Toyota’s Future: Hydrogen- and Battery-Powered Vehicles

Despite the supply chain disruptions caused by the COVID-19 pandemic, Toyota Motor Corporation (Toyota) managed to increase its sales and retain its title as the world’s top-selling carmaker for three consecutive years from 2020. However, the gradual shift in global market trends toward battery electric vehicles (BEVs) threatened to leave Toyota lagging behind, particularly in China, the United States, and Europe. In response to the threats from BYD Auto and Tesla in Toyota’s main markets, Koji Sato was appointed president of Toyota in April 2023. Under Sato’s leadership, Toyota announced plans to establish a BEV Factory, with the goal of producing 1.5 million BEVs by 2026. Despite Toyota's commitment to hydrogen fuel cell electric vehicles, exemplified by the Mirai, the company struggled to increase sales in this category due to infrastructure challenges. With Toyota’s Hydrogen Factory scheduled to open in July 2023, Sato emphasized Toyota’s intention of preserving hydrogen as a viable option for achieving a carbon-neutral society. The company faced the challenge of determining whether it was a solid strategy to develop and maintain both battery and hydrogen options in pursuit of a zero-emissions environment. Both endeavours demanded tremendous financial investments and time-consuming efforts, thus potentially slowing Toyota’s battery development. While other carmakers focused solely on BEVs, Toyota’s ability to compete in this category once the BEV Factory commenced mass production in 2026 while also investing in hydrogen remained uncertain.

This case is intended for senior undergraduate and graduate students in courses on global business strategy, new product development, supply chain management, new market entry, and customer relationship management. The case also provides enough numerical information to analyze how new products (BEVs in the case) are adopted by various markets based on the diffusion of innovations theory.<br><br>As the external environment surrounding Toyota has changed, the company faces new challenges in 2023. In this case, students can learn how a company can transfer its resources from an existing business to a new one and how a company’s valuable capabilities can neutralize threats in its external environment. After studying the case, students should be able to do the following:<br><br><ul><li>Understand how and when a company can transfer its core competencies to a new business.</li><li>Identify a preliminary competitor’s threat in the context of a shift in market trends from the conventional to the innovative.</li><li>Understand technological advancements associated with changes in the industry environment.</li><li>Evaluate each competitor’s innovation pipeline, assessing their current and future products or service offerings, as well as their research and development activities.</li></ul>

• Toyota Motor Corporation
• BEV factory
• battery electric vehicles
• hydrogen factory
• zero-emissions vehicles
• global market trends
• competitor analysis
• new product development
• supply chain disruptions
• carbon-neutral society
• global business strategy
• technological advancements
• market entry strategy
• customer relationship management
• innovation pipeline
• new market dynamics
• strategic leadership
• sustainability initiatives.