Toyota has become one of the world’s largest automakers by churning out cars, trucks, and sport utilities - affordable, reliable, and safe. But over the years, it has also grown a reputation for being kind of boring. A scion of the Toyota family, Akio Toyoda, now has the reins at the company founded by his ancestors, and he gave a severe order: no more boring cars. Now the Japanese giant is doubling down on speed, adventure, and cutting-edge technology in a bid to survive and succeed in an era where global automakers face tremendous uncertainty over the future. Toyota aims to maintain its reputation for producing cars that are affordable and of excellent quality, while also injecting them with enthusiasm and energy.
The Founding of the Toyota Motor
Toyota Motor was founded in 1937 by Kiichiro Toyoda, the son of the famed Japanese inventor and industrialist, Sakichi Toyoda, who made his fortune building looms for weaving fabric. The business became especially successful after the outbreak of World War One led to a downturn in the Japanese cotton and fabric businesses, which was worsened by the Great Kanto Earthquake of 1923, the Financial Panic of 1927, and the Worldwide Depression in 1929. On the other hand, the earthquake created a massive demand for cars. The disaster had devastated the Japanese rail system, and the country began importing choices from Ford Motor Company to convert into buses for public transport.
Toyota created the automotive production division of Toyota Automatic Loom Works on September 1st, 1933, and soon after began plans to build a manufacturing facility. He had absolutely no experience making automobiles, so he purchased vehicles from Ford, Chevrolet, and Chrysler and took them apart, looking for models on which he could base his own design. He also recruited engineers from Japanese car companies and local subsidiaries of American carmakers such as GM.
The company’s first production passenger car, the Model AA, was launched in 1936, and a separate company, Toyota Motor, was formed the next year. Soon, though, Japan was embroiled in World War Two, and the country’s auto industry shifted production to help with the war effort.
The Path to Success from Flop to Top Seller
The war left Toyota a battered company. Production was tightly restricted, materials were in short supply, and one of its factories had been bombed at the war’s end. In its aftermath, though, Toyota began making the trucks. The company believed Japan would need to rebuild itself. Toyota also got a big break in 1950 when the U.S. Army placed a large order for trucks needed in the Korean War. Toyota almost doubled monthly production from 650 vehicles to 1000 vehicles.
Slowly, Toyota remade itself, but it realized it had to expand beyond Japan if it wanted to survive and grow over the long term. And to do that, the automaker looked to the massive and fast-growing market in the United States. The cars 1950s America is best known for are massive vehicles but Toyota executives noticed sales of compact cars were growing, and just about all of them were European. The company figured there was an opportunity for its own relatively small vehicle.
The Toyopet Crown, a sales office, was opened in a former Rambler dealership in Southern California. But the Toyopet Crown was a flop, and Toyota’s newly hired American staff saw the disaster coming. The first problem was that the Crown was built to drive at low speeds over Japan’s shoddy roads. But the car was ill-suited to U.S. roads, which were smooth and new, and where cars could reach highway speeds of 60 miles per hour. Toyota sold 287 Crowns in 1958. Sales tripled in 1959, but the company soon pulled the car from the market and regrouped.
Toyota was serious about understanding the U.S. market, though, and began to design cars specifically for U.S. buyers. And it worked, by 1967, Toyota was the third-best-selling import brand in the United States. In 1973, it set up a design studio in Southern California called Calty Design Research to develop vehicles that best suited the tastes of the American market. Today, that group has two offices. The Newport Beach, California studio focuses on concept designs and advanced designs, while the Ann Arbor office does designs for production vehicles. Toyota also received a leg up in the U.S. auto market thanks to the oil crisis of the mid-1970s, which left customers scrambling to find fuel-efficient vehicles. In 1975, the company gained the top spot among import brands. In 1986, it was the first import brand to sell one million vehicles in the U.S., and since then, it has remained among the top sellers. So how did it get there?
Their cars did not have the flair or pedigree of their American and European competitors. But Toyota and other Japanese manufacturers offered something different - quality and reliability at low prices. I mean, they hit the market at the perfect time because clearly, for there was oil crisis at that time. The U.S. automakers weren’t producing really the small cars. And here comes the Japanese with a high-quality, reasonably priced product with excellent fuel economy.
Crucial to achieving this was Toyota’s approach to manufacturing, which has become renowned throughout the automotive industry and the larger world of manufacturing.
Reviving Up Excitement and passion
From the very beginning, Toyota stressed the importance of efficiency in its factories. Plants were set up to emit waste and inconsistency as much as possible. One thing this does is reduce wasted parts by only keeping a small number of parts on hand at any given time and only making what is needed. The factory is liable to waste a lot less time, energy, and materials if it discovers a defect in something. Consistency and reliability became the keys to Toyota’s strength, and as the automaker’s sales grew, the Toyota production system became perhaps the most respected in the world.
“We never believe we’re the best at anything. You know, I appreciate our competitors and others thinking that we’re great. You know, it’s nice to be thought of as great. We constantly wake up in the morning and think, you know, we’re not that great, we need to get better. Continuous improvement. So that’s a factor. One factor, too, is respect for people. And the reason why that plays into the current production system is when you look at how we operated our players, we actually empowered the team member on the wall to make critical decisions about the quality of the products coming off that far.” Says Christopher Reynolds, Chief Administrative Officer, Toyota Motor North America.
Beginning in 2009, the company suffered perhaps its worst recall scandal in its history. An off-duty California highway patrolman was driving on a highway with his family when the Lexus they were in unexpectedly accelerated, crashed into another car, then tumbled off the highway and caught fire. Everyone in the car was killed. That was the beginning of a long drama that would result in the company recalling millions of vehicles and paying out more than one billion dollars in a settlement with the U.S. government. Like many automakers, Toyota was also swept up in the scandal over faulty airbags installed by the Japanese supplier Takata.
But if Toyota faces an enduring challenge today, it is not a perception that its products are unsafe. It is a perception that its products don’t particularly excite people. At least in the U.S., auto sales have hovered near record levels in recent years. But industry observers expect sales to turn downward in the future. The other threat facing Toyota and indeed all automakers is the excitement over self-driving cars and competition from other forms of transportation. Cash-rich tech companies have thrown their weight behind a plethora of new transportation concepts, including ride-hailing and apps that allow customers to quickly rent electric scooters and bicycles. Most of these concepts are still in their infancy, but they are rapidly attracting investment. Legacy automakers do not want to be left behind. To be fair to Toyota, it has been responsible for more than a few innovations in its long history.
In 1997, Toyota launched the hybrid car market with the Prius, the first production hybrid vehicle. Toyota is also credited with creating one of the earliest examples of what we now think of as a crossover. The Toyota Rav-4 was one of the first SUV-like vehicles built with a unique body frame typically used for cars, crossovers, and SUVs. Now, they make up 48 percent of the US new car market, and smaller crossovers such as the Rav-4 are some of the best-selling and fastest-growing segments. But now, like its competitors, Toyota is trying to transition from a traditional carmaker into a diverse mobility business.
The company invested six hundred million dollars in D.D., a Chinese ride-hailing app similar to Uber and Lyft in the United States, in early 2019, about a year after making a 500-million-dollar investment in Uber. The company also has a number of organizations that are devoted to researching new technologies. Toyota Research Institute was founded in 2015. It studies robotics and artificial intelligence and is, among other things, trying to build a car that is incapable of crashing. Toyota A.I. Ventures, the venture arm of the institute, manages more than 200 million dollars and invests in an array of mobility technologies in areas such as robotics, artificial intelligence, and aviation.
In the meantime, Toyota is trying to make old cars that are not just practical, safe, and reliable. Current president Akio Toyoda is known to be passionate about cars in a way that is distinct from his predecessors. Akio is a driver and is fond of racing cars under a pseudonym. Notably, he test drove the Supra himself. The Supra is also the first car in the United States to be released under Toyota’s Garza racing sub-brand, a new line of vehicles meant to help fulfill Akio Toyoda’s “no more boring cars” mandate.
“I think it all kind of starts with the ‘no more boring cars’ mantra, really. You know, it kind of embodies that award for Toyota. And I think, you know, when you add that to some of the other things that we’re doing around adding some other models to our car lineup, it really, really lifts up the Supra idea as something for all of us to look at and say, wow, how can we inject some more light into some of our cars? And so. So I think overall what it does is it brings emotion back to our brand.” Says Samuel De La Garza, Senior Marketing Manager for Supra Toyota Motors.
Apart from the Supra, Toyota is trying to infuse excitement into much of its lineup, even in models typically known as family haulers or ride-hailing workhorses. Notably, the automaker is expanding its Toyota Racing Development or TRD sub-brand. Historically, Toyota has stuck the TRD badge mostly on its pickups such as the Tacoma, the Tundra, and the Forerunner SUV. But in 2018, Toyota came out with TRD versions of the Avalon and Camry sedans. The move shocked the automotive press. For now, moves like this may help keep drivers interested in owning a Toyota, despite fierce competition from fellow automakers and a bevy of new transportation options. Toyota has made itself into one of the world’s biggest and most respected automakers, using innovation and discipline to leapfrog American and European rivals. The next several decades might reveal whether that will still matter.