Dec. 26, 2019
Toyota's Endless Pursuit of Creating Ever-better Cars in the 'Real World'Continuing to refine competitiveness in this once-in-a-century transformational period
Executive Vice President*
- *Title as of December 2019
The auto industry is in the midst of a once-in-a-century period of profound transformation, a period that requires change on our part. For precisely that reason, however, we have to be mindful of what must not change―namely, we must continue to hone our competitiveness in the real world of car making. This alone will allow us to generate the resources needed to weather the changes to come and shift management resources to make even more appealing cars for the coming era.
Toyota's car making is distinguished by its volume―producing and selling more than 10,000,000 units per year globally―and its full lineup, ranging from compact to full-size cars and commercial vehicles, eco-cars, and GR sports cars. We are leveraging these distinctions through two key initiatives. The first is Toyota New Global Architecture (TNGA), aimed at greatly enhancing the potential of cars and utilizing the advantages of scale to implement smart sharing. The second is the in-house company system, through which are creating distinctive cars based on the customer's perspective. Through these initiatives, Toyota is thoroughly applying its core strengths, the Toyota Production System (TPS) and its approach to cost reduction, to further hone efforts to make ever-better cars that are even more affordable. With the step beyond that―a complete business model change to a mobility company―as our unwavering goal, we are advancing a wide range of innovations.
Our Progress So Far
It has been four years since the introduction of TNGA and three years since the launch of the in-house company system. The number of models and units produced based on these systems is growing. Beginning with the fourth-generation Prius in 2015, we have steadily expanded the range of models based on TNGA, including the mid-size C-HR, full-size Crown and Lexus, the Supra sports car, and the compact Yaris. In 2019, we have announced six such models, bringing the total as of November 2019 to 19. These new models now account for approximately 40% of our global vehicle sales. In particular, Toyota produces and sells more than 1,000,000 Corollas per year and recently introduced a Japan-only size, different from the global model, to accommodate the nation's roads. In addition, our RAV4―the world's best-selling SUV boasting powertrains and drive systems suited to region-specific conditions, has been reintroduced to Japan with affordable pricing. Thanks in part to these efforts, the RAV4 has done well among younger consumers, who are seen as less interested in cars, with customers aged 39 and below accounting for 45% of all sales.
We have also seen clear gains in competitiveness under TNGA in the areas of vehicle development and production. Development man-hours have been reduced approximately 25% thanks to improved evaluation efficiency through grouping development and component standardization. Capital expenditures related to model switchover is also down an average of about 25% per line, as we are now able to efficiently produce multiple models using the same facilities due to advances in equipment and fixture standardization. Furthermore, we have reduced vehicle costs approximately 10% by standardizing components and reducing the number of component types as well as by revising component structures and simplifying production processes through manufacturing improvement in cooperation with suppliers. However, due in part to enhancements to environmental performance and safety features, we have not yet been able to bring prices as low as customers would like. We will continue working to make cars with such features even more affordable.
Initiatives for a Once-in-a-century Period of Transformation
The environment surrounding car making has changed rapidly in recent years, from the tightening of environmental regulations to the entry of new players from other industries and the diversification of mobility businesses. Such changes are expected to continue increasing in scope and speed, and delivering the cars that customers want via conventional methods is already growing difficult. We are currently advancing three initiatives to address these changes and continue to surpass customer expectations.
The first initiative is to enhance the in-house company system. In July 2019, we established the Vehicle Development Center and expanded the Toyota ZEV Factory. At the Vehicle Development Center, we aim to further accelerate development and reinforce product appeal by fully integrating everything from advanced planning and advanced development to mass production development in a lean manner. At the same time, we are nurturing skilled human resources able to advance the total optimization of cars as well as development from the customer's perspective. At the Toyota ZEV Factory, by consolidating all of Toyota's functions related to zero-emission vehicles (ZEVs), we will be able to advance the integrated planning, development, and manufacturing of next-generation ZEV products. The existing vehicle-based companies will also further leverage the specific features of their respective cars, competing with one another to further differentiate their products from the customer's perspective and hone their efforts to make ever-better cars.
The second initiative is the evolution of the TNGA. In addition to global changes, such as the shift from sedans to SUVs, region-specific customer preferences are in constant flux. Rather than rigidly pushing complete global standardization, we are making adjustments by model and region to meet customer needs while advancing smart sharing and cost refinement. Alongside flexible development, we will implement flexible production of differently shaped models to further ensure a framework that is resilient to changes in demand.
The third initiative is to build relationships with partners as we move away from a policy of internal self-sufficiency in preparation for the CASE era.* Specifically, we are applying a "home and away" perspective as we rebuild our businesses based on careful evaluations of the strengths and weaknesses of each Toyota Group company while advancing alliances with other companies to enhance competitiveness and speed. We are working with Daihatsu Motor Co., Ltd., to reinforce coordination in car making, focusing mainly on compact cars in Japan and emerging nations. In addition, we are advancing collaboration in the areas of development and production with Suzuki Motor Corporation, which boasts a strong market share in India, leveraging the strengths of both our companies, as well as collaboration with Subaru Corporation in the area of All-wheel Drive (AWD) technologies, to make cars even more fun to drive, and battery electric vehicle (BEV) development. Through such efforts, we are promoting collaborative car making that leverages our respective strengths to meet evolving needs. At the same time, in the areas of safety and eco-friendly technologies, which can best contribute to society if they are in widespread use, we are not only accelerating technological development within Toyota to lead the way but also going beyond competition to actively promote collaboration across the industry.
Going forward, we will continue to push forward ambitiously, constantly seeking improvement based on the TPS and cost reduction as we work to transform into a mobility company. Through such initiatives, by the end of 2021 we plan to introduce 14 new models, raising the portion of global vehicle sales accounted for by such models to approximately 60%.
Our Unchanging Focus on Creating Cars That Will Be Loved
Toyota boasts numerous long-selling models still in production more than 50 years after their launch, such as the Crown, Land Cruiser, Hiace, and Century. Over the decades, we have pursued car making that meets the needs of the times, thinking carefully about the role that each vehicle plays and receiving feedback from customers around the world. In this way, our customers have helped make us what we are today, for which we are deeply thankful. In autumn 2019, 53 years after the debut of the original Corolla, we launched its 12th generation. Recently, hearing about a man who has driven his original model for 53 years, I was moved by how beloved cars can be. Beyond attachment to the car itself, through the process of making memories with his family in it, his entire experience with the Corolla has transformed into something irreplaceable. Going forward, to prevent our cars from being commoditized, we will continue to work to make cars that customers will want, so that they will be loved and the experiences had with them unforgettable, seeking always to deliver cars that are high quality, affordably priced, and that meet our customers' needs.
Executive Vice President