Toyota has a problem.
It is failing, fast, in the race to electric vehicle technology. While I am a skeptic on the arrival of self-driving car technology, I'm all-in on electric - and indeed, believe that in the next few years we will see a massive tipping point with production such that within ten years, most new vehicles will be electric. And few will be from Toyota. The brand might not survive due to the fact it has waited so long.
Why has this happened? As is often the case in family-run dynasties, it can be directly related to the refusal of the grandson of the founder, Akio Toyoda, to accept the reality of the disruption occurring in the automotive industry with the shift to electric vehicles. The result is that have now fallen significantly behind - not only Tesla, but other manufacturers who are leading the race such as Ford, Kia, and Volvo.
How does happen? Denial of the obvious, discounting trends, and dismissing reality. The thing is - this happens all too often in far too many industries, and there are powerful lessons to learn here. The biggest lesson is that a stubborn CEO who clings to the past rather than aligning with the future can often be the basic cause of the downfall. First, some background.
The car industry's most prominent skeptic of the transition to electric vehicles, Toyoda - a grandson of the company's founder - had frequently expressed reservations about both the feasibility and necessity, in climate- change terms, of going all-electric in the short run. "Carbon is our enemy, not the internal combustion engine," he once said. At a conference in Thailand just a few weeks ago, Toyoda added that he speaks for a "silent majority" of auto executives who are also "wondering whether EVs are really okay to have as a single option."
The last great electric-car skeptic
2 February 2023, The Washington Post
The admission of the obvious - that Toyota needs to accelerate its investment in electric - came at the same time that Volswagon was doubling down on initiatives it already had underway for quite some time - as with some other legacy automakers. All of them tried to catch up to the commanding lead set by Tesla.
The German automaker announced a plan to accelerate its transition to battery-powered vehicles and bolster operations in China and North America.
Volkswagen said on Tuesday that it would spend $193 billion on software, battery factories and other investments as it aimed to make every fifth vehicle it sold electric by 2025.
Volkswagen Points $193 Billion at E.V.s
15 March 2023, The New York Times
Volkswagen's announcement included a '10 point plan' for getting to electric. Notably:
"Two-thirds of that sum will be channeled into producing battery cells, developing software and shoring up supply chains of critical raw materials."
Volkswagen Points $193 Billion at E.V.s
15 March 2023, The New York Times
This came with a flurry of other announcements:
Volkswagen retooled its plant in Chattanooga, Tenn., last year to begin producing electric vehicles , and it now produces the ID.4 sport utility vehicle there. On Monday, Volkswagen said it had chosen a site in Ontario for a new battery plant. And earlier in March, the company said it would put up a factory in South Carolina to build pickup trucks and S.U.V.s that would be sold under the moribund Scout brand.
Volkswagen Points $193 Billion at E.V.s
15 March 2023, The New York Times
Toyota? Denial.
Toyota and Nissan are falling behind Tesla and Chinese rivals in the race to dominate electric market, writes Howard Mustoe
As recently as December, executives at the company were wavering over the push to battery-powered cars, with Akio Toyoda, the company's president and grandson of its founder Kiichiro Toyoda, insisting that a "silent majority" of car companies is concerned that electric vehicles will not alone be able to end reliance on fossil fuels.
How Japan lost pole position as world's best carmaker
8 March 2023, The Daily Telegraph
What does this type of reticence lead to? Limited early investments that did not go well:
Toyota and Nissan are falling behind Tesla and Chinese rivals in the race to dominate electric market.
Early efforts at rival Toyota have not run entirely smoothly. Last year it launched its first mainstream battery car in the US, the BZ4X sports utility vehicle. Toyota has now fixed the problem, but early buyers were told to return their cars to dealers because the wheels could fall off.
How Japan lost pole position as world's best carmaker
8 March 2023, The Daily Telegraph
Meanwhile, Volvo and VW plan an all-electric fleet by 2030. Already, more than 1 in 10 vehicles in Europe is electric, 1 in 5 in China, and 6% in the US. Toyota? Almost nothing. And it will be very slow to catch up.
Toyota Motor Corp will begin producing mid- to large-sized electric sports utility vehicles (SUVs) at its Kentucky plant as early as in summer 2025, aiming for monthly output of more than 10,000 by the year's end, the Nikkei business daily reported on Tuesday.
The company aims to sell about 1 million electric vehicles globally by 2026, according to the report.
Toyota will start electric SUV production in US as early as 2025
21 February 2023, Reuters News
The shift came with a rather stark admission by the new CEO:
Toyota Motor Corp.'s next chief executive said he wanted to accelerate development of parts and manufacturing methods optimized for electric vehicles , calling for an " EV -first mind-set" in building out Toyota's EV lineup.
"We need to drastically change how we do business," said Koji Sato, who is set to become chief executive in April, taking over from longtime leader Akio Toyoda.
Toyota Pushes EV-First Strategy
WSJ, 14 February 2023
By 2030? But a 1/3 of their production is scheduled to be based on EV technology., while many other legacy automakers will be fully electric by then.
Can a company successfully catch up in a race to the future when it is lagging so far behind? That's a big question - and it should provide some food for thought on how generational change and aligning to disruption are often a factor.
Toyota is seen by many as an EV laggard. In announcing his decision to vacate his position to Mr Sato, who is 13 years younger, the chairman-designate made clear it was time for a new generation to speed up the move into the electric era.
Kaizen, Chinese-style
4 February 2023, The Economist
Is it wrong to make this a generational thing? Maybe not. Here's the most telling admission:
"When it comes to digitalization, electrification and connectivity, I personally feel that I belong to the older generation," said Mr. Toyoda, 66 years old, in announcing that 53-year-old engineer Koji Sato would take over as president and CEO in April, while Mr. Toyoda would become chairman. "For me to take a step back is important."
Toyota Rethinks Electric Strategy
30 January 2023, Dow Jones Institutional News
"Because of my strong passion for cars, I am an old-fashioned person in regards to digitalisation, electric vehicles and connected cars. I cannot go beyond being a car guy, and that is my limitation," Toyoda admitted yesterday.
Resistance to electric cars has doomed Toyota
27 January 2023, The Daily Telegraph
CEO hubris and denial. It's a thing!
The petrolhead boss of Japanese vehicle giant - a fan of combustion engines - has risked damaging his company's reputation
Farewell Akio Toyoda, the voice of the silent majority. The boss of Toyota will be remembered for lots of things as he steps aside after 14 years in charge of the world's biggest carmaker.
He is, after all, the grandson of the company's founder, as well as the great-grandson of inventor Sakichi Toyoda, who many regard as the father of the Japanese industrial revolution. That means he is practically royalty in Japan.
He is also one of the industry's last real petrolheads - his dedication to testing out Toyota's more exciting cars himself even extends to competing in motorsport races under the pseudonym Morizo. Toyoda thought a nickname would help him blend in with the other drivers.
But he is probably best known as an increasingly outspoken critic of the electric car revolution - something that may have ultimately cost him his job. A recent outburst, in which he claimed to be part of a "silent majority" in the car industry questioning whether electric vehicles are the only way forward, made him an instant poster boy for the sceptics.
Resistance to electric cars has doomed Toyota
27 January 2023, The Daily Telegraph
The lesson learned? You can dismiss disruptive change.
But disruptive change often has the last word!
Futurist Jim Carroll has never been a fan of CEOs who are stuck in the past. Sadly, in his 40 year career speaking and working with disruptive change, he has met quite a few. He always knows how things are going to turn out for them!