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Toyota Has Well-Oiled Wheels Of Succession But Still Faces A Tough Road Ahead

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  • Change at the top at the world’s largest car manufacturer
  • President and CEO Akio Toyoda is stepping down
  • Koji Sato, Operating Officer and Chief Branding Officer will take over
  • Toyota faces being swerved out of pole position by EV rivals

Tough Road Ahead For Toyota

The wheels of succession are well oiled at Toyota Motor Corp (NYSE:TM), with the company hoping to calm any nervousness about Akio Toyoda’s departure with the appointment of the chief branding officer Koji Sato, who has been waiting in the wings.

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With Toyoda becoming chairman hopes are high for a smooth transition with the share price dropping only slightly following the announcement.

Executive longevity is rewarded, with Toyoda having held the reins since 2009 after a long career in other positions at Toyota. Sato will have to fire up the company on all cylinders to reach its target of producing 30 new electric models by 2030 and assuage investors’ concerns that it’s been on go-slow while the EV race has heated up.

There are big risks that it could be swerved out of pole position, if it doesn’t step harder on the pedal of production of full electric vehicles. From being a pioneer with its Prius, it risks being left behind as rivals crowd into the space.

His branding expertise will be seen as a significant benefit, but Toyota arguably needs an injection of new ideas to ensure its crown doesn’t slip as the world’s largest automaker. He has overseen Lexus in recent year and remarks at the press conference about ‘polishing value’ seem to indicate he is set to position the company on the more premium end of the scale.

This may raise eyebrows given that it comes at a time when Telsa is cutting the price of its models to appeal more to the mass market. Sato will have to keep navigating the challenge of keeping costs low and already much slimmer margins than Tesla intact.

It is investing $5.6 billion in battery production to keep supply chains supple, but here too rivals BYD (SHE:002594) and Tesla Inc (NASDAQ:TSLA) are already well ahead of the game. The road ahead for Toyota is going to be a huge challenge to navigate, and Sato will need to show he has a firm grip on the wheel.

Article by Susannah Streeter senior investment and markets analyst, Hargreaves Lansdown