Toyota announced today it will boost the fuel efficiency of its vehicles’ powertrains—the engine and transmission. What’s perhaps more interesting, is, in a break from its traditional practice, the company will build more new models on common platforms to make use of shared parts on different vehicle models.

 

Toyota also aims to reduce the amount of capital investment required to prepare a production line for a new model by approximately 50 percent compared to 2008 levels.

 

“Through these combined projects, Toyota aims to shift to plants that are always competitive, rather than plants that depend on volume,” the company announced.

 

“Sudden and drastic changes in the business environment mean that conventional ways of thinking and doing business can no longer help us grow sustainably,” says Toyota President Akio Toyoda. “We are at a crossroads where we must now build a new business model.”

 

An integrated development approach for powertrain components and vehicle platforms will greatly improve core vehicle performance and product appeal, Toyota explains. Development of vehicles is also being grouped to promote strategic sharing of parts and powertrain components with the goal of reducing resources required for development by 20 percent or more, the company explains. What’s more, by working even closer with suppliers, Toyota intends to further reduce costs and reinvest the resulting resources into developing advanced technologies and strengthening product appeal.

 

Since 2013, Toyota has been increasing the versatility of its production lines, linking production of same-model vehicles across multiple plants and steadily increasing operational availability to make thorough use of capacity surpluses at each plant. Subsequently, the company explains, it has increased its total global load factor (line utilization rate) to more than 90 percent from approximately 70 percent in 2009.

 

Although rolling out new platforms and powertrain components will temporarily require increased production line investment, investment requirements are still expected to result in lower investment levels than those required in 2008. And, because Toyota’s strategic sharing of parts and components will allow multiple platforms and powertrain components to be added to a line for mixed production, the company predicts it will be able to respond flexibly to changes in demand and achieve significant reductions in overall production line investment.

 

There are, of course, many possible consequences. For example, the strategy, including use of more common parts, is quite efficient and has become a global automotive trend, Shigeru Matsumura, analyst at SMBC Friend Research Center says in an Agence France-Presse article. But Matsumura also says the approach could result in huge recalls if the same defective part was found across a company’s vehicle models.

 

“This strategy... can be a double-edged sword,” Matsumura says in the AFP article. “Toyota and other companies with the same practice are likely to boost their investment in improving quality control.”

 

It also remains to be seen what the fallout will be for Toyota’s suppliers. Historically, Toyota’s suppliers needed to design parts to meet specifications that were optimal for individual car models—even where other automakers employed globally compatible standards. Toyota’s plans will change that approach because the company will use global standards for certain parts. That, in turn, may force weaker suppliers out of the supply chain while presenting a growth opportunity for larger suppliers.

 

What impact do you think Toyota’s new strategies will have on its competitiveness? Secondly, how do you think its suppliers will react?