David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Toyota just got its appetite back:

“The rules of the game have changed, with increasing competition from the likes of Tesla, Chinese auto startups and Google... We may have been focusing too much on defending our position. The automotive industry is currently facing a big change, what we thought was the future may just happen tomorrow. We need to be attacking and defending at the same time.”

That was President Akio Toyoda at the company's annual shareholder meeting in Tokyo Wednesday.

Contrast Toyoda's words with what he said when presenting the company's annual results just over a month ago: A focus on improving performance and quality risked underestimating the importance of cost and manufacturing efficiency, he suggested then. Toyoda promised to "invest steadily" rather than aggressively, adding:  "I feel a strong sense of crisis about whether or not we are actually executing carmaking from the perspective of the customer."

Profit Motive
Three-year average operating margins at Toyota are among the best in the auto industry
Source: Bloomberg
Note: Shows all non-Chinese automakers with more than $10 billion in annual sales. Chinese companies have been excluded because of their minimal export sales.

How to explain the shift in tone? As Gadfly has long argued, Toyota's cautious approach to the future of driving has risked squandering its vast advantages of scale and profitability, as competitors plan the roll-out of autonomous and battery-electric vehicles years in advance. With even Apple Inc.'s chief executive officer outlining detailed autonomous-vehicle plans in an interview with Bloomberg Television this week, it's high time Toyoda got off the fence.

As we suggested last month, some of the company's foot-dragging might come down to its embrace of nemawashi, the Japanese management philosophy that dictates businesses should be circumspect and consult widely before embarking on any new strategy. The flip-side is that when a course of action is eventually agreed upon, there should be few internal turf wars. As a result, change then can be blisteringly fast.

You can get a glimpse of where this may head by looking at where Toyota is moving with autonomous-driving technology. Advanced driver-assistance features will be available in all models by the end of the year, Senior Managing Officer Kiyotaka Ise told Wednesday's meeting. That builds on the company's announcement last month of a collaboration with Nvidia Corp.

That development shows the fearsome potential of Toyota's scale advantage. At the moment, no car on the market can offer truly autonomous driving, and getting to that point is going to involve a titanic effort of data collection, processing and deep learning to give vehicles the knowledge of behavior and road hazards that most people take for granted.

The Car in Front
In California, Google's lead in autonomous miles driven looks close to unassailable
Source: California DMV
Note: Chart has an upper limit of 20,000 miles for scaling reasons.

Alphabet Inc.'s approach is to rack up hours upon hours of test driving with its Waymo cars. The 3 million-odd miles of autonomous driving that Waymo's fleet has accumulated puts it well ahead of the competition.

Tesla Inc.'s tactic has been different: promoting the sorts of lane-keeping and collision-avoidance mechanisms available on other high-end cars since the mid-2000s as a breakthrough "Autopilot" feature, and harvesting data from its exponentially larger fleet of semi-autonomous vehicles to hack Alphabet's advantage in fully-autonomous information.  By the end of last year, that had produced a database of 1.3 billion driver miles, according to the company.

The potential for Toyota to repeat this trick is formidable. With annual production of 10 million vehicles, it makes as many cars every two-and-a-half days as Tesla did last year. Assume that just 10 percent of that total get equipped with Nvidia's technology and that they cover the 14,000 miles a year typical of U.S. drivers, and it will have passed the 1.3 billion mile mark in just over a month.

Value Proposition
Investors' faith in Toyota is undimmed. In enterprise value-to-Ebitda terms, it's near multi-year highs
Source: Bloomberg

Toyota may have been late to the game in the driving revolution, but it would be a mistake to count it out. Like the United States, in a famous metaphor of Winston Churchill's, the company resembles a gigantic boiler. It may be slow to get going -- but when the fire is lit, there is no limit to the power it can generate.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. To use the jargon of the industry, Waymo's cars deliver SAE Level 4 and Level 5 automation. Tesla's Autopilot is a Level 2 feature, analagous to Honda Motor Co.'s Sensing Suite and Geely Automobile Holdings Ltd.-owned Volvo's Pilot Assist.

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David Fickling in Sydney at

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Matthew Brooker at