Unveiling Toyota's Strategy for the Electrification Era: Financial Results Announcement Q&A Session


Toyota's financial report for the fiscal year ended March 2023 indicated a projected operating income of 3 trillion yen. Amid the push towards electrification, the new management's strategy emerged from a Q&A with journalists.

Topic III: Path to production of 10.1 million units

Question: You’re forecasting production of 10.1 million units. How do you plan to achieve that?

Executive Vice President Yoichi Miyazaki

With the customer feedback we've received and considering the products we're looking to bring to market, we feel that a target of around 10.1 million units is achievable.

A year ago, we were in the dark about which semiconductors would be in short supply and when. At that time, we faced constant disruptions, starting production only to suddenly run out of parts, which impacted our production numbers.

Over the past year, we've made significant progress. We began by identifying the semiconductors presenting a risk, then adjusted our designs to allow for the use of effective alternatives in production. On the sales side, we've emphasized promoting models that are not dependent on these precarious semiconductors.

As a result, while we're not out of the woods yet, our ability to manage semiconductor shortages has improved dramatically. This has given us the confidence to set a production goal of 10.1 million units for this fiscal year.

What we strive for above all else is to make our customers smile. To achieve this, each member at the genba is dedicated to deepening bonds with our customers. Our regional-focused management, underpinned by our product-centered strategies, is what propels us toward the production goal of 10.1 million units.

Topic IV: Enhancing BEV competitiveness and approaching the Chinese market

Question: Toyota boasts a broad portfolio of profitable models, including hybrids. Does Toyota aim to maintain consistent profitability across all regions with its range of vehicles, including Battery Electric Vehicles (BEVs)?

President Sato

In order to prevent cars from being commodified, we see our strength in hybrid technology as vital, just as you have pointed out.

Moving forward, in what we believe to be growth sectors in emerging markets, hybrid technology serves a crucial dual role of underpinning our profit foundation and enabling us to produce ever-better cars specific to regional needs, while providing a means to reduce CO2 emissions.

On the other hand, our “multi-pathway” strategy emphasizes the importance of not concentrating on any single domain, but rather aligning with regional needs to deliver the most appropriate solutions for each area.

We believe it’s important to make cars that embody our identity, extending not only to hybrids but BEVs as well.

We are in the midst of fervently exploring how to create BEVs than only a carmaker can provide.

We aim to create a mobility solution within the BEV paradigm that goes beyond merely replacing the powertrain with electric. This goal is fundamental to our efforts as we establish a new organizational structure.

Question: How does Toyota view the world's largest market, China, and what are the plans to maintain and expand its market share there?

Executive Vice President Miyazaki

Looking back at our past performance, we encountered several obstacles, including difficulties securing semiconductors and the specific early-year impact of COVID-19 in China. These factors led to temporary downturns in some areas of the market.

As a result, the number of Lexus cars we exported from Japan to China decreased, which is reflected in our figures from the previous fiscal year.

However, we also have local operations in China. When looking at our overall business there, including these local operations, we've actually been able to increase our market share compared to the previous year, despite the difficult circumstances.

In China, our hybrids, including plug-in hybrid vehicles (PHEVs), continue to receive strong support from our customers.

Based on last year's figures, our market share has grown to around 9%.

Looking ahead, we expect the market to remain highly competitive. However, we are committed to expanding our business by focusing on creating cars that appeal to Chinese customers, developing sales strategies that please our customers, and fostering meaningful customer relationships.

Question: After attending the Shanghai Auto Show, what were your impressions of China's shift towards electrification?

Executive Vice President Hiroki Nakajima

When I visited Auto Shanghai, there were quite a few aspects that genuinely surprised me.

What stood out was not just the progress in electrification, particularly with BEVs, but the intense competition in intelligent technologies. Electrification seemed to be taken for granted, and the real race was in differentiating through smart features.

The challenge lies in how we can promptly provide what our Chinese customers perceive as advanced.

For instance, when it comes to the development of areas such as infotainment or the so-called digital cockpit, addressing these from Japan could be time-consuming. As a result, we decided to accelerate localization by establishing our development site in China and moving forward with the help of local suppliers.

On the same day as the financial results were announced, May 10th, Toyota revealed its plans to set up a new BEV Factory, aimed at accelerating the development and business of next-generation BEVs, embodying Toyota's distinct character as a car manufacturer. Takero Kato, Head of the Vehicle Development Center, was announced as the new President of BEV Factory.

In the Q&A session, Vice President Nakajima introduced President Kato, noting his past experience with BEV development in China. Furthermore, he shared the following comment: “We're determined to shape the future with our next-generation BEVs.”