New Toyota CEO targets 1.5M EV sales in 2026, plans U.S.-built crossover EV

TOKYO – New Toyota Motor Corp. CEO Koji Sato, warning that the industry is in a “life or death situation,” plans to turbocharge the company’s EV sales to 1.5 million vehicles in 2026 with the help of a newly developed platform and local production of a three-row, full-electric crossover in North America.

The new dedicated EV architecture will enable Toyota’s future EVs to double their range, thanks to more efficient battery use, and require half the investment and development resources.

In the next three years, Toyota and Lexus will add a total of 10 new EVs, including models on the new platform and others on evolved versions of the current e-TNGA one.

Sato and two top lieutenants, Chief Technology Officer Hiroaki Nakajima and CFO Yoichi Miyazaki, outlined the EV ramp up on Friday in Tokyo as they unveiled a new business vision for Toyota.

It was Sato’s first news conference since taking the helm of Toyota Motor Corp. on April 1, when Akio Toyoda became chairman after more than a decade leading his family’s company. Sato had previously led Lexus.

Sato’s big-picture strategy, called the Toyota Mobility Concept, calls for expanding the Japanese juggernaut’s business beyond cars to find new revenue streams and deliver bigger margins in an industry that is facing profound change. The road map calls for leveraging electrification, new forms of mobility and digitalization and tapping new opportunities in connected infrastructure. 

"The No. 1 message is, ‘Let’s change the future of cars,' " Sato said. "We have to further pursue enhancing the value of cars. That is how we need to evolve."

The new Toyota boss, known as Captain Sato internally, said he would stick with Toyota’s diversified approach to electrification that relies on hybrids and hydrogen fuel cell vehicles, even as he dials up EVs. Toyota said it now achieves better profit margins on hybrids than from gasoline-only vehicles.

The multipronged approach is also needed to cater to the needs of Toyota’s far-flung global customer footprint and accommodate a lineup that spans minicars to trucks. 

“Out of that diversity comes innovation,” Sato said. 

‘Bulldozer’ drive

Sato, who has said that jump-starting the company’s EV strategy is his top priority, is pushing ahead with plans to roll out a new full-electric platform by 2026 that will help propel Toyota’s global EV sales to about 1.5 million vehicles. Toyota sold just 25,000 full EVs globally in 2022.

Nakajima, who now leads global product development, said production costs will be slashed by taking the famed Toyota Production System into a new era and with a radical expansion of automation, such as autonomous transport, connected technologies and automated inspections.

"We will completely transform the landscape of our production plants," said Nakajima, whose in-house nickname is Bulldozer for his hard-driving approach to product development. He said the way Toyota's next-generation EVs will be made is "completely different."

As part of the production overhaul, Toyota wants to achieve carbon neutrality at all its global manufacturing sites by 2035, Nakajima added. In that year, Toyota’s global new-vehicle fleet will be emitting half as much emissions as it did in 2019, the company pledged.

Miyazaki, Toyota’s CFO, said the EV strategy will be tailored to the needs of Toyota’s diverse markets. In developed markets such as North America and Europe, Toyota will continue to evolve and improve upon the bZ series of electric vehicles, which ride on the e-TNGA platform. In emerging markets such as Southeast Asia, Toyota will focus on electric pickups and small cars.

U.S.-built crossover EV planned

In North America, Toyota will also begin local production of a new three-row, all-electric crossover that sources batteries from a new plant in North Carolina.

Executives did not provide further details. But Japan's Nikkei business daily has reported that Toyota will update an existing factory in Kentucky and start with monthly output of 10,000. That would put annual output at about 120,000 vehicles.

“We will make meet the wide range of demand globally with diverse options,” Miyazaki said.

Toyota executives said their EV cadence was moving according to plan and that battery supply was the main factor preventing earlier disclosure of the 1.5 million target for 2026.

“It might have seemed we came late, but for us it was just a matter of appropriate timing,” Miyazaki said. “In producing 1.5 million, if there are no batteries, we can’t produce. So, the biggest pacesetter was batteries.” 

Late last year, Toyota prepared the way by announcing that it would nearly triple its investment in the North Carolina battery plant, to $3.8 billion from $1.3 billion, to also make power packs for full-electric vehicles. The plant is slated to open in 2025.

In the future, Toyota will consider dedicated EV-only plants, depending on how demand develops, Miyazaki said. 

'Outside the box'

Sato, 53, was tapped as CEO to inject youth and fresh perspective as he navigates a largely hidebound legacy automaker into a new era of electrification, autonomous driving and connectivity. 

Sato’s reboot comes as the company coasts comfortably on soaring profits and sales. But Toyota is also coming under increased pressure from a wave of new rivals from Silicon Valley to China that are challenging tradition with new ways of building and selling cars. 

These newcomers, unburdened by holdover costs of decades-old factories, supply chains geared around internal combustion and convoluted distribution networks, are also raking in unprecedented profit margins. S&P Global estimates Tesla’s profit margin at 20 percent. Toyota’s operating margin, robust by industry standards, stands around 10 percent.

"The current status of the auto industry is a life or death situation and very competitive," Sato said. "We want to think outside the box, outside our existing concepts."

Sato has said his EV overhaul will lead off with Lexus, which already has said it plans to go fully electric worldwide by 2035 and sell 1 million EVs globally in 2030. 

Toyota, as a whole, is targeting global sales of 3.5 million EVs in that time frame.

Getting there will require a rapid climb. In 2022, Toyota sold only 24,466 full-electric vehicles worldwide. That compares with 2.6 million hybrids in the same period. 

Playing catchup

But Toyota is stepping up the pace in 2023 with a ramped up rollout of the Toyota bZ4X crossover and its Lexus premium counterpart, the RZ. 

Toyota’s global EV sales more than tripled to 9,016 vehicles in the first two months of the year.

In the critical U.S. market, meanwhile, Toyota sold about 1,880 EVs through March. By contrast, General Motors, its top mainstream American rival, sold more than 20,000.

But even as Toyota moves faster into EVs, the competition is not standing still.

If Toyota reaches 1.5 million EV sales in 2026, Chinese EV rival BYD could be selling 3 million and Tesla as much as 5 million, said Koji Endo, senior auto analyst at SBI Securities Co. in Tokyo.

“Toyota’s 2026 goal is a big, big jump, as far as Toyota is concerned,” Endo said. “But you need to compare it with other makers. There could be half a dozen companies selling more than 1.5 million EVs in 2026. Can they really catch up to those front-runners? That’s the question.”