At a recent supplier summit gathering 484 companies, outgoing CEO Koji Sato described the situation in unusually direct terms. According to Automotive News, he told executives that the industry is now “battling for our very survival,” urging collective action to address deep structural challenges.
Toyota has long been synonymous with stability and efficiency, largely built on its production system and lean manufacturing philosophy. That reputation makes the warning more striking, suggesting that even the most disciplined players are feeling the strain.
Mounting Pressure from Global Competition and Industry Shifts
The concerns raised by Toyota stem from a combination of factors affecting the entire automotive sector. Chinese automakers are rapidly advancing and redefining cost structures, creating new competitive benchmarks. At the same time, software is becoming central to modern vehicles, adding complexity to development and production.
According to InsideEVs, tariffs and broader economic disruptions have compounded the situation, contributing to what Sato described as an industry facing more upheaval in recent years than in previous decades. He emphasized the need for unified action, stating that companies must “work together as one” and improve productivity across the board.
A Shift in Quality Standards to Reduce Waste and Costs
One of the most concrete changes discussed at the summit involves Toyota’s approach to quality control. The company is introducing what it calls “Smart Standard Activity,” aimed at reducing overly strict specifications that lead to unnecessary waste.
According to Automotive News, Toyota previously rejected components with minor cosmetic imperfections, even when they had no functional issues. Examples included headliner boards with small black spots, steering wheels with nearly invisible wrinkles, and wire harnesses discarded due to slight discoloration, up to 10,000 units per month in some cases.
Shoji Nishihara, a purchasing manager in Toyota’s vehicle development department, noted that “the average customer doesn’t even see these parts.” As a result, the company has begun relaxing standards for non-visible components to lower costs and reduce scrapped materials.
Leadership Transition Underscores Urgency for Reform
The message of urgency was reinforced by incoming CEO Kenta Kon, who will assume the role on April 1 after serving as CFO. Despite Toyota’s scale, 11 million vehicles sold annually and strong profitability, he warned that the company is not in a “secure and comfortable position.”
Kon highlighted reducing the break-even point as a priority and called for rebuilding what he described as “weakened competitive foundations.” Addressing suppliers directly, he stressed the importance of mutual reinforcement within the ecosystem, stating that growth depends on restoring Toyota’s overall strength.
