Toyota needs its new chief to tell an electrifying brand story
Its CEO succession may be an opportunity to push the pedal on EVs
The CEO of the world’s biggest car company is stepping aside, after steering the firm through supply-chain crises brought on by natural disasters and a pandemic over his more than decade-long reign. Under Akio Toyoda’s leadership, Toyota Motor Corp never quite took the electric path head-on like its peers and refrained from touting EVs as the future. Did he mess it up and leave the Japanese company on its back foot? Not quite. Toyoda, who’s likely to stay active as chairman, may have just played a master stroke.
Nervous in the shadow of Tesla, global carmakers have hastily talked up massive investments and laid out electrification plans. They’ve released and recalled models while running into teething troubles even as EV profitability struggled. But Toyota focused on reducing emissions as its endgame. It said that clean cars will help “only when they come into widespread use.” It took low-key but effective measures to do this, including working with suppliers and improving existing technology. Sadly, those don’t get investors and analysts excited.
The carmaker’s EV efforts have been understated and long-running: It set up an EV division in 1992 and launched its electric RAV4 four years later. It was withdrawn in 2014 because charging times were too long, unless customers drove long distances for speedy top-ups. Toyota launched smaller EVs in the 2000s, investing over $7.7 billion, and has made over 19 million batteries over the past three decades. In 2021, it invested more in powerpacks. When Toyoda laid out its EV strategy then, with his heir and chief branding officer Koji Sato by his side, he said 35% of the firm’s vehicles would be fully electric by 2030.
Toyota couldn’t convince the world it wasn’t reluctant on EVs, partly because of Toyoda’s plain-spoken approach. He outlined insufficient clean energy and charging infrastructure as limitations. It would take time, he said. Now, as EV batteries become a geopolitical flashpoint, the challenge of securing supplies has got magnified.
Toyoda has a point. Carmakers are still working out supply agreements and turning to China, despite diplomatic tensions. While EV sales have risen under regulatory pressure and subsidies, battery technology has kept costs high. Charging infrastructure is scarce and the cars remain unaffordable for most. This is so even in an advanced market like the US.
Still, Toyoda’s approach has had results. Between 2019 and 2021, his firm brought down direct and indirect greenhouse gases. In 2021, Toyota’s 18.1 million hybrids had reduced emissions (because of lower fuel consumption) as much as 5.5 million EVs would have. Compared to some other large automakers, its emissions-per-vehicle are lower, as is the energy it uses to produce every vehicle.
Sure, critics often eye this with some scepticism. However, isn’t cleaner air why the world got into electric vehicles in the first place? To lower emissions? It wasn’t just to create a fancy new car in the name of innovation. Expensive technology rarely outlives the practical alternatives used by the masses. At best, they co-exist. The invention and death of the supersonic Concorde aircraft is one example of excessively costly endeavours that eventually become hard to justify. Or, viewed another way, ceiling and floor fans still exist (Dysons in their best form), even though air-conditioning came along.
Perhaps Toyoda realized that for the world’s biggest car company to remain ahead, globally, it would have to keep up its branding exercises. Especially after Toyota’s epic failure to launch the bZ4x electric vehicle. Toyoda, a self-described rally-racing “car guy”, was never able to do the breathless marketing spiel to sow lofty expectations. He acknowledged this: “While we may not have explained things adequately, I think our products speak best for themselves,” adding that the firm was pursuing “all options.”
Toyota’s new CEO has a different record. Sato’s efforts at Lexus set the brand up to target 100% battery EV sales by the end of this decade in some regions. Perhaps Sato will start focusing the firm’s wide-ranging future mobility strategy toward EVs and hybrids, and show investors that. Now that the company is making EVs in China, he is likely to benefit from the uptick as a portion of their global total, as well. With the US Inflation Reduction Act giving its various plug-in hybrid offerings a major boost, earnings there could give Toyota wiggle room with its EV plan. The Japanese carmaker won’t be a Tesla anytime soon, but it will remain the trusty drive most consumers want and, importantly, can afford.
Playing the martyr and replacing himself was Toyoda’s clearest message yet. If Sato can tell a truly electrifying brand story, then Toyota may finally be able to shed its laggard image.
Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies across Asia Pacific.
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First Published:31 Jan 2023, 10:54 PM IST
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