Revving up the electric vehicle business is the first priority for Koji Sato as the new chief executive of Toyota Motor Corp. strives to sharpen its competitive advantage as the world's No. 1 automaker.
The 53-year-old veteran engineer has pledged to address energy security and carbon neutrality, and aims to transform Toyota from a conventional auto manufacturer into a mobility company at the same time.
The world's largest auto seller is the leading maker of gasoline-electric hybrid vehicles but lags behind in pushing all-electric vehicles.
Toyota currently offers several green technology options rather than focusing on EVs under a "multi-pathway strategy" that is sometimes considered a factor behind its relatively slow shift to battery-powered vehicles.
"Sato was Akio Toyoda's right-hand man. I think they are thinking in very parallel lines," Christopher Richter, deputy head of research at CLSA Securities Japan, said at a recent press conference at the Foreign Correspondents' Club of Japan.
Sato took the helm at the carmaker on April 1, replacing founding family scion Akio Toyoda in the company's first leadership change in 14 years.
At his first press conference as Toyota's top executive Friday, Sato set a lofty sales goal of 1.5 million electric vehicles with 10 new models by 2026. Toyota aims to boost its EV sales to 3.5 million vehicles in 2030.
"EVs are one of the most important options" to achieve carbon neutrality, Sato said. "We will expand our lineup in the next few years
Toyota sold 10.48 million vehicles worldwide in 2022 but its EV sales accounted for a small fraction of that at 24,000. The figure compares with 1.31 million electric vehicles sold by the world's largest EV maker, Tesla, the same year and the Volkswagen Group's sales of 572,100.
When the Japanese carmaker announced the appointment of Sato as new CEO, Toyoda said at a press conference that he himself felt too "old" to address the rapidly changing business environment. New services and technologies are expected to be increasingly needed for connected, autonomous, shared and electric vehicles, known as CASE.
Toyota believes battery EVs are not the only solution, betting on the need for multiple alternatives such as hydrogen-powered fuel-cell vehicles, hybrids and plug-in hybrids to cut emissions of carbon dioxide.
"What Toyota is competing against is not really rivals in China or Europe but actually all those governments and government policies," Koji Endo, head of equity research at SBI Securities, said at the FCCJ's press conference, referring to the regulatory environments of those countries.
Toyota's approach can better meet different requirements for each country's emission rules, analysts say. Some countries still have to rely heavily on fossil fuel power generation in the near term and EVs may not be the best choice in such markets. If customers cannot afford relatively costly EVs and FCVs, hybrids could be an option.
"If the Biden administration is replaced by a (Donald) Trump one, policies in the United States are going to be completely, 180 degrees, changed," Endo said.
U.S. President Joe Biden aims to make 50 percent of all new cars and light trucks sold in the U.S. market by 2030 electrified vehicles under the Green New Deal policy. But when Trump was in office, the world's biggest economy withdrew from the Paris climate accord.
Not many carmakers can follow suit, as higher development costs and more human resources are necessary to prepare for a variety of powertrain options.
"EVs have to be first, but it's really great to have a hedge of some other technology going forward," CLSA's Richter said.
Still, analysts say EVs are the most promising technology to achieve carbon neutrality in the long term and that Toyota's slow approach to the market could hinder its future growth.
Global EV sales are expected to surge to around 73 million vehicles in 2040 from about 2 million in 2020, making up 61 percent of the overall market, according to an estimate by Goldman Sachs.
"There is no doubt Toyota is lagging behind in the area of battery electric vehicles," said Takaki Nakanishi, auto analyst and CEO of Nakanishi Research Institute. "The important task for Mr. Sato and his new team is ramping up its effort in BEVs."
The new CEO is expected to take strong leadership as he did when he led the upscale Lexus brand division that is spearheading Toyota's EV strategy.
The Japanese automaker has vowed to make all Lexus models EVs by 2035 with its plan to launch a next-generation electric model in 2026.
Toyota failed to get off to a smooth start recently with the botched debut of the bZ4X. Output of its first mass-produced EV model had to be halted for a few months after its rollout in May last year in Japan due to possible wheel separation.
"We will expand our offering of electrified cars in a practical way," Sato said.