HEVs, selling over 12 million cumulatively, and hybrids accounted for 17% of sales in 2017.”

Akio Toyoda assumed the company’s presidency in June 2009. Since then, he has quietly and successfully steered the company through the global financial crisis and the aforementioned scandal, as well as the difficulties resulting from natural disasters and geopolitical tension

Indeed, he adds, “It is possible that in 20 years’ time, we will be making similar comments about Toyota’s fuel cell vehicles, it being one of the few companies to have launched a fuel cell-powered car on the open market – though it is also stepping up its development of battery-powered vehicles.”

The new Automotive World report examines the prospects for Toyota in the five years to 2022. Over the forecast period, the outlook for Toyota’s production is one of moderate growth, with output expected to rise from just over 9.8 million units in calendar 2017 to almost 11.5 million in 2022. Over the same period, the report forecasts Toyota’s output expanding moderately, with plants in China and the US expected to see the fastest rates of increase.

The automotive industry faces considerable change, both over the long term, and in the near term. Expect Toyota to make cautious, evolutionary changes and maintain a leading position at the top of the industry.

To learn more about the opportunities and challenges facing Toyota over the next five years, download Automotive World’s latest Strategy update: Toyota – 2018 edition

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