Akio Toyoda leaves Toyota CEO job to Koji Sato

Japanese car manufacturer Toyota has announced a change at the top of the group. Koji Sato, COO of the group and president of the Lexus brand and the motorsport subsidiary Gazoo Racing, will become Toyota’s new president and CEO on 1 April 2023, replacing Akio Toyoda in this role.

Toyoda (66), the grandson of group founder Kiichiro Toyoda, will take over as chairman of the board of directors, replacing Takeshi Ushiyamada (76). What impact the change in leadership will have on Toyota’s current multi-drive strategy remains to be seen. Toyota is currently revising its EV strategy and will present a new three-year plan to its suppliers early this year.

The change at the top will coincide with the new fiscal year in Japan, which traditionally starts on 1 April and ends on 31 March of the following year. Takeshi Ushiyamada will then step down as chairman but will remain a member of the board and deputy director of the company.

Toyota does not give any background information in the short and emphatically factual announcement. The news agency Reuters seems more to the point: “Toyota’s chief executive will step down as head of the company his grandfather founded, the automaker said on Thursday, handing over to the leader of its Lexus luxury brand as the Japanese giant struggles to meet the shift to electric vehicles.”

The electric challenge

Toyota posted a broadcast alongside the announcement on its YouTube channel. There, Toyoda said it was now Sato’s job to transform Toyota into a “mobility company”, but without giving details. Incoming CEO Sato also took part in the talk and gave unusual insights into the process for a major Asian corporation. During a trip to Thailand at the end of 2022, Toyoda asked him, as a complete surprise, if he could take over the CEO position. Sato said he initially thought it was a joke.

Even for analysts in Japan, the announcement came as a surprise. Reuters quotes an analyst who suspects that Toyoda, as chairman of the board of directors, will continue to be heavily involved in the operational business, so for Sato, this will be “a kind of apprenticeship”. For Bloomberg Economics, Tatsuo Yoshida writes that “this is a positive change because it will rejuvenate the top of the company while at the same time, there will be stability with Mr. Toyoda in a supervising role.”

It was not only Toyoda’s unresolved succession that had recently caused disgruntlement among investors. Toyoda’s strategy of focusing for a long time on hybrid cars and fuel cell vehicles instead of battery-electric drives has also come under increasing criticism, given global market developments.

Toyota is the champion of hybrid drive and a pioneer in hydrogen as an energy source, but it has dragged its feet in developing BEVs. This has caused rising criticism from investors as well as NGOs who accuse Toyota of greenwashing and still promoting internal combustion engines and, thus, fossil fuels.

In 2021, the group announced major investments in electrification, but even then, Akio Toyoda has regularly shown some skepticism about pure electric cars for all car users worldwide. It’s foreseen that Koji Sato will continue this policy. He promised “to accelerate the electric transition but at the same time produce vehicles that respond to different values and local needs.”

That’s reiterating the actual credo of the group by not putting all the eggs in the same basket and giving the clients a maximum of options to choose from,  depending on the energy transition pace in their respective regions.

Akio Toyoda

As the grandson and son of two illustrious company leaders (founder Kiishiro and successor Shoishiro Toyoda), Akio had a serious task before him. “You probably heard the saying that the third generation in a family business usually ruins the business, and that’s what I’ve been hearing and thinking of all my life. I have always been determined to prove the opposite.”

As a young boy, Akio just wanted to become a taxi driver, and he has always been very keen on motorsports, racing himself under the alias ‘Morizo’. Akio Toyoda studied law at the prestigious Keio University in Tokyo and entered the company in 1984. He slowly escalated the company ladder, but in 1998 he surprised everybody by founding Gazoo.com, an internet platform dedicated to racing.

In 2009, aged 53, he became the youngest CEO  ever of Toyota in a period of serious financial turmoil. Apart from that, severe quality problems required the recall of millions of Toyotas and obliged him to a humiliating public sorry before the American congress. He learned a lot from it, and today, Toyota has one of the best relationships worldwide with its suppliers and manages to have a supply chain less influenced by sudden shortages, although the company has also suffered during the pandemic.

For years now, Toyota has been the number one manufacturer (volume-wise) in the world. Like most Japanese companies, Toyota is rather conservative, but Akio Toyoda often looked enviously at ‘start-ups’ like Tesla. Nevertheless, he has always said that “tesla has a good recipe, but at Toyota, we offer a complete menu.”

Akio Toyoda welcomed his successor yesterday at an online press conference. “He’s young, and he has colleagues with the same spirit of mind. I expect him to surpass limits I never could master.” Koji Sato replied: “I’m an engineer, and I’ve been developing cars for a long time. I love making cars and will continue to do so.”