Toyota

Toyota Motor Corporation
Type	Public
Traded as	TYO: 7203 NYSE: TM Nikkei 225 component
Industry	Automotive
Founded	28 August 1937
Founder	Kiichiro Toyoda
Headquarters	Toyota City, Aichi Prefecture, Japan
Key people	Kenta Kon (President and chief executive officer) Akio Toyoda (Chairman)
Products	Automobiles, commercial vehicles, engines, robotics, financial services
Employees	Approximately 380,000
Website	toyota.com

Toyota Motor Corporation is a Japanese multinational automotive manufacturer headquartered in Toyota City, Aichi Prefecture. It has been the largest car manufacturer in the world by volume in most years since 2008 and produces approximately ten million vehicles annually.

The company was established on 28 August 1937 by Kiichiro Toyoda as a division of Toyoda Automatic Loom Works, the textile machinery business founded by his father Sakichi Toyoda, and separated the same year.

Toyota's influence on manufacturing exceeds its influence on the automobile. The Toyota Production System, developed principally by Taiichi Ohno between the 1950s and the 1970s, is the foundation of lean manufacturing and has been adopted across every manufacturing industry, in healthcare, in software development through its influence on agile methods, and in service industries. Its principles, just-in-time production, jidoka or automation with a human element, the andon cord permitting any worker to stop the line, kaizen or continuous improvement, and the elimination of the seven wastes, are among the most widely taught ideas in the practice of management.

Its products include the Corolla, the best-selling car in history at more than 50 million units; the Hilux, among the most widely used vehicles in the developing world; the Land Cruiser; the Camry; and the Prius, introduced in 1997 as the first mass-produced hybrid and the vehicle that established the category.

As of 2026 the company produces vehicles under four brands, Toyota, Lexus, Daihatsu and Century, the last spun off as an independent ultra-luxury marque in October 2025, with the performance division Gazoo Racing also becoming a separate brand as GR from late 2025. It holds a 20 per cent stake in Subaru, approximately 5 per cent of Mazda, and interests in Suzuki, Isuzu and others, together with a 25 per cent stake in Archion.

Toyota's position on electrification has been the most contested in the industry. It resisted the general commitment to battery electric vehicles, invested in hybrids and in hydrogen instead, and was criticised heavily for it between 2020 and 2023. The subsequent slowing of electric vehicle demand in Western markets and the resurgence of hybrid sales have been widely read as a vindication.

History

Looms and the founding, 1867 to 1945

Sakichi Toyoda (1867 to 1930) was an inventor from a farming family in what is now Kosai, Shizuoka, who devised a series of improvements to the weaving loom.

His most consequential invention was a loom that stopped automatically when a thread broke, which meant that a single operator could supervise many machines rather than watching one, and which is the origin of the concept the company calls jidoka: a machine that detects its own faults and stops, so that defects are not produced and so that human attention is required only when something is wrong.

He sold the patent rights to the British firm Platt Brothers in 1929 for £100,000, and instructed his son to use the proceeds to investigate automobiles.

Kiichiro Toyoda (1894 to 1952) studied engineering at Tokyo Imperial University, travelled to the United States and Europe to study car manufacture, and established an automotive division within the loom company in 1933.

The first passenger car, the Model AA, appeared in 1936, and it resembled the Chrysler Airflow closely, which was normal practice for a Japanese manufacturer of the period.

The automotive business was separated as Toyota Motor Co. on 28 August 1937. The spelling was changed from Toyoda because Toyota is written with eight strokes in katakana, a number considered auspicious, and because it separated the company's name from the family's.

The war years were spent producing lorries for the Imperial Japanese Army, and the company's plants were scheduled for bombing when the war ended.

Crisis and the production system, 1945 to 1970

Japan after 1945 had no capital, a destroyed industrial base and a domestic market too small to support the volumes on which American mass production depended.

Toyota nearly failed in 1949 and 1950. A credit crisis produced a liquidity shortage, the company could not pay its workers, and a strike over the resulting dismissals ended with Kiichiro Toyoda resigning in acceptance of responsibility, an act that is recorded in the company's own history as establishing the principle that leadership bears the consequences of failure.

The company survived on orders for lorries from the American military during the Korean War.

The Toyota Production System was developed in this context by Taiichi Ohno, an engineer who had come from the loom business, together with Eiji Toyoda and Shigeo Shingo.

Its premises follow from the conditions. Toyota could not afford inventory, so it produced only what was needed when it was needed, which is just-in-time. It could not afford defects, so it stopped the line when one appeared rather than repairing at the end, which is the andon cord and jidoka. It could not afford dedicated machines for long production runs, so it reduced changeover times to permit small batches, which is Shingo's single-minute exchange of die. And it could not afford to waste anything, so it identified the seven wastes and pursued their elimination continuously, which is kaizen.

Ohno drew explicitly on two American sources: Henry Ford's writing on flow, and the American supermarket, whose practice of restocking shelves as items were removed rather than to a schedule gave him the kanban signalling system.

The result is a production system that achieves higher quality at lower cost with less inventory than mass production, and its discovery by the West took thirty years. The Massachusetts Institute of Technology's International Motor Vehicle Program, whose findings were published as The Machine That Changed the World in 1990, established that Japanese plants required approximately half the effort per vehicle with substantially fewer defects, and it coined the term lean production.

The Corolla, introduced in 1966, was the product of the period and became the best-selling car in history.

International expansion, 1957 to 1990

Toyota's first American export, the Toyopet Crown in 1957, failed comprehensively: the car was designed for Japanese roads and speeds and could not sustain American highway cruising. The company withdrew, redesigned and returned with the Corona in 1965 and the Corolla in 1968.

The 1973 oil crisis transformed its position. American manufacturers sold large cars with poor fuel consumption, and the shift to small economical vehicles was one for which Toyota's products were already designed. Its American sales rose very rapidly through the 1970s.

The response was political. American manufacturers and the United Auto Workers pressed for protection, and Japan agreed voluntary export restraints from 1981, limiting shipments. The unintended consequence was that Japanese manufacturers, constrained in units, moved upmarket to maximise value per vehicle, which is the origin of Lexus, Acura and Infiniti, and built factories in the United States to produce vehicles that were not imports.

NUMMI, the New United Motor Manufacturing joint venture with General Motors at Fremont, California, opened in 1984 and is among the most instructive industrial experiments conducted. General Motors' Fremont plant had been its worst, with absenteeism approaching 20 per cent, and had closed in 1982. Toyota reopened it with substantially the same workforce and the same union, applied its production system, and produced vehicles of quality comparable to those made in Japan within two years.

The lesson, which General Motors took thirty years to accept, was that the difference was the system and not the workers. The plant closed in 2010 and was bought by Tesla.

Lexus was launched in 1989 with the LS 400, developed under a programme called F1 with an explicit instruction to exceed the Mercedes-Benz S-Class in refinement. It did, at a substantially lower price, and it forced the German manufacturers to improve. The brand's dealer service standards, which were as important as the product, established a level the industry had not offered.

Toyota's American manufacturing expanded through Georgetown, Kentucky, from 1988 and to a very large number of plants since, and the company is now among the larger American manufacturers by employment.

The Prius and hybrids, 1993 to 2010

The Prius originated in a 1993 internal project called G21, charged with designing a car for the twenty-first century, with the objective of doubling fuel efficiency.

Its hybrid system combines a petrol engine operating on the Atkinson cycle, which is more efficient and less powerful, with two motor-generators and a planetary gearset that permits the engine and the motors to drive the wheels in any combination without a conventional transmission. The arrangement recovers braking energy, permits the engine to run at its efficient point or to stop entirely, and requires no external charging.

It went on sale in Japan in December 1997, the first mass-produced hybrid, and internationally from 2000. Toyota lost money on each of the early cars.

Its second generation from 2003, with a distinctive shape that made it visible as a hybrid, became a cultural object in California and among people who wished their choice to be seen, and cumulative hybrid sales across Toyota's range now exceed 25 million vehicles.

The strategic consequence is that Toyota has approximately thirty years of experience manufacturing electric drive components, batteries and power electronics at very large volume, which is the basis of its subsequent position.

Crisis and Akio Toyoda, 2009 to 2023

The company reported its first operating loss in seventy years in the financial year to March 2009, following the financial crisis, having pursued a growth target that Akio Toyoda subsequently said had exceeded the organisation's capacity.

Akio Toyoda, the founder's grandson, became president in June 2009 and immediately faced the unintended acceleration crisis.

From late 2009 Toyota recalled more than eight million vehicles in the United States over floor mats trapping accelerator pedals and over sticking pedal assemblies. Allegations of a fault in the electronic throttle control produced congressional hearings at which Toyoda testified in February 2010, and a NASA investigation commissioned by the National Highway Traffic Safety Administration found no electronic cause. The company paid US$1.2 billion in 2014 to settle a Department of Justice criminal investigation into its disclosures, and substantial sums in civil litigation.

Toyoda's response was to state publicly that the company had grown faster than it could develop people, to slow expansion and to introduce the Toyota New Global Architecture, a set of shared platforms and components intended to reduce development cost and improve dynamics.

He also drove the company's return to motorsport, its Gazoo Racing performance division, and a general insistence that the products should be interesting, which reversed a period in which Toyota's vehicles had been criticised as competent and dull.

The hydrogen commitment. The Mirai, launched in 2014, is a hydrogen fuel cell vehicle. Toyota's position, maintained against general scepticism, is that batteries are unsuitable for heavy vehicles, for long ranges and for regions without charging infrastructure, and that hydrogen is required for those. Sales have been very small, the refuelling network has not been built, and the commitment has cost several billion dollars.

The electrification position. Toyota declined to commit to battery electric vehicles on the timetable its competitors announced, arguing that the carbon reduction per battery is greater if the cells are distributed across many hybrids than concentrated in few electric vehicles, that charging infrastructure and grid capacity would constrain adoption, and that customers in most of the world would not accept the compromises.

The position was criticised very heavily. Greenpeace ranked Toyota last among manufacturers on decarbonisation for several consecutive years. The company lobbied against emissions standards in the United States, India and elsewhere, including backing the first Trump administration's proposal in October 2019 to override California's authority to set its own standards, which produced shareholder resolutions and criticism from institutional investors.

Koji Sato succeeded Toyoda as president in April 2023, with Toyoda becoming chairman, and committed the company to a battery electric programme while retaining the multi-pathway approach.

Recent years, 2023 to 2026

The assessment of Toyota's position has reversed.

Electric vehicle demand growth slowed substantially in Europe and North America from 2023, hybrid sales grew very rapidly as consumers chose them over both petrol and electric, and manufacturers that had committed heavily to electric vehicles reported very large losses. Toyota's hybrid production could not meet demand, waiting lists extended to many months, and its profits reached record levels.

Certification scandals affected the group from 2022. Daihatsu, the small-car subsidiary, suspended shipments in December 2023 after an investigation found that safety certification tests had been falsified over many years across a very large number of models. Hino, the lorry subsidiary, had admitted falsifying emissions data in 2022. Toyota itself disclosed irregularities in certification testing for several models in June 2024, and Toyoda apologised publicly.

Tariffs. In June 2025 Toyota announced an average price increase of approximately US$270 on some American vehicles from July, following the imposition of a 25 per cent tariff on imported vehicle parts.

Brand restructuring. In October 2025 the Century nameplate was spun off as an independent ultra-luxury marque producing low-volume hand-built vehicles, Toyoda explaining that it would serve a market Lexus does not. In late 2025, with the unveiling of the GR GT, Gazoo Racing was announced as a separate brand selling under its own badge.

Leadership. Kenta Kon became president and chief executive in April 2026, succeeding Koji Sato, with Akio Toyoda remaining chairman.

The Toyota Production System

The production system is Toyota's most significant contribution to the world and is worth setting out properly, because it is very widely misdescribed.

The two pillars

Just-in-time means producing only what is required, when it is required, in the quantity required. Its purpose is not principally to reduce inventory cost, although it does, but to expose problems. Inventory conceals defects, machine breakdowns, absenteeism and unbalanced processes, because there is always a buffer. Removing it makes every problem visible immediately and therefore forces its solution.

Jidoka, translated approximately as automation with a human touch, means that a machine or a process stops when something abnormal occurs. It derives from Sakichi Toyoda's loom, which stopped when a thread broke. Its purpose is that defects are not passed on and not produced in quantity, and that human attention is directed to abnormality rather than to watching normal operation.

The mechanisms

Kanban is the signalling system through which a downstream process requests material from an upstream one, originally cards attached to containers. It makes the system a pull rather than a push: nothing is produced until something downstream has consumed what it made.

Heijunka or levelling smooths the production schedule so that the same mix is built each day rather than in batches, which permits suppliers to deliver steadily and which prevents the peaks that create inventory.

Andon is the cord or button any worker may use to stop the line. Ohno's insistence on this was regarded as extraordinary and remains the practice that companies attempting to copy the system find hardest to adopt, because it requires management to accept that a worker may halt production.

Standardised work defines the current best method, and is the baseline against which improvement is measured. The point frequently missed is that standardisation exists in order to permit improvement: without a defined method there is nothing to improve.

Kaizen is continuous improvement by the people doing the work, in very large numbers of very small increments rather than in occasional large projects. Toyota receives and implements an enormous number of employee suggestions annually.

The five whys is the practice of asking why repeatedly until the root cause is reached, rather than treating a symptom.

Genchi genbutsu means go and see: a manager investigating a problem goes to where it occurs rather than reading a report.

The seven wastes are overproduction, waiting, transport, over-processing, inventory, movement and defects, with unused human talent added subsequently.

What is usually missed

Companies attempting to adopt the system generally copy the mechanisms and not the premise, and the premise is that the system exists to develop people.

Ohno's position, restated by Toyota's executives since, is that the tools are means of creating problems that people must solve, that solving them develops the people, and that a company with developed people can solve problems it has not yet encountered. A firm that installs kanban and inventory reduction without the problem-solving culture obtains a fragile supply chain and nothing else.

The second element usually missed is the relationship with suppliers. Toyota works with suppliers over decades, sends its engineers to improve their processes, shares the resulting savings, and does not switch on price, which is the opposite of the practice that Western manufacturers adopted and which is why Toyota's supply chains are more resilient.

Its diffusion

The system was studied intensively from the 1980s, described in The Machine That Changed the World (1990) and in James Womack and Daniel Jones's Lean Thinking (1996), and adopted across manufacturing.

Its extension beyond manufacturing has been substantial: lean healthcare in hospitals including Virginia Mason and ThedaCare, lean startup methodology in technology through Eric Ries, agile software development through its influence on the Scrum and Kanban methods, and lean construction.

Toyota has been unusually open about it, permitting competitors to tour its plants on the reasoning that the system cannot be copied by observation because it is a culture rather than a set of techniques, a judgement the NUMMI experience supported and which General Motors's failure to propagate what it learned there demonstrated.

Products

Corolla, introduced in 1966 and now in its twelfth generation, is the best-selling automobile in history with more than 50 million sold.

Camry has been among the best-selling cars in the United States for most of the past thirty years.

RAV4 created the compact crossover category in 1994 and is now the world's best-selling non-electric vehicle.

Hilux has been produced since 1968 and is the standard light truck across Africa, the Middle East, Australia, Southeast Asia and Latin America, valued for durability in conditions no other manufacturer's vehicles survive. Its reputation has an unfortunate dimension: it is the most widely used vehicle in irregular warfare, a phenomenon documented sufficiently often that the phrase technical describes a Hilux with a weapon mounted.

Land Cruiser, produced since 1951, occupies a comparable position in the most demanding environments and is used by the United Nations, by aid organisations and by armies.

Prius established the hybrid category in 1997.

Mirai is the hydrogen fuel cell vehicle.

bZ4X and the subsequent bZ range are the battery electric vehicles.

Century is the ultra-luxury limousine used by the Japanese imperial household and by senior executives, hand-built in small numbers, and spun off as an independent brand in October 2025.

Lexus covers the premium range, Daihatsu small vehicles principally for Japan and Southeast Asia, Hino commercial vehicles, and GR performance vehicles from late 2025.

Supra, GR86 and GR Yaris represent the performance line Akio Toyoda reinstated, the first developed with BMW and the second with Subaru.

Alliances and holdings

Toyota's approach to consolidation has been to take minority positions rather than to acquire, on the reasoning that a partner retaining independence contributes more than a subsidiary.

Subaru, approximately 20 per cent, with joint development including the GR86 and BRZ and the shared electric platform.

Mazda, approximately 5 per cent, with a joint plant in Alabama.

Suzuki, a cross-shareholding, with cooperation in India where Suzuki's Maruti is dominant.

Isuzu and Hino cooperate in commercial vehicles.

Daihatsu is wholly owned and Hino majority owned.

Archion, approximately 25 per cent.

Toyota Industries, the original loom company, remains a substantial shareholder in Toyota and Toyota in it, part of a cross-holding structure among the group companies that a 2025 restructuring proposed to simplify.

Woven City, a development at the foot of Mount Fuji on the site of a closed plant, is a testbed for autonomous vehicles, robotics and connected infrastructure, with the first residents from 2025.

Electrification and the multi-pathway argument

Toyota's position on electrification is the most consequential strategic disagreement in the automotive industry and it deserves to be set out on its own terms rather than as the caricature it is usually reduced to.

The argument

Toyota's position, stated consistently since approximately 2019, has several parts.

Battery supply is the constraint. The quantity of lithium, nickel and cobalt available limits how many battery electric vehicles can be built. A battery large enough for one electric vehicle is enough for approximately 90 hybrids or six plug-in hybrids. If the objective is to reduce emissions with a limited quantity of cells, distributing them across many vehicles that displace some petrol use each reduces more emissions than concentrating them in few vehicles that displace all of it.

The grid matters. An electric vehicle charged from coal generation produces more emissions over its life than a hybrid. The carbon benefit therefore depends on the grid, and grids in India, much of Southeast Asia, and parts of the United States and Europe remain substantially fossil-fuelled.

Infrastructure and customers. Charging is unavailable to a majority of urban residents without private parking, and the second-hand market for electric vehicles, which is where most people buy cars, is immature and has had very poor residual values.

Multi-pathway. Toyota therefore sells hybrids, plug-in hybrids, battery electric vehicles and hydrogen vehicles, on the argument that different markets require different answers and that a single global solution is an assumption rather than a conclusion.

The criticism

Environmental organisations and several institutional investors have criticised the position severely.

The strongest criticism is not about the argument but about the lobbying. Toyota opposed emissions standards in the United States, India, Australia and elsewhere, supported the first Trump administration's attempt to remove California's authority in October 2019, and funded trade associations that lobbied against electrification. A company may hold a technical view and advocate for it; lobbying to weaken the standards that would force its competitors to move is a different thing, and it is what produced the shareholder resolutions and the bottom rankings.

The second criticism is that the argument is convenient. Toyota's hybrid position is extremely profitable, its investment in it is amortised, and a slower transition preserves the value of that investment, which means the company's technical analysis and its commercial interest point the same way.

The outcome so far

The evidence since 2023 has favoured Toyota commercially. Electric vehicle demand growth slowed sharply outside China, hybrid sales grew very rapidly, manufacturers that committed heavily reported very large losses, Ford and General Motors delayed or cancelled programmes, and Toyota's profits reached records.

It has not favoured Toyota environmentally in the terms its critics use. Its absolute emissions have not fallen, its battery electric sales remain small, and its hydrogen programme has produced very few vehicles.

The most defensible summary is that Toyota's technical analysis has been substantially correct about the pace of the transition and about the constraints, that its commercial position benefited from being correct, and that its political conduct in advocating for slower standards is a separate matter on which the criticism stands.

Models in detail

Corolla

The Corolla has been produced since 1966 and is the best-selling automobile in history, with cumulative sales exceeding 50 million across twelve generations.

Its design brief has been consistent: reliable, inexpensive to run, adequate in every respect and exceptional in none. Its chief engineer for the first generation, Tatsuo Hasegawa, an aeronautical engineer who had designed the Hayate fighter during the war, introduced features slightly above the class standard, including a four-speed floor-mounted gearbox and MacPherson struts, on the argument that a car should exceed expectations modestly rather than either matching or transcending them.

The name derives from the Latin for a small crown, continuing the Crown and Corona naming.

Its role in the world is difficult to overstate. It has been the default family car across a very large number of countries for six decades, its parts are available everywhere, and a great many people's first and only experience of car ownership is a Corolla.

Hilux and Land Cruiser

The Hilux, produced since 1968, is a light pickup whose reputation for surviving conditions that destroy other vehicles has made it the standard commercial vehicle in Africa, the Middle East, Southeast Asia, Australia and Latin America.

The BBC programme Top Gear subjected one to a sequence of abuses including submersion in the sea, a drop from a crane, a fire and the demolition of the building on which it stood, and it continued to run, a demonstration that was widely watched and which Toyota did not commission.

The Land Cruiser, produced since 1951, occupies the equivalent position in more demanding terrain, and is the standard vehicle of the United Nations, of aid organisations and of a great many armies and police forces.

Both vehicles' reputations have an uncomfortable dimension. The Hilux is the most widely used vehicle in irregular warfare, sufficiently so that a pickup with a weapon mounted is called a technical, and the term Toyota War describes the 1987 conflict between Chad and Libya in which Chadian forces mounted anti-tank weapons on Hiluxes and defeated an armoured opponent. Toyota has stated that it cannot control the secondary market for durable vehicles, which is accurate and which does not make the association less visible.

Prius

The Prius, whose name is Latin for before, was developed under chief engineer Takeshi Uchiyamada with an instruction to double fuel efficiency and with a deadline that required the team to produce a working system in a compressed period.

Its first generation, a conventional-looking saloon sold in Japan from December 1997, lost money on every unit. Its second generation from 2003 adopted the wedge shape that made it recognisable, which was a deliberate decision on the reasoning that a buyer choosing a hybrid wishes the choice to be visible.

It became a cultural marker in California and among a professional class, was driven to the Academy Awards by actors, and was mocked correspondingly.

Its fourth generation, launched in 2015, was widely criticised for its styling, and the fifth in 2022 was received as among the better-looking cars in its class, which reversed a twenty-five year position.

Century

The Century, produced since 1967 and named for the centenary of Sakichi Toyoda's birth, is the Japanese state and executive limousine.

It is hand-built in very small numbers, its paint requires a large number of coats hand-polished between them, its interior uses wool rather than leather on the reasoning that leather is noisy and cold, and its badge is a phoenix engraved by hand over several weeks.

It is used by the Imperial Household, by the Prime Minister and by senior executives, and it is essentially unavailable outside Japan.

Its establishment as an independent brand in October 2025 reflects a judgement that a market exists for very low-volume hand-built vehicles that neither Toyota nor Lexus can serve.

GR

The Gazoo Racing performance division, established under Akio Toyoda and becoming an independent brand from late 2025 with the GR GT, produces the GR Yaris, a three-door all-wheel-drive car built for rally homologation and sold to the public, the GR Corolla, the GR86 developed with Subaru and the GR Supra developed with BMW.

The GR Yaris in particular is regarded as a remarkable thing for a company of Toyota's character to have produced, being built on a dedicated line with a bespoke platform for a homologation requirement in a series Toyota had already won.

Reception

Among consumers Toyota's position is exceptional and durable. Its vehicles are bought by people who do not wish to think about their car, which is the largest segment of the market and the one most manufacturers neglect, and its resale values are consistently the highest in the industry, which is the market's own measure of expected durability.

Among manufacturing practitioners the company is studied continuously and its production system is the foundation of the discipline. Its willingness to admit competitors to its plants, on the judgement that the system is a culture and cannot be copied by observation, has been vindicated repeatedly.

Among enthusiasts Toyota was for two decades a company that made appliances, and the reassertion of interesting products under Akio Toyoda has substantially changed that assessment.

Among environmental organisations Toyota is the most criticised manufacturer in the world, principally for its lobbying, and the criticism has been sustained and specific.

Among investors the company is regarded as the best-run manufacturer in the industry, is valued at a multiple below what a comparable American or European company would receive, and has been criticised for its conservative balance sheet and its cross-shareholdings.

In Japan Toyota occupies a position closer to a national institution than a company. It is the largest taxpayer, the largest employer through its supply chain, the benchmark for wage negotiations, and the principal source of the country's manufacturing reputation, and its chairman's public statements are treated as economic commentary.

The company and Japan

Toyota's relationship with its country is closer than that of almost any company anywhere.

Toyota City was named Koromo until 1959, when the town changed its name in recognition of the employer that had transformed it. Its population, its schools, its hospital, its sports facilities and its economy are substantially the company's.

The Japanese economy. Toyota's revenue is equivalent to a substantial proportion of Japanese gross domestic product, its exports are a very large element of the trade balance, and its wage settlements set the national benchmark, which is why the Bank of Japan cited the 2024 agreement in its assessment of inflation.

The keiretsu structure, in which group companies hold shares in each other and trade preferentially, is the classic Japanese arrangement and Toyota's is the most successful example.

The lifetime employment expectation has weakened across Japan and has been substantially maintained at Toyota, which is among the reasons the company can invest in training over decades.

The 2011 earthquake and tsunami disrupted the supply chain severely and produced Toyota's analysis of which components had single sources and long lead times, from which it concluded that just-in-time should not apply to those, and which is why it held semiconductor stocks when the 2021 shortage arrived.

Demographics. Japan's ageing and shrinking population is the constraint on Toyota's domestic market and the motivation for its investment in assistive robotics, and the company's maintenance of three million units of domestic production is a policy choice with a political dimension.

Assessment of the record

Three judgements about Toyota can be made with reasonable confidence.

The first is that its production system is among the most important contributions any company has made to how work is organised. It was developed under constraint, by people who could not afford the alternative, and it has since been adopted across industries that have nothing to do with cars. Its central premise, that a system should be designed to expose problems so that the people in it are obliged to solve them and are developed by doing so, is a genuinely different idea about what management is for, and it has been imitated far more often than it has been understood.

The second is that its product strategy is unglamorous and correct. Toyota builds vehicles that start, that can be repaired, that hold their value and that require no thought, and it has done so consistently for six decades in markets where its competitors have pursued excitement and lost money. The reliability rankings are the evidence and the resale values are the market's confirmation.

The third is that its judgement about electrification has been substantially right about the pace and the constraints and that its conduct in advocating for it has been objectionable. Those are separate propositions and the argument about the company has generally conflated them.

The open question is the same one facing every incumbent manufacturer. Toyota's capabilities are the capabilities the industry required for a century, and the capabilities it will require are software, batteries and electronics, at which Chinese manufacturers are ahead and in which Toyota's advantages do not transfer. The company has approximately thirty years of experience in electric drive components from hybrids, which is more than anyone, and it has not yet demonstrated that this converts into a competitive battery electric vehicle at a competitive price.

Global operations

Toyota manufactures in approximately 28 countries and sells in more than 170.

Japan

Domestic production remains approximately three million vehicles a year, a proportion far higher than that of comparable manufacturers, and Toyota has maintained it deliberately as a matter of policy, on the ground that the engineering and the production system depend on proximity between development and manufacture.

Its Japanese plants are concentrated in Aichi Prefecture around Toyota City, formerly Koromo and renamed in 1959, and in Kyushu and Tohoku.

The company is by a very wide margin the largest Japanese corporation, and its supply chain employs a substantial proportion of Japanese manufacturing workers. Its annual wage negotiation sets the benchmark for the country, and its capital expenditure decisions are of macroeconomic significance.

North America

Toyota has manufactured in the United States since NUMMI in 1984 and independently since Georgetown, Kentucky, in 1988.

Its American plants include Georgetown, the largest Toyota plant outside Japan; Princeton, Indiana; San Antonio, Texas, for the Tundra; Blue Springs, Mississippi; Huntsville, Alabama, for engines, jointly with Mazda; Buffalo, West Virginia; and Liberty, North Carolina, a battery plant representing an investment of approximately US$14 billion.

It also manufactures in Canada at Cambridge and Woodstock, Ontario, and in Mexico at Guanajuato and Baja California.

The company is among the larger American manufacturers by employment and has argued, when tariffs have been proposed, that it is an American manufacturer, which is substantially true and which has not prevented it from being affected.

Asia

China is a joint venture market, with FAW Toyota and GAC Toyota, and Toyota's position has declined substantially since 2022 as domestic manufacturers have taken share with electric and plug-in hybrid vehicles priced below anything Toyota offers. The company announced a wholly owned Lexus plant in Shanghai in 2025, following Tesla's precedent.

India operates through Toyota Kirloskar and through a growing relationship with Suzuki, whose Maruti subsidiary holds approximately 40 per cent of the Indian market and whose vehicles Toyota rebadges.

Southeast Asia is Toyota's strongest region outside Japan. It holds approximately a third of the Thai, Indonesian and Philippine markets, manufactures extensively in Thailand and Indonesia, and its Innova, Avanza and Hilux occupy positions that no competitor has approached.

Australia has been Toyota's largest market by share for two decades; manufacturing ceased there in 2017 along with the rest of the industry.

Europe

Toyota manufactures at Burnaston in England, at Valenciennes in France, at Kolín in the Czech Republic, at Adapazarı in Turkey and in Poland and Portugal.

Its European share is approximately 7 per cent and has grown steadily, driven almost entirely by hybrids, which now constitute the great majority of its European sales and which have suited a market with high fuel prices and expensive electricity.

Africa, the Middle East and Latin America

Toyota's position in these markets is built on the Hilux and the Land Cruiser and on a reputation for durability and for parts availability that is worth more than any feature.

The company manufactures in South Africa, Brazil, Argentina and Venezuela, and its distribution in markets with limited infrastructure is frequently the decisive advantage: a vehicle that can be repaired anywhere is worth more than one that cannot.

Motorsport

Toyota's motorsport activity was reorganised under Akio Toyoda as Gazoo Racing, which became an independent brand from late 2025.

World Rally Championship. Toyota competed from 1972, won manufacturers' titles in the 1990s, was excluded in 1995 following the discovery of an illegal turbocharger restrictor bypass that the FIA described as the most sophisticated cheating device it had encountered, and returned in 2017, winning multiple manufacturers' and drivers' titles.

World Endurance Championship and Le Mans. Toyota competed at Le Mans from 1985, suffered a series of near-misses including the 2016 race in which its car stopped on the final lap while leading, and won from 2018 to 2022, achieving five consecutive victories.

Formula One. Toyota competed from 2002 to 2009 with the largest budget in the sport and won no races, which is among the more instructive failures in motorsport and which is generally attributed to a decision-making structure unsuited to the sport's pace. It returned as a technical partner to Haas in 2024.

NASCAR. Toyota has competed in the Cup Series since 2007 and has won championships, becoming the first non-American manufacturer to do so.

Dakar has been won by Toyota's Hilux, and the vehicle's reputation in the rally is commercially significant in the markets where it sells most.

The motorsport commitment is explicitly connected to product. Toyoda's position, stated repeatedly, is that racing develops people and components and that a company which does not race produces cars that are boring, and the GR Yaris, developed for rally homologation and then sold to the public, is the clearest product of that view.

Research and technology

Toyota Research Institute, established in 2016 with an initial commitment of US$1 billion and led by Gill Pratt, conducts research in automated driving, robotics and materials, principally in the United States. Its approach to automated driving, called Guardian, emphasises systems that assist a human driver rather than replace them, which is a different objective from its competitors'.

Batteries. Toyota has pursued solid-state batteries for approximately two decades, holds more patents in the field than anyone, and has announced production repeatedly with the current target in the late 2020s. A solid-state cell replaces the liquid electrolyte with a solid one, which would permit higher energy density, faster charging and better safety, and manufacturing at scale has defeated everyone who has attempted it.

Hydrogen. The Mirai fuel cell vehicle, the fuel cell modules Toyota sells to lorry and bus makers, and the hydrogen combustion engine developed in racing constitute a substantial commitment that has produced very little revenue and that the company maintains on the argument that heavy transport will require it.

Robotics. Toyota has developed assistive robots for household and care use, partly motivated by Japanese demographics, and the Human Support Robot and the walking assistance devices have been trialled in care settings.

Woven City, at the foot of Mount Fuji on the site of a closed plant, is a purpose-built testbed for autonomous mobility, robotics, connected infrastructure and energy systems, with the first residents from 2025.

Software. Arene, the vehicle operating system Toyota has developed through its Woven by Toyota subsidiary, is the company's response to the general industry difficulty with software, and its development has been slower than announced, which is also the general industry experience.

Suppliers and the group

Toyota's relationship with its suppliers is structurally different from that of Western manufacturers and is among the sources of its advantage.

The Toyota Group comprises companies with cross-shareholdings and long histories, including Denso, the second largest automotive supplier in the world; Aisin, which makes transmissions; Toyota Industries, the original loom company; Toyota Boshoku for interiors; Toyoda Gosei for rubber and plastics; and Toyota Tsusho, the trading company.

The kyohokai, the supplier association, meets regularly, shares improvement practice and provides a mechanism through which Toyota's engineers assist suppliers to reduce cost, with the savings shared rather than extracted.

The consequences are that suppliers invest in Toyota-specific capability because the relationship is durable; that quality problems are addressed jointly rather than by switching; and that Toyota's supply chain proved substantially more resilient than its competitors' during the semiconductor shortage of 2021, because the company had maintained buffer stocks of critical components following its analysis of the 2011 earthquake, an explicit departure from just-in-time for parts with long lead times and single sources.

The criticism is that the arrangement is a closed system that disadvantages outside suppliers, and Japanese and American regulators have examined it periodically.

The cross-shareholdings among group companies have been criticised by international investors as insulating management, and a 2025 proposal to restructure Toyota Industries produced objections over the price offered to minority shareholders.

Lexus

Lexus was created because of a trade restriction and became the most successful luxury brand launch of the modern era.

The voluntary export restraints agreed in 1981 limited the number of vehicles Japanese manufacturers could ship to the United States, which meant that the profit per vehicle became the variable that mattered.

Toyota's response, project F1 initiated in 1983, was an instruction to build a car better than the Mercedes-Benz S-Class. The development involved approximately 1,400 engineers, 450 prototypes and a stated budget in excess of US$1 billion, and the team lived in California for a period to understand American luxury buyers.

The LS 400, launched in 1989, achieved a lower drag coefficient, a quieter cabin and better reliability than its German rivals at approximately two-thirds of the price. Its launch advertisement, showing a glass of water balanced on the engine at high revolutions, demonstrated the refinement directly.

The dealer proposition mattered as much. Lexus dealerships were built to a specification, service included collection and a replacement vehicle, and the response to the brand's first recall in 1989, in which dealers collected every affected car, repaired it, washed it and returned it, established a reputation that German manufacturers had not offered.

Lexus became the best-selling luxury brand in the United States within a decade and remains among the leaders. Its position in Europe has been weaker, because European buyers associate luxury with a marque's history, and its hybrid range has been its principal European product.

The brand's difficulty in recent years is that its identity has been refinement rather than dynamics or technology, and the market has moved toward both. The LFA supercar of 2010, produced in 500 examples with a naturally aspirated V10 developed with Yamaha, was an attempt to address it and is regarded as among the finest cars Japan has produced.

The 2025 announcement of a wholly owned Lexus plant in Shanghai is the brand's principal recent strategic move.

Safety and quality

Toyota's reliability record is the foundation of its position and is measured consistently.

Consumer Reports and J.D. Power have placed Toyota and Lexus at or near the top of reliability rankings for four decades, with Lexus frequently first and Toyota second.

Durability rather than reliability is the more distinctive characteristic. A Toyota that requires repair is repairable, parts are available almost everywhere, and the engineering avoids components whose failure requires the replacement of an assembly. The Hilux and Land Cruiser reputations rest on this.

The method is not secret. Toyota changes designs slowly, introduces new technology only after it has been proved in a less critical application, maintains commonality across models and generations, and its engineers' willingness to accept a less advanced solution that is known to work is what produces the outcome. The corresponding criticism is that its products lag competitors in features and in interface design.

Recalls. The 2009 and 2010 unintended acceleration recalls are described above. Toyota has conducted very large recalls since, including for Takata airbag inflators, which affected the entire industry and which is the largest recall in automotive history, and for fuel pumps.

Certification. The falsification scandals at Daihatsu, Hino and Toyota itself between 2022 and 2024 are the most serious challenge to the company's quality identity, because they concerned not the products, which performed adequately in subsequent testing, but the integrity of the process that certifies them.

Environment

Emissions. Toyota has committed to carbon neutrality across its operations by 2035 and across its value chain by 2050, and reports progress against a 2019 baseline.

Hybrids are the company's principal environmental argument. Approximately 27 million hybrids sold have displaced, on the company's calculation, emissions equivalent to approximately nine million battery electric vehicles, using a fraction of the battery materials.

Manufacturing. Toyota's plants have pursued waste, water and energy reduction under the Environmental Challenge 2050 programme, and several are landfill-free.

Recycling. The company has developed battery recovery arrangements with Redwood Materials and others, and its hybrid batteries from the earliest Priuses are now reaching end of life in volume.

The criticism concerns the lobbying rather than the operations, and it has been sustained. Greenpeace ranked Toyota last of ten manufacturers on decarbonisation in 2021, 2022 and 2023. InfluenceMap has assessed its climate policy engagement as among the most obstructive of any company in any sector. Shareholder resolutions requesting disclosure of lobbying, filed by Danish and Dutch pension funds and by the AkademikerPension, received substantial support in 2023 and 2024, and the company agreed to review its associations.

Timeline

• 1926 Sakichi Toyoda founds Toyoda Automatic Loom Works.
• 1933 Kiichiro Toyoda establishes an automotive division.
• 1936 The Model AA passenger car appears.
• 1937 Toyota Motor Co. is separated on 28 August.
• 1950 A financial crisis and strike produce Kiichiro Toyoda's resignation; Korean War orders save the company.
• 1951 The Land Cruiser enters production.
• 1957 The Toyopet Crown fails in the United States.
• 1966 The Corolla is introduced.
• 1968 The Hilux is introduced.
• 1973 The oil crisis transforms Toyota's American position.
• 1981 Voluntary export restraints are agreed.
• 1984 NUMMI opens with General Motors.
• 1988 Georgetown, Kentucky, begins production.
• 1989 Lexus launches with the LS 400.
• 1990 The Machine That Changed the World documents the production system.
• 1997 The Prius launches in Japan in December.
• 2008 Toyota becomes the largest manufacturer in the world by volume.
• 2009 The first operating loss in seventy years; Akio Toyoda becomes president; the acceleration recalls begin.
• 2010 Toyoda testifies before Congress in February; NUMMI closes.
• 2014 The Mirai hydrogen vehicle launches; a US$1.2 billion criminal settlement is paid.
• 2016 Toyota Research Institute is established.
• 2018 Le Mans is won for the first time, and again each year to 2022.
• 2019 Toyota backs the proposal to remove California's emissions authority in October.
• 2021 Woven Planet is established; the semiconductor shortage affects Toyota less than competitors.
• 2022 Hino admits falsifying emissions data.
• 2023 Koji Sato becomes president in April; Daihatsu suspends shipments in December over certification falsification.
• 2024 Toyota discloses its own certification irregularities in June; record profits are reported.
• 2025 Prices rise in the United States in July following tariffs; Century is spun off as an independent brand in October; Gazoo Racing becomes a separate brand; Woven City receives its first residents.
• 2026 Kenta Kon becomes president and chief executive in April.

Competition

Volkswagen has alternated with Toyota as the largest manufacturer by volume and has been substantially less profitable, with a complex brand portfolio and a very high cost base in Germany.

BYD and the Chinese manufacturers are the principal strategic threat. They produce vehicles at costs Toyota cannot match, they are ahead in batteries and in vehicle software, and they have taken Toyota's Chinese share and are entering Southeast Asia, which is Toyota's strongest region.

Hyundai and Kia have improved to the point of competing directly on quality and have been ahead of Toyota in battery electric vehicles.

General Motors, Ford and Stellantis compete principally in North America, where all three depend on pickup trucks and where Toyota's Tundra has never achieved comparable share.

Honda and Nissan are the Japanese competitors, the latter substantially weakened and having explored a merger with Honda that was abandoned in 2025.

Tesla competes in the premium electric segment and has been overtaken by BYD in volume.

The competitive question is whether Toyota's advantages, manufacturing discipline, supplier relationships, hybrid expertise and brand, are worth as much in an industry whose difficult problems are batteries, software and electronics, at which Chinese manufacturers are better.

Selected statistics

• Founded: 28 August 1937.
• Employees: approximately 380,000.
• Production: approximately 10 million vehicles annually including Daihatsu and Hino.
• Revenue: exceeding ¥45 trillion.
• Countries with manufacturing: approximately 28.
• Corolla: more than 50 million sold since 1966, the best-selling car in history.
• Hybrids: more than 27 million sold since 1997.
• Consecutive years as largest manufacturer by volume: most years since 2008.
• Le Mans victories: five consecutive from 2018 to 2022.
• Reliability rankings: Lexus and Toyota at or near the top for four decades.

Corporate affairs

Leadership

The Toyoda family has provided leadership intermittently rather than continuously, and professional managers have run the company for long periods.

Kiichiro Toyoda founded the automotive business and resigned in 1950 accepting responsibility for the crisis.

Eiji Toyoda, his cousin, led the company through the period in which the production system was developed and the American expansion began.

Shoichiro Toyoda led it through the 1980s.

Hiroshi Okuda, Fujio Cho and Katsuaki Watanabe were professional managers, the last presiding over the growth that preceded the 2009 crisis.

Akio Toyoda was president from 2009 to 2023 and has been chairman since. His tenure encompassed the recall crisis, the restructuring, the reassertion of product quality and the multi-pathway position, and his personal involvement in motorsport under the pseudonym Morizo is unusual for a chief executive of a company of that size.

Koji Sato was president from 2023 to 2026.

Kenta Kon became president and chief executive in April 2026, having previously been chief financial officer.

Finances

Toyota's revenue exceeds ¥45 trillion and its operating profit has reached record levels, exceeding ¥5 trillion, driven by hybrid demand, by a weak yen and by pricing.

It is consistently among the most profitable car manufacturers in the world and among the very few that have been profitable in essentially every year of the past three decades other than 2009.

Its balance sheet is exceptionally conservative, with net cash and very large reserves, which is characteristic of Japanese manufacturing and which has been criticised by investors seeking higher returns and which permitted the company to survive 2009 and 2020 without difficulty.

Toyota Financial Services, which provides consumer and dealer finance, is a substantial business in its own right.

Employment

Toyota employs approximately 380,000 people, and its Japanese employment practices include the lifetime employment expectation that has characterised large Japanese firms, though this has weakened across the country.

The company's relationship with its Japanese union is cooperative, with annual spring negotiations that set a benchmark for Japanese industry generally, and Toyota's agreement to substantial wage increases in 2024 was cited by the Bank of Japan in its assessment of whether Japan had escaped deflation.

Its American plants are non-union, and the United Auto Workers has campaigned without success, which Toyota attributes to conditions and the union to resistance.

Criticism

Certification falsification at Daihatsu, disclosed in December 2023, involved irregularities in safety testing over many years across dozens of models and produced a suspension of shipments and government inspections. Hino falsified emissions data over approximately twenty years, disclosed in 2022. Toyota itself disclosed testing irregularities for several models in June 2024. The pattern, in a company whose identity rests on quality, produced very substantial domestic criticism and Toyoda's public apology.

The unintended acceleration recalls of 2009 and 2010 produced congressional hearings, a US$1.2 billion criminal settlement and very large civil payments, and the technical cause was determined to be mechanical and human rather than electronic.

Lobbying against emissions standards is described above and is the criticism most frequently made by investors.

Human rights. Toyota has been examined over supply chain conditions and over its continued operations in Myanmar following the 2021 coup, which it suspended, and over labour conditions at suppliers.

Diversity in senior management is very limited, which is characteristic of large Japanese companies and which international investors have raised.

Cross-shareholdings among the Toyota group companies have been criticised as protecting management from shareholder pressure, and a 2025 restructuring proposal addressing them was itself contested over the price offered to minority holders.

Assessment

Toyota's achievement is not a product but a method, and the method has outlived every competitor that dismissed it.

The Toyota Production System was developed because the company was poor, in a destroyed country, with a market too small to support American methods, and the constraints produced a system better than the one it was forced to replace. Its diffusion since 1990 has changed manufacturing, healthcare, software and services worldwide, and the company that invented it gave it away, correctly judging that it could not be copied by observation.

Its products reflect the same discipline. A Corolla is not exciting and it starts, which is what most people want from a car and which the industry took thirty years to take seriously. Toyota's reliability rankings have been at or near the top for four decades, and the Hilux and Land Cruiser occupy positions in the most demanding environments that no competitor approaches.

Its strategic judgement on electrification is the most interesting question about it. The company took a position that every observer considered wrong, was criticised more heavily than any competitor, and has been substantially vindicated by events. That it was also the position most favourable to its own profits does not make it incorrect, and its lobbying conduct does not make it correct.

The risk is the one every incumbent faces. Toyota's advantages, manufacturing discipline, supplier relationships, engine and hybrid expertise, are advantages in the industry that exists and are worth less in the one that is arriving, in which the difficult parts are batteries, software and electronics. The Chinese manufacturers are better at all three, and Toyota's Chinese sales have declined accordingly.

See also

• Lean manufacturing
• Toyota Production System
• Lexus
• Volkswagen
• BYD
• General Motors
• Subaru

Manufacturing philosophy in practice

Several practices distinguish a Toyota plant from a conventional one and are worth describing because they are frequently described incorrectly.

The line stops. A conventional plant treats a line stoppage as a failure to be avoided. A Toyota plant treats it as the system working: a worker who encounters a problem pulls the andon cord, a team leader arrives within the takt time, and the line stops only if the problem is not resolved before the vehicle reaches the end of the station. The stoppage rate is therefore high and the duration is very short, and a plant with no stoppages is assumed to be concealing problems.

Takt time is the rate at which vehicles must be produced to meet demand, derived by dividing available time by required output. Every station's work is balanced to it, and the balancing is redone whenever demand changes, which is why Toyota can adjust volumes without the disruption a conventional plant experiences.

Standardised work is documented by the team, not imposed by industrial engineers, on the reasoning that the people doing the work know it best and will follow a method they wrote.

Multi-skilling. Workers rotate between stations, which reduces injury from repetition, permits flexibility when demand changes, and means that a worker understands more of the process and can therefore see more problems.

The five S practices, sorting, setting in order, shining, standardising and sustaining, govern the physical organisation of a workplace and are the element most commonly adopted in isolation and least commonly effective, because tidiness without the problem-solving culture produces a tidy factory with the same problems.

A3 problem solving requires a problem, its analysis and its proposed solution to fit on a single sheet of A3 paper, which forces clarity and which is taught throughout the company.

The chief engineer system gives one person responsibility for a vehicle programme, with the authority to direct the functions without managing them, which is an unusual structure and which produces coherence that a matrix organisation does not.

Selected criticism and controversies

Unintended acceleration, 2009 to 2014, described above.

Certification falsification at Daihatsu, Hino and Toyota, 2022 to 2024, described above.

Emissions lobbying, described above and the most sustained criticism.

The 1995 rally exclusion over a turbocharger restrictor bypass concealed in a way the FIA described as the most sophisticated it had seen, for which Toyota was excluded from the World Rally Championship for a year.

Discrimination. Toyota settled an American racial discrimination class action in 2006 and has faced claims over promotion practices.

Supply chain. A 2022 report by Human Rights Watch and others examined aluminium sourcing in the automotive industry generally, and Toyota's supply chain has been examined for links to Xinjiang.

Myanmar. Toyota suspended operations at a plant in Myanmar following the 2021 coup after criticism of its investment there.

Cross-shareholdings and the 2025 Toyota Industries restructuring proposal, criticised by international investors over the price offered to minority shareholders and over the governance implications.

Dealer practices in the United States, principally markups above list price during the shortage period of 2021 to 2023, produced customer complaints that the manufacturer said it could not control because franchise law prevents it setting prices.

Structure of the group

Toyota Motor Corporation is the listed parent.

Wholly or majority owned: Daihatsu Motor, Hino Motors, Toyota Auto Body, Toyota Housing, Woven by Toyota, Toyota Financial Services, Toyota Research Institute, and the manufacturing subsidiaries in each region.

Group companies with cross-shareholdings: Denso, Aisin, Toyota Industries, Toyota Boshoku, Toyoda Gosei, Toyota Tsusho, JTEKT and others, several of which are separately listed and all of which supply Toyota substantially.

Minority holdings in other manufacturers: Subaru at approximately 20 per cent, Mazda at approximately 5 per cent, Suzuki through a cross-shareholding, Isuzu, and Archion at approximately 25 per cent.

Joint ventures: FAW Toyota and GAC Toyota in China; Toyota Kirloskar in India; Primearth EV Energy with Panasonic for batteries; and a substantial number of regional distribution arrangements.

The structure reflects a consistent preference for cooperation over acquisition, and Toyota's holdings in Subaru, Mazda and Suzuki give it access to their capabilities and markets without the integration cost or the cultural difficulty that acquisition would involve.

The development of the production system

The system's development is worth recording in sequence because it was not designed but assembled over approximately thirty years in response to specific problems.

1945 to 1950. Kiichiro Toyoda instructed the company to catch up with American productivity within three years, which was regarded internally as impossible given that American output per worker was approximately nine times Japanese. Taiichi Ohno's conclusion was that the difference was not effort but waste, and that Japanese workers were not a ninth as productive but were producing a great deal that nobody needed.

1947 to 1955. Ohno, running a machine shop, arranged machines in the sequence of operations rather than by type, which is the opposite of conventional practice, and required each operator to run several machines. Output per worker rose substantially and the workers objected strenuously, which is a recurring feature of the system's history.

1953. Ohno visited American supermarkets and observed that shelves were restocked as items were removed, by the shelf rather than by a schedule. The kanban system followed.

1955 to 1965. Shigeo Shingo's work on changeover reduced die changes on large presses from hours to minutes, which permitted small batches and therefore permitted a mixed production schedule, which permitted production to follow demand rather than to build inventory.

1960s. The andon and the authority to stop the line were introduced against considerable management resistance, and Ohno's insistence on them is the element of the system that companies attempting to copy it most frequently omit.

1970s. The oil crisis made Toyota's efficiency visible. Japanese manufacturers generally suffered; Toyota recovered faster and more profitably, and the Japanese government and other manufacturers began to study why.

1978. Ohno published Toyota Production System in Japanese, and the English translation in 1988 brought the ideas to a Western audience that had already begun to notice.

1984. NUMMI demonstrated that the system transferred to American workers in an American plant, which removed the explanation that Japanese success was cultural.

1990. The Machine That Changed the World quantified the difference and named it lean production, and the diffusion into other industries followed.

Since. Toyota has continued to describe the system as incomplete, on the reasoning that a system claimed to be finished cannot be improved, and its internal term for the underlying philosophy, the Toyota Way, was codified in 2001 around two pillars, continuous improvement and respect for people, the second being the element most frequently omitted from external accounts.

Regional market positions

Japan. Toyota holds approximately half the domestic market including Daihatsu, which is a share no manufacturer holds in any other large market, and its position is effectively unassailable.

United States. Approximately 15 per cent, second to General Motors and ahead of Ford, with the RAV4, Camry and Corolla among the best-selling vehicles and with the Tundra having never achieved a comparable position in pickups, which are the most profitable American segment.

Europe. Approximately 7 per cent and rising, almost entirely hybrids, with the Yaris, Corolla and C-HR the principal products.

China. Approximately 5 per cent and falling, having been substantially higher, as domestic manufacturers have taken the market with electric and plug-in hybrid vehicles.

Southeast Asia. Approximately a third in Thailand, Indonesia and the Philippines, the strongest regional position any manufacturer holds anywhere outside its home market, built on the Hilux, Innova, Avanza and Fortuner.

India. Modest directly and substantial through the Suzuki relationship.

Africa and the Middle East. Dominant in several markets, built on the Hilux, Land Cruiser and Corolla and on parts availability.

Australia. Market leader for more than two decades.

Latin America. Strong in Brazil and Argentina with the Corolla and Hilux.

The next decade

Toyota's stated strategy under its new leadership has several elements.

Multi-pathway continues: hybrids, plug-in hybrids, battery electric vehicles and hydrogen, allocated by market.

Battery investment at scale, including the North Carolina plant at approximately US$14 billion and Japanese capacity, with solid-state cells targeted for the late 2020s.

A dedicated battery electric platform and a next-generation vehicle architecture, with a manufacturing approach that includes giga casting, which Toyota has adopted after examining Tesla's vehicles, and a self-propelled assembly line in which the vehicle drives itself between stations rather than being carried by a conveyor.

Software through Arene, whose development has been slower than announced.

Brand separation through Century and GR, which permits the Toyota brand to remain what it is while the company addresses segments it could not otherwise.

China through the wholly owned Lexus plant and through greater use of local development, an acknowledgement that vehicles designed in Japan no longer suit the Chinese market.

Whether this is sufficient depends on a question nobody can answer, which is how fast the transition proceeds. Toyota's position is optimised for a slow one and it has been substantially right about the pace so far. If the pace accelerates, particularly through Chinese manufacturers exporting at prices Western manufacturers cannot match, the company's advantages will matter less than its lateness.

What is not in doubt is that Toyota will approach the problem the way it approaches every problem, by improving continuously in small increments, by developing the people who do the work and by declining to commit to a direction until it is certain. That method has been right more often than it has been wrong for seventy-five years, and its principal risk is that it is slow, which is the one characteristic that a discontinuity punishes.

Hybrid technology explained

Toyota's hybrid system is the technology on which a substantial part of the company's recent profitability rests and it is worth explaining, because it differs from what most people assume a hybrid to be.

The power split device

At the centre of the system is a planetary gearset with three elements: a sun gear, a ring gear and a carrier holding planet gears between them.

The petrol engine drives the carrier. One motor-generator, called MG1, is connected to the sun gear. The second motor-generator, MG2, and the wheels are connected to the ring gear.

The arrangement has no clutches and no conventional gears. The relationship between the three elements means that for any engine speed, the speed of the wheels can be varied continuously by varying the speed of MG1, which acts as a generator absorbing power and converting it to electricity that either drives MG2 or charges the battery.

The consequences are considerable. The engine can run at whatever speed is most efficient for the power required, regardless of road speed. It can stop entirely, with the vehicle driven by MG2 alone. It can charge the battery while driving. And there is no transmission to shift, so there is nothing to wear out and no interruption in torque.

The Atkinson cycle

The petrol engine uses a modified Atkinson cycle, in which the inlet valve closes late so that some of the charge is pushed back out, producing an effective compression stroke shorter than the expansion stroke.

This extracts more work from each unit of fuel and produces less power for a given engine size, which is acceptable in a hybrid because the electric motor supplies power when it is needed.

Regeneration

Braking is performed principally by MG2 acting as a generator, converting the vehicle's kinetic energy to electricity rather than to heat in the brake pads. Friction brakes are used only for the final stop and for emergency braking, which is why hybrid brake pads commonly last several times longer than conventional ones.

Why it matters commercially

The system requires no charging, so it has no infrastructure dependency. It uses a small battery, approximately a fiftieth of an electric vehicle's, which costs little and uses few materials. It improves urban fuel consumption by approximately 40 to 50 per cent, which is where most driving occurs. And it is now cheap to build, because Toyota has manufactured the components at very large volume for twenty-eight years and the development cost was amortised long ago.

The resulting margin on a hybrid is comparable to that on a petrol vehicle, and a manufacturer selling hybrids therefore earns money while reducing emissions, which no manufacturer selling battery electric vehicles has consistently managed outside China.

Toyota in popular understanding

Toyota occupies a particular place in public consciousness that differs by country.

In Japan it is the country's largest and most respected company and a source of national identification.

In the United States it is the manufacturer whose vehicles do not break, and its association with dependability is strong enough that the brand is used as shorthand for the quality.

In Australia the Hilux and the Corolla have been the best-selling vehicles for long periods and the brand is close to universal.

In much of Africa, the Middle East and Southeast Asia Toyota is not a brand among others but the default, and its vehicles' ubiquity is a fact of the landscape.

The Top Gear Hilux experiments, the Toyota War in Chad, and the presence of a white Land Cruiser at every aid operation in the world are each expressions of a single characteristic: the vehicles work in conditions where other vehicles do not, and that fact has shaped how a substantial part of the world moves.

The company has occasionally been mocked for dullness, including by its own chairman, whose reinstatement of interesting products was explicitly a response to it, and the mockery is a form of compliment: a company criticised for making cars that are too reliable and insufficiently exciting has solved the harder problem.

Selected bibliography

On the production system: Taiichi Ohno, Toyota Production System: Beyond Large-Scale Production (1978, English 1988); Shigeo Shingo, A Study of the Toyota Production System (1981); James Womack, Daniel Jones and Daniel Roos, The Machine That Changed the World (1990); Jeffrey Liker, The Toyota Way (2004); Mike Rother, Toyota Kata (2009).

On the company: Yukiyasu Togo and William Wartman, Against All Odds (1993); Micheline Maynard, The End of Detroit (2003) and Curve Ahead; the company's own Toyota: A History of the First 50 Years.

On NUMMI: the This American Life episode of 2010, which is among the more widely heard accounts of why the Toyota system did not transfer to General Motors.

On the recalls: the NASA and National Highway Traffic Safety Administration reports of 2011, and the congressional hearing transcripts of 2010.

Financial detail

Toyota's financial year ends on 31 March.

Revenue has grown from approximately ¥20 trillion in 2010 to approximately ¥31 trillion in 2020 and above ¥45 trillion in recent years, the last figure assisted substantially by a weak yen, which raises the reported value of foreign earnings without any operational change.

Operating profit exceeded ¥5 trillion for the first time in the year to March 2024, the first Japanese company to achieve it, and has remained at comparable levels.

Margins of approximately 10 to 12 per cent at operating level are approximately double those of Volkswagen and General Motors and comparable to Mercedes-Benz's, which is remarkable for a manufacturer whose products are principally in the volume segments.

The sources of the margin are the production system's cost position, the hybrid premium, which customers pay and which costs Toyota little, the absence of the losses its competitors incur on electric vehicles, and the financial services business.

The balance sheet holds net cash, which is unusual for a manufacturer and which permitted the company to survive 2009 and 2020 without raising capital.

Capital expenditure runs at approximately ¥2 trillion annually with comparable research and development spending, and the battery and software commitments have raised both.

Shareholder returns have increased under pressure from international investors, with a rising dividend and substantial buybacks, and the company's historical reluctance to return capital has been a persistent criticism.

The share price reached record levels in 2024 and 2025 as hybrid demand and the yen combined, and Toyota's market capitalisation has at times approached that of the next several manufacturers combined, which is the position Tesla held in the opposite direction five years earlier.

Governance

Toyota's board is smaller than a comparable Western company's and has a majority of internal directors, which international governance standards discourage and which the company defends on the ground that the business requires deep operational knowledge.

Akio Toyoda's re-election as chairman received approximately 72 per cent support in 2023 and approximately 72 per cent again in 2024, which is a very low figure by Japanese standards and which reflected institutional investors' objections to the certification scandals, to the cross-shareholdings and to the climate lobbying. Glass Lewis and Institutional Shareholder Services both recommended against him.

Cross-shareholdings among the group companies have been reduced progressively under pressure from the Tokyo Stock Exchange's corporate governance reforms, and the 2025 Toyota Industries restructuring was part of that process and was itself contested.

Shareholder resolutions on climate lobbying disclosure, filed by European pension funds, have received support in the twenties as a percentage, which is high for a Japanese company and which the company has responded to with a review of its trade association memberships.

Succession has alternated between family members and professional managers, and the 2026 appointment of Kenta Kon, a finance executive, with Toyoda remaining chairman, continues an arrangement in which the family retains influence without operational control.

Conclusion

Toyota is the most successful manufacturer in the world by almost any measure that has been applied for fifty years, and the reasons are unglamorous and difficult to copy.

It makes vehicles that work, in enormous numbers, at a cost its competitors cannot match, using a system it developed because it could not afford anything better and which has since been adopted by everyone who could understand it.

It has been wrong about things. Formula One consumed a very large budget for no result. Hydrogen has produced almost nothing. The unintended acceleration crisis and the certification scandals were serious failures in a company whose identity is quality. Its lobbying against emissions standards is the thing for which it will be most criticised in retrospect.

It has been right about the thing that mattered most recently, which is that the transition to electric vehicles would be slower, more expensive and more dependent on infrastructure than the industry's commitments assumed, and it has profited very substantially from being right while its competitors have lost money being wrong.

The question its next decade will answer is whether a company organised around continuous incremental improvement can respond to a discontinuity, which is the one situation its method is not designed for, and whether thirty years of hybrid experience converts into a position in a market that Chinese manufacturers currently lead.

Additional notes

The name. Toyoda, the family name, means fertile rice paddy, which the founders considered unsuitable for an industrial company. Toyota has no meaning in Japanese, is written with eight strokes in katakana, and the number eight is associated with prosperity because the character widens toward the bottom, suggesting increase. The change also separated the company from the family, which mattered in a country where family businesses were common and where the founders wished the enterprise to outlast them.

The logo, adopted in 1989 for the company's fiftieth anniversary, comprises three ellipses. The company's explanation is that two represent the heart of the customer and the heart of the company and the third the technological opportunities and the boundless opportunities ahead, and that the letters of Toyota can be traced within them, which is true and which requires looking for.

The Toyota Way, codified internally in 2001, rests on two pillars: continuous improvement, comprising challenge, kaizen and genchi genbutsu, and respect for people, comprising respect and teamwork. The second pillar is the element most frequently omitted from external descriptions of the system, and Toyota's executives have said repeatedly that a company implementing the tools without it will fail.

The production research conducted by outsiders has been unusually thorough because Toyota permitted it. Delegations from General Motors, Ford and a very large number of other companies have toured its plants, and the company's position, that observation does not transfer a culture, has been repeatedly vindicated: General Motors learned the system at NUMMI and did not propagate it, and its inability to do so is documented in its own internal assessments.

The Toyota Commemorative Museum in Nagoya, in the original loom factory, displays the textile machinery alongside the automotive history and is the clearest demonstration of the connection between them, since the jidoka concept that governs a modern assembly line began with a loom that stopped when a thread broke.

Toyota and the industry's future

The automotive industry is undergoing four simultaneous transitions and Toyota's position differs in each.

Electrification is the one on which the company is behind by volume and ahead by experience, holding more electric drive manufacturing history than anyone through hybrids and less battery electric volume than several competitors.

Software is the transition on which every established manufacturer is behind, and Toyota's Arene programme has been slower than announced, which is the industry's common experience and which is more damaging for a company whose reputation is competence.

Autonomy is the one Toyota has approached differently, pursuing systems that assist a human driver rather than replace one, on an argument about liability, about the difficulty of the last few per cent and about what customers actually want. It has invested substantially through Toyota Research Institute and has not attempted a robotaxi.

The shift of production to China is the structural change that matters most and that no Western or Japanese manufacturer has answered. Chinese manufacturers produce vehicles at costs that reflect a complete domestic supply chain, very large scale, state support and a labour cost advantage, and their exports have grown from negligible to among the world's largest within five years. Tariffs have slowed this in North America and Europe and have not slowed it in the markets where Toyota is strongest, which are Southeast Asia, the Middle East and Latin America.

The company's answer to all four is the same as its answer to everything, which is to improve continuously, to develop the people doing the work and to avoid committing before it is certain. That method produced the best manufacturer in the world and it is slow, and the question of the next decade is whether the industry's changes are the kind that reward patience or the kind that punish it.