One of her questions was about Toyota’s apparent lead in hybrid cars. Was it luck, or was it planned?
One answer to that question is in Liker’s book The Toyota Way when he discusses their product development system, specifically using the Prius as an example. They didn’t set out to build a hybrid car. Rather, the goal was to radically improve fuel economy. A lot of things were tried, and hybrid technology just emerged as the way to go. It was, without a doubt, a huge risk.
In 2005, the analysts were skeptical.
May 11, 2005, in The New York Times:
Profit Plunges at Toyota as It Vies for Market Share
From the article:
High gas prices have helped Toyota sell more small cars, like the Corolla sedan and the compact cars in the Scion line. And sales of the gas-sipping Prius hybrid sedan have more than doubled in recent months compared with last year. But analysts say the added sales have not helped Toyota’s bottom line as those vehicles tend to be less profitable than S.U.V.’s and big sedans.
“Even though Toyota’s market share is growing fantastically, Toyota’s profitability is actually in somewhat of a stagnant period,” said Takaki Nakanishi, an auto analyst at UBS Securities Japan.
and from another section:
But Toyota’s heavy investment outlays and its focus on smaller, less profitable vehicles raise questions about whether Toyota managers are more concerned with gaining market share than with increasing profits, said Mr. Nakanishi of UBS, who noted that Toyota’s profit margin had fallen for each of the last three quarters.
Clearly, the profit focused analysts were questioning the heavy R&D commitment to fuel economy when the big profits were clearly in the big SUVs and trucks.
Keep in mind, of course, that this “plunging profit” was still 2.5 billion dollars for the quarter at a time when GM and Ford were showing record sales and recording record losses.
OK – now fast forward
Today, all indicators are that Toyota’s profits are down, just like everyone else’s. But they aren’t recording losses, just earning less than they had. The demand for the Prius has outstripped their battery supplier’s ability to produce, at least in the short term, and they have been able to raise prices on it and other high-mileage models.
Honestly, my opinion is that they developed the hybrid more as a long term commitment to pushing “greener” transportation technology, and as a platform from which to develop other things. I don’t think anyone honestly saw the surge in fuel prices.
Nevertheless, I would contend that Toyota’s generally conservative approach and keeping their eye on the long term serves them better than trying to please the analysts. What we have here is simple: They bucked what the analysts were saying. GM did exactly what they were saying. GM put all of their proverbial eggs into the high-profit big trucks and SUV’s, and they don’t really have a Plan B right now.