Summary of Key Points
Over the past decade, Toyota has become a stable profit generator thanks to its core strengths in lean manufacturing, just-in-time production, and zero inventory strategies. However, it has significantly fallen behind in the era of electric vehicles (EVs) due to the fact that its traditional advantages are no longer applicable in this new market segment. Additionally, Toyota has failed to keep up with changes in strategic choices, core technologies, supply chain models, and智能化 capabilities.
Detailed Analysis
1. Traditional Methods Fail in the EV Context
Toyota’s lean production methods (minimizing waste and efficient assembly), just-in-time procurement (ordering parts only when needed), and zero inventory policies (avoiding excess inventory to save costs) were designed for internal combustion (IC) vehicles. The heart of IC vehicles is the engine and transmission, areas where Toyota excels, enabling it to squeeze every last penny out of production costs. In contrast, the core components of EVs are batteries, motors, and software—none of which are Toyota’s strengths. For example, while Toyota has not yet mass-produced solid-state batteries, companies like CATL and BYD have already achieved low-cost, long-range liquid battery technologies. Motors and software are also areas where new players (such as Tesla and Xpeng) hold a significant advantage, leaving Toyota with little expertise in these fields.
2. Misstrategic Focus Hindered EV Development
Toyota initially believed that hybrid vehicles represented the best transitional solution, which is evident from the success of its Prius hybrids. As a result, it invested most of its resources in this area, neglecting the development of pure-electric vehicles. It was only when global trends shifted towards electrification (driven by policies in China and Europe) that Toyota realized the need to accelerate its EV efforts. By 2021, Tesla had already sold millions of electric cars, while BYD had a wide range of EV models available. By then, Toyota was far behind.
3. Zero Inventory Strategies Struggle with the EV Supply Chain
Toyota’s zero inventory approach relied on a well-established IC vehicle supply chain with local parts suppliers that could deliver goods on the same day. However, the EV battery supply chain is more complex, as batteries require raw materials like lithium, cobalt, and nickel, which are often sourced internationally (e.g., Australia and Chile). The long transportation times and volatile prices of these materials pose significant challenges for zero inventory strategies. A shortage or price surge in raw materials can disrupt production, leading to delays in EV delivery. For instance, the sharp rise in lithium prices in 2022 caused supply shortages, affecting Toyota’s ability to produce EVs.
4. Lack of Intelligence Fails to Keep Up with the “Software-Defined Vehicle” Trend
Modern EVs are more than just vehicles with batteries; they are intelligent devices capable of autonomous driving, voice control, and remote updates. Toyota’s infotainment systems are outdated and lack advanced features compared to Tesla’s FSD or Xpeng’s XNGP. Consumers buy EVs for their intelligent capabilities, and without these innovations, Toyota’s EV models struggle to attract buyers.
In Summary
Toyota’s success was built on its expertise in IC vehicles, but the EV industry has evolved significantly, with different technologies, business models, and customer demands. Toyota failed to adapt in time, leading to its lagging behind competitors. This is similar to a restaurant that once thrived on delicious cooking but struggles in an era of online ordering—if it refuses to change, it will inevitably be outcompeted.