It is difficult not to have a soft spot for a company that started out by making textile looms and now defines its mission as producing “happiness for all”. Toyota became the world’s largest carmaker by steadily, constantly and soberly improving its vehicles, year after year.

Akio Toyoda, a member of its founding family, expressed its approach nicely last week as he announced he was stepping down as president. In his 13 years in charge, he had to chose between pursuing “quick victory” or “a path that leads back to the essential qualities and philosophies that gave us strength . . . I chose the latter.”

But Toyota has a flaw that, as in a Greek tragedy, results from these noble qualities. It has been so focused on doing better what it has always done that it missed the turn in the road towards electric vehicles. So Toyoda will become the company’s chair, while 53-year-old Koji Sato, head of its Lexus luxury brand, takes over.

The problem it faces is common to many incumbent carmakers as they attempt to pivot towards EVs, but Toyota has turned into a matter of principle. The days of Toyota having an ecological halo from its hybrid engine Prius in the mid-2000s are gone: it now sits squarely at the bottom of Greenpeace’s ranking of environmental carmakers.

The company sold 10.5mn vehicles across the world last year, of which fewer than 25,000 were EVs that run on batteries alone. Until recently, it did not merely lag behind carmakers such as Tesla and BYD, the Chinese company, in making the kind of zero emission cars to which many governments want to switch decisively in the next decade or so, but hardly competed at all.

Toyota did not overtake VW, Ford and other manufacturers by chance: its diligent focus on quality overtook Detroit’s carelessness in the 1980s and turned Japanese cars into a byword for reliability. Toyoda revived it from a crisis over a fatal US crash soon after he took over and if you want an economical, sturdy and long-lasting petrol or hybrid car, a Toyota is still for you.

The evolution of the Prius shows how Toyota operates. Putting an electric engine alongside a petrol one was a radical innovation in 1997, when Toyota launched the first model in Japan. By 2009, nearly half of all hybrids sold in the US were Priuses. The wedge-shaped car was driven by Hollywood stars and was the Tesla of its day.

Prius sales have fallen sharply since then, yet Toyota’s engineers have kept on tinkering with it, steadily reducing the sizes of batteries and motors, extending its driving range and cutting carbon emissions per kilometre by an average of 10 per cent throughout each of its five generations. The Prius is better for the environment than in the days when it was more admired.

The improvement effort has not just gone into Priuses: other models including Corollas and Lexuses have also evolved. Toyota sold a total of 2.7mn hybrids last year, giving it an edge until now in meeting emissions standards. But as Europe and the US focus on vehicles with zero emissions, not just lower ones, its ingenuity matters less.

This change of emphasis has not pleased Toyoda, who warned in 2020 that “the current business model of the car industry is going to collapse”, if governments tried to enforce too rapid a transition to pure EVs. His job switch is unlikely to halt Toyota’s lobbying in favour of hybrids, but it now emphasises a subtler argument about the likely shortages of lithium needed to make lithium-ion batteries for EVs.

Gill Pratt, Toyota’s chief scientist, tirelessly insists that putting a lot of lithium into large batteries for EVs is a waste of precious resources if drivers are going to use them mostly for fairly short commutes. The same amount of lithium could be used more efficiently in terms of cutting carbon emissions by dividing it among more hybrids (including plug-ins) with smaller batteries.

That is an interesting point, which could be proved right if lithium shortages become as bad as some predict. But Toyota’s strength in hybrids and weakness in pure EVs make the company so biased that I doubt whether governments are going to listen very much, even if they should. It needs to buckle down and sell a lot more EVs itself in order to be treated seriously.

Toyota is now attempting to catch up: it intends to invest $35bn in the electric transition and sell 3.5mn EVs by 2030. Toyoda last week admitted the need to accelerate: “A carmaker is all that I am, and I see that as my own limit.” A lot rests on how far he permits Sato to change course.

It need not be too late for Toyota: pure EVs made up only about 10 per cent of new car sales last year, mostly driven by Europe and China with other parts of the world still lagging behind. Toyota also knows a lot about batteries, having started work on the technology for the Prius 30 years ago.

History shows that Toyota can make a remarkable amount of progress when it decides to get going, and it needs to do that now with EVs. Its outgoing chief executive trod “a rough path requiring a tremendous amount of time to bear fruit” after he took over. Welcome to another one.

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