Toyota grapples with the car of the future

Toyota is the world’s biggest carmaker but according to Akio Toyoda, the scion who heads the business, it exists only because of an early success in Japan’s efforts to go global.

Mr Toyoda’s great-grandfather, Sakichi Toyoda, invented a new kind of power weaving loom and sold his patent to Platt Brothers, a British company, in 1929, just as the Great Depression hit.

“It’s only because Platts bought Sakichi’s patent that Toyota was able to change its whole business to automobiles. That capital was the seed,” says Mr Toyoda in an interview with Nikkei and the Financial Times.

He says he wants “to deepen our roots” in the UK, signalling his commitment to Toyota’s British manufacturing whatever the outcome of the forthcoming Brexit referendum on the question of whether the UK should leave the European Union.

As Mr Toyoda confronts new problems — from the potential death of petrol engines to the rise of self-driving cars — he also wrestles with what it means to run Japan’s most successfully globalised company, where a renewed push for growth means the home market will account for an ever-smaller share of total sales and employment.

Toyota’s founders worked for their country, he says, but it is now hard to say which country that should be. “Everywhere we are present, ahead of the country we put the town,” he says. “We want to grow with the town, be needed by the town, meet the expectations of the town.” In Japan, that is Toyota City, home to 423,000 people. In the UK, Derby is the company’s town.

In the end we want people to look not for ‘Made in Wherever’ but ‘Made by Toyota’

At the same time, something about Toyota remains Japanese. “The roots are in Japan. It’s like cherry blossoms. There are cherry blossom trees all around the world, but however far you go, the cherry blossom is still a symbol of Japan,” says Mr Toyoda. “In the end we want people to look not for ‘Made in Wherever’ but ‘Made by Toyota’.”

Mr Toyoda has come a long way since stumbling through Toyota’s twin crises of recalls and recession during a miserable first year as chief executive in 2009. A subdued figure when testifying to the US Congress about the recall of 6m Toyota vehicles after reports of unintended acceleration, he is visibly more confident today.

Nor does his power stop at Toyota: he is a face of corporate Japan, with close ties to Shinzo Abe, the prime minister. His influence extends to the wages of the country’s workforce and the economy.

Toyota is making a bold bet on fuel cell vehicles with the recent launch of its Mirai sedan, but last year Mr Toyoda broke tradition by forging a loose tie-up with Mazda.

The latter has developed new diesel and petrol technology, and the deal highlights the need for Toyota to venture outside its closely-knit empire of suppliers as the cost of new low-carbon technologies climbs.

“For the last hundred years, gasoline engines have occupied the mainstream, but if you look forward a hundred years it will not just be gasoline, but diesel, electrics, plug-in hybrids and fuel cell vehicles,” says Mr Toyoda.

“We don’t yet know which will be chosen — ultimately it comes down to customers and the market.

What will influence the choice is the regulations in various countries,” he adds. With the Prius and now the Mirai, Toyota has shown it is willing to make bets on powertrain technology, and it is the kind of engineering challenge with which Mr Toyoda and his company seem at ease.

The company is less comfortable with the shift towards automation and driverless vehicles, which will not only bring Toyota into competition with software giants such as Google, but also threatens Mr Toyoda’s very conception of what a car is all about.

“If you’re going from A to B, and you just need to get there, then driverless may be fine. But is that really a car?” says Mr Toyoda. “Where to turn, where to stop, how fast to drive, do I overtake, do I let that car past — a car should provide suitable freedom.”

In recognition of the challenge, Toyota has hired Gill Pratt, a robotics expert from the US defence department, and recently added Google’s former head of robotics, James Kuffner. It is investing $1bn to set up an institute in Silicon Valley for artificial intelligence research. By 2020, it plans to sell cars that can switch lanes automatically on motorways.

Mr Toyoda is an amateur race driver and one of his favourite slogans is “fun to drive” — an oxymoron if the car is driverless. He makes clear that Toyota’s goal is for technology to complement, rather than replace, the person behind the wheel.

“If my ability can be supplemented with automatic driving and artificial intelligence to make driving safer, more comfortable, and fun, I think that can make the appeal of a car even greater,” he says. It is an attractive vision — but “fun” is not a word airline pilots often use to describe the autopilot.

One place where Mr Toyoda has driven for fun is the Goodwood Festival of Speed, the hill climb for classic cars hosted by Lord March at his house in Sussex in England every summer. Mr Toyoda points to it as an example of events Japan would do well to replicate.

“I still think Japan is behind on this kind of culture — when will we have something like Goodwood, something that is not just high-speed races?” he says.

He argues that it is Britain’s car culture that helped its auto industry to survive. “I want cars to be our culture.”

Industry chiefs voice Brexit unease

Japanese companies, like many other foreign investors, have been reluctant to engage publicly on UK plans for a referendum on whether to leave the EU though some have aired concerns privately, write Chris Tighe and Peggy Hollinger.

Hiroaki Nakanishi, chairman and chief executive of Hitachi, said he raised his worries about a so-called Brexit with David Cameron, the UK prime minister last spring. “I used to say, why are you making such a ridiculous decision?” Speaking in September, Mr Nakanishi said he had since realised the issue was more complicated. The electronics group would not, however, reconsider its investments if Britain left the union.

“Britain is a very good place to do business,” Kaoru Yano, chairman of NEC, the IT services and products group which has its European headquarters in Britain, told reporters from the FT and another UK paper. “It is good for the British economy to be a member. It is very important.”

“If there was a future trade agreement between the UK and EU then it doesn’t make a lot of difference,” said Trevor Mann, chief performance officer at Nissan and the carmaker’s most senior Briton. “If there are going to be tariffs it would make a significant difference.” In the meantime, he concludes: “All that is speculation.”

Japan’s long history of significant industrial investment in the UK may have afforded some safeguard against a rapid retreat. With so much at stake, any reallocation of investment would have to represent a long-term shift in strategy, analysts say.