Toyota Remains World No.1 But its List of Problems is Growing
Toyota has secured its position as the world’s largest automaker for the fourth consecutive year, outperforming its German rival, Volkswagen, despite facing an expanding list of challenges. The Japanese manufacturer announced record sales of 11.2 million vehicles worldwide in 2023, marking a 7.2% increase from the previous year.
While Toyota celebrates its sales achievement, the company is grappling with various issues that could impact its reputation and operations. Concerns have emerged over the certifications of certain vehicles, leading Toyota to suspend shipments of specific models due to irregularities found in certification tests for diesel engines developed by its affiliate, Toyota Industries. This setback involves 10 models globally, including popular ones like the Land Cruiser 300 SUV and Hiace van.
To address the challenges and regain trust, Toyota has outlined measures, including conducting new engine certification tests in the presence of regulators as needed. This development follows a recent scandal involving Daihatsu, a small carmaker owned by Toyota, which admitted to forging safety test results for over three decades, raising significant questions about the overall integrity of Toyota.
The automotive giant is also urging U.S. customers to cease driving certain models immediately and undergo necessary repairs. Last week, Toyota issued warnings to owners of approximately 50,000 vehicles, citing the risk of airbag explosions that could cause serious injury or death. This comes as part of the ongoing fallout from issues related to faulty Takata airbags, resulting in massive recalls in recent years.
Despite these challenges, Toyota remains committed to its growth strategy, emphasizing the importance of maintaining its global leadership position. The company’s 2023 sales success is attributed to solid demand across regions and overcoming semiconductor shortages.
While Toyota faces internal challenges, the global automotive landscape is witnessing increased competition. Volkswagen, Toyota’s perennial rival, reported growth in all regions, particularly in Europe and North America. The Chinese market, crucial for both automakers, presented challenges, with Volkswagen citing a “challenging” environment in the region.
China’s auto market, the largest globally, has become highly competitive, impacting industry-wide profitability. Tesla’s aggressive pricing strategy in China triggered a price war, drawing in numerous automakers, including legacy manufacturers. This intense competition has led to increased sales but raised concerns about sustained profitability across the industry.
As the automotive sector navigates challenges and transitions towards electric vehicles (EVs), both Toyota and Volkswagen are adjusting their strategies. While Toyota has lagged in the global EV race, Volkswagen reported a nearly 35% surge in fully electric vehicle sales in 2023, reflecting the industry’s shift towards sustainable and electrified transportation.
