The New Chief Executive Holds The Key To Toyota's Electric Future

Nobody anticipated that Koji Sato, the president of Toyota's luxury brand Lexus at the time, would go into the vintage auto dealership in Nagano Prefecture, find a buyer for a repaired AE86 Corolla from a bygone period, and then pick up the sporting hatchback.

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As CEO of the biggest automaker in the world, Mr. Sato, 53, received new keys on Saturday. He will need to maintain a consistent focus on Toyota's future rather than romanticizing the company's history.

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With the change to electrification and automation, which has already produced a few early winners, most notably Tesla, Toyota, along with the rest of the $2.86 trillion global automotive industry, confronts a once-in-a-lifetime upheaval.

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As the shift to EVs proceeds faster than expected, the key issue is whether any of the incumbents — from Toyota and Volkswagen to Ford Motor and General Motors — will be able to navigate their way through and survive.

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"The next wave is on its way, all of those Japanese manufacturers must be adequately prepared before it is too late, Koji Endo said the SBI Securities managing director .”

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Mr Sato stated his intention to embrace a bolder and speedier "EV first" approach when unveiling his leadership team in February, vowing to restructure battery production and manufacturing platforms by 2026, with Lexus serving as the strategy's centerpiece. But, no specific details have emerged thus far.

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On the same occasion, Mr. Sato reiterated Toyota's multifaceted strategy championed by Akio Toyoda, the company's chief executive for the previous 14 years who will become chairman, a position that would allow him to continue to influence the company's strategy.

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"Mr. Sato has taken command of the ship, but Toyota is a massive ship, and a change in senior leadership will not cause it to shift direction immediately, Of course, the ship's owner is still Akio Toyoda," said Tatsuo Yoshida, an analyst. 

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Until now, Mr. Toyoda has consistently emphasized the importance of the company founded by his grandfather diversifying its bets across multiple technologies — from batteries to hybrids to hydrogen and legacy combustion engines — to serve customers and successfully transition to a post-fossil fuel future.

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In March, Mr. Sato stated, "We see promise in all possible solutions." Experts anticipate that he will unveil his intentions in the coming months, putting Toyota in direct rivalry with Tesla and China's BYD, the two largest EV companies.

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Building a specialized EV production platform from scratch will be an early hurdle for Mr. Sato as he attempts to grow battery EVs and reclaim some of the momentum stolen by those two competitors.

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"The key question is whether it's his strategy or one designed to prevent embarrassment," said Seiji Sugiura, an analyst with Tokai Tokyo Research.

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Toyota declared a goal of selling 3.5 million EVs per year by 2030 in December 2021. Battery EVs accounted for just 16,000 of the 9.5 million cars sold in the fiscal year ending March 2022, prompting critics to lament the company's unwillingness to commit to a completely electrified lineup or put up a strategy to phase out petrol-powered vehicles and decarbonize by 2050.

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When Toyota unveiled its first electric vehicle, the bZ4X, last year, expectations were high. Yet, this resulted in a loss of face when hundreds of automobiles were recalled because the bolts were not tight enough.

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While sales commenced in October, Mr. Sato will have to demonstrate that Toyota's battery-powered EVs are ready for prime time.

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Much depends on Mr. Sato's executive staff. Toyota has a solid bench of vice presidents.

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Hiroki Nakajima was designated chief technology officer, Yoichi Miyazaki was named chief financial officer, and Simon Humphries was made chief branding officer.

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"The new CEO is young, but Akio's old guard persists, They're still not persuaded Mr. Sato and his team can be trusted with everything just yet," said Yoshio Tsukuda, head of the Tsukuda Mobility Institute.

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The exchange at the used-car shop in Nagano last year offered a glimpse into Mr. Sato’s leadership style. He’s known for his relaxed demeanor and quick smile, traits that helped the young engineer climb the ranks at Lexus before being tapped on the shoulder to lead Toyota.

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“An enthusiast is better poised to understand what customers want,” said Toshio Fujimura, a former Toyota engineer who is now a professor at the Aichi Institute of Technology. “It makes sense for a car company to be led by someone who loves cars.”

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The AE86, which began production in 1983, quickly became popular in Japan but reached cult status in the 1990s after it was popularised by the anime Initial D. When he came across a pristine model restored to near-stock condition, Mr. Sato said he couldn’t help himself.

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“This car represents my youth,” Mr. Sato said in a video posted in December on the shop’s YouTube channel. “I know this car has a big following and many people adore it.”

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