Toyota's 2023 results were SOO good, it's worrying. Chairman Toyoda wants to slow things down

Later this month, Toyota is expected to announce a record high profit of USD 30 billion for its financial year ending March 2024. This comes after Toyota hit a record high sale of 11.2 million units (including Lexus, Daihatsu, and Hino) in the last calendar year.

But this was not the outcome many number-crunching, future forecasting financial analysts predicted. Toyota started 2023 facing a series of intense public relations attacks from the Western media calling it an anti-BEV lobbyist. They predicted that Toyota will be the next Kodak or Nokia.

Bloomberg even published an article with the title ‘The world’s love affair with Japanese cars is souring - Brands like Toyota have been global favorites for decades. How did they get the shift to electric so wrong?’

The article quoted Jefferies financial analysts as saying, “Toyota has substantially miscalculated its EV strategy.”

Critics say the anti-BEV Toyota is clinging on to its hybrids for too long, lobbying governments to slowdown adoption of electric cars, which is a lie.

Toyota simply implored governments of the world to “Listen to the customer,” which is a fair point for any elected government. Toyota explained that “It is the customer, not car makers, or even regulations, that will determine what kind of car sells in the future.”

The last part is now playing out for all to watch and study in Europe and China, as subsidies are rolled back, manufacturers grappling with overcapacity, leading to a price war that is now spilling over to export markets.

Also read: Effect of price war: BYD has overtaken Honda in bookings collected during Thai motor show

Also, Toyota lobbied no more than Tesla, whose former BEV lobbyist Grace Tao later became Tesla’s vice-president, according to a report by the New York Times.

Analysts: We were wrong about Toyota

14 months and three financial quarters after Bloomberg’s scathing article, Toyota reported a 107.9% increase in 3-quarter (April to December 2023) net profit.

While other carmakers are slashing prices to clear unsold BEVs piling up at their dealerships, Toyota is making so much money from its high-in-demand hybrids that it had to revise its annual profit forecast upwards by 14 percent!

Meanwhile, Tesla kept missing its quarterly targets; BYD hit its annual sales target of 3 million units but investors dumped the company’s stocks anyway, over concerns dealers holding too much inventory, and frequent price cuts are eating into its profits.

Investors looking to recoup their losses from ill-timed BEV investments are now pumping money into Toyota. In the last 12 months, Toyota’s stocks surged over 105%, Tesla is down 4%, BYD is down 16%.

Making a U-turn from their stinging words last year, Wall Street types are now busy making up to Toyota.

In February 2024, Morgan Stanley’s auto analyst Adam Jonas said “I owe Toyota an apology. From 2019 through 2021 we predicted the demise of hybrids given changes in regulations, EV adoption and consumer tastes. We were wrong. Hybrids are proving to be a viable transition tech defining share winners/losers in 2024.”

Against this backdrop, you would think that Chairman Akio Toyoda would be smirking with an “I told you so” look. Far from it. Toyota doesn’t care what financial analysts (or short-term investors) say, good or bad. To Toyota, an analyst's buy / sell / hold / calls are distracting noises. When they see Tesla's valuations overtaking Toyota, they willl pressure Toyota follow Tesla. When they lost money on Tesla, they will praise Toyota.

The only voices that matter to Toyota are the voices of customers. Customers are telling Toyota that they want BEVs, but many more say they want hybrids, while the people in the Global South say they still need diesels, others say they want high-speed refuelling hydrogen – basically a menu of options to meet every customer’s unique needs, thus explains Toyota’s Multi-pathway’ approach.

Toyota is not anti-BEV, but neither is it pro-hybrid, or pro-ICE. Toyota is simply pro-customer. Few, including many pro-hybrid / pro-ICE Toyota fans, understand this.

Subsidy-boosted demand is not genuine demand, thus explains why Toyota has more customers today than it has cars to deliver, while rival manufacturers are sitting on unsold, heavily discounted BEVs.

Learnings from 2023: Electric is the future, but hybrids to pay the bills today

Toyota’s own projections predict there will be real big shift to BEVs, one that doesn’t rely too much on subsidies, in the second half of this decade, which in manufacturing terms, is quite soon.

But soon is not tomorrow, and to survive until ‘soon,’ one must first survive tomorrow, and that itself may prove too difficult for many BEV manufacturers.

Changan’s Chairman Zhu Huarong estimates that 60% to 70% of China’s 148 brands will be gone in the next few years.

Remember that of all Chinese electric car brands, only BYD and Li Auto are making money, and neither are foolish enough to risk everything they have for a 100% BEV-only product line-up. BYD and Li Auto hedge their bets with a variety of plug-in hybrids and extended range electric vehicles (which carries its own on-board generator). The sharp contrast in their fortunes versus BEV-only brands like Nio, XPeng, even Tesla, proves this.

Toyota wants to run slower in 2024, sell less cars, fix Daihatsu

Despite its stellar ‘mic drop’ financial results, Chairman Toyoda is concerned that Toyota’s record-setting positive results will undo the reforms made during his 14-year presidency.

The scandals at Daihatsu, Hino, and Toyota Industries reminded Akio that his job is not done, even though he is no longer CEO.

Akio started 2024 not talking about BEVs or hybrids or what-nots. That’s a task for his CEO Koji Sato. Instead, Akio Toyoda zeroed in on something more fundamental – the foundation of the company’s future, specifically, its people, especially the ones at Daihatsu, which Akio is not too impressed.

Speaking in January 2024 to announce the new Toyota Group vision, the Chairman said, “When the numbers go up, many people praise you. People want to get praised and nobody can criticize that. What we must consider, however, is where these volumes and profits are coming from. If we only harvest from the fields our predecessors carefully left us, such management won’t last long. That was the case when I first became President,” referring to the 2008 recall crisis, his baptism of fire as President.

Looking at the recent scandals at Toyota’s subsidiaries, Akio said, “When a crisis threatens a company’s survival, we are given two paths as managers. One is a path of short-term success via stop-gap measures and all-or-nothing bets. The other leads back to the founding origins that give our existence meaning. For us, there is only one path. We return to our staring point and fix what went wrong,”

Speaking in a separate session with frontliners and middle-ranking managers, people who often finding themselves caught in difficult positions, Akio Toyoda said:

"While organizations and corporate visions serve as a necessary compass, you move the ship. So please ask yourself, “What kind of person do I want to be? What do I want to do? What makes me happy?”

"I think that mid-level leaders often lose sight of themselves, but we should try to act in ways that would be praised by our future, more grown-up selves. Even if no one else appreciates this, it helps to establish our own core.

"Organizational and corporate policies are set by the powers of that time and might change from year to year, right? You can’t let yourself be tossed around by them.

"Being part of a company means following certain rules. But when it comes to the question of what to do, ask your heart. Starting today, try living your life that way—it may change how you see things."

Toyota has yet to announce its forecast for financial year 2024, but CFO Yoichi Miyazaki has hinted at an intentional slowdown in sales.

"We have been running this quarter at a sprint, so we don't keep our customers waiting," said Miyazaki, referring to the semiconductor parts shortage that led to long waiting periods in 2021 and 2023.

"It's true we've been overwhelmed, with labour shortages affecting our suppliers. We want to rethink our speed to win the long-distance race," Miyazaki told Jiji Press.

"We need initiatives that will allow us to run a marathon," he told Automotive News Europe, adding that forecasts for 2024 will be about deciding an appropriate ‘cruising speed,’ rather than hitting the rev limiter.

The reforms at Daihatsu are aimed at correcting the work culture there, where intense vehicle development schedules had pushed staffs to ignore rules and regulations so they meet their bosses’ tight deadlines.

Also read: Last Daihatsu-developed Vios: Toyota terminates EMCC, takes over ASEAN models development

Several job titles have been eliminated too. Chairman, Executive Manager, and Deputy Executive Manager are no more. The top-3 highest ranking Daihatsu management members, including the already-resigned Chairman and President, have also been asked to return 100% of their bonuses received in the last financial year.

Daihatsu is also extending vehicle development lead time by 40 percent, to reduce pressure on development staff.

Unproductive work like what Daihatsu describes as ‘meaningless formal written reports by staff to managers’ has also been removed.

It is also importing a factory-style Toyota Production System’s ‘Andon’ cord - which empowers staff to halt the ‘assembly line’ if a quality issue is not addressed - into office environments.

Delays for new Perodua / Toyota model launched in Malaysia

This reorganization, coupled with an on-going, separate audit called by Toyota for all Daihatsu-developed models, implied that there will be delays in launching the D66B Perodua Nexis (unconfirmed name) and Toyota Yaris Cross in Malaysia, as well as work on the next generation Toyota Yaris. The latter is rumoured to also be shared with the next generation Perodua Myvi.

As hinted by Yamazaki’s comments, Toyota is in no hurry to rush these new Daihatsu-developed models out. Every on-going Daihatsu project must be combed through once more with a fine comb.

Unfortunately, the delays will result in lower sales, and therefore lower revenue for both Perodua and UMW Toyota Motor in 2024.

Neither Perodua nor UMW Toyota Motor has announced their sales target for 2024. With their new model launch schedule thrown into disarray, it's hard for either companies to give an accurate forecast.

Aiming for slower, more sustainable growth is good for Toyota and its customers in the longer term, but not for Sime Darby Motors in the near-term, which paid RM 5.84 billion for 100% of UMW Holdings.