Toyota is facing a transformation: New CEO Kenta Kon has announced a drastic streamlining of the Japanese automaker's model lineup. Too many variants, too high costs—that is the diagnosis of the new boss, who is taking the helm in difficult times. While the industry is increasingly focusing on autonomous driving and electromobility, Toyota continues to rely on hybrids and combustion engines, but that is set to change now.
Model Diversity as a Cost Trap
"We simply have too many models in our portfolio," Kon explained in an internal memo. The number of different series and derivatives has grown uncontrollably in recent years. While competitors like Tesla score points with a slim model lineup—Model 3, Model Y, Model S, and Cybertruck—Toyota offers over 30 different models, from compact cars to SUVs and pickups. This diversity drives up development and production costs.
Comparison: Tesla vs. Toyota
Strategic Realignment
The streamlining of the model lineup is part of a broader strategy to make Toyota more competitive again. Kon plans to increasingly invest the freed-up funds in the development of electric vehicles and autonomous driving technology. While Tesla hopes for FSD approval in Europe, Toyota is relying on a combination of its own software and partnerships.
Impact on Suppliers
The portfolio streamlining also has direct effects on the supply chain. Fewer models mean fewer variants and parts, simplifying logistics and saving costs. Analysts expect that Toyota can improve its margins in the long term as the number of models decreases.
Future of the Brand
Whether the model reduction will be enough to lead Toyota to the forefront of electromobility remains to be seen. Tesla shows with the Cybercab how efficient a slim product portfolio can be. Toyota, on the other hand, must master the balancing act between tradition and innovation.