In his last major appearance in the role, former Toyota CEO Koji Sato sent a message that sounded less like a routine corporate warning and more like a wake-up call. On March 25, Sato addressed about 700 executives from 484 supplier companies at Toyota’s annual supplier gathering, warning that the industry’s old habits were no longer enough. “Unless things change, we will not survive,” Sato was quoted as saying in his speech. Days later, Toyota confirmed that Sato would become vice chairman and chief industrial officer on April 1, with Kenta Kon taking over as president and CEO.
The warning is important because it comes from a company that has spent decades setting standards for global manufacturing discipline. Toyota will remain the world’s best-selling automaker through 2025, despite declining production in some regions and increased competition in China. When a company of Toyota’s size and reputation starts talking openly about survival, the point isn’t that collapse is imminent. The point is, the competitive landscape in the global auto industry is changing much faster than many traditional automakers expected.
Photo credit: BYD.
It’s easy to chalk up China’s rise to a price story, but that only reflects part of what’s happening. BYD sold 4.6 million vehicles in 2025, despite a sharp slowdown in growth and pressure on profitability from a domestic price war. Entering 2026, the company is still vigorously promoting overseas sales. It first talked about exports reaching 1.6 million vehicles, then lowered the target, and later expressed confidence that it could reach 1.5 million overseas sales. This is the scale that traditional automakers are dealing with right now.
The deeper issue is control over the most important parts of the EV value chain. The IEA said that by 2024, China will account for about 80% of global battery production, which will give its automakers and suppliers a huge structural advantage. CATL remains the world’s largest maker of electric vehicle batteries, while BYD has become a major force not only in complete vehicles but also in battery and charging technology. That’s why China’s challenge goes beyond price tags. It’s about supply chain control, speed of execution, and the ability to get new technology into production quickly.
The rise of Chinese automobiles is no longer exclusive to traditional manufacturers. Huawei’s smart car solutions business will grow 72.1% in 2025, while Xiaomi has become a meaningful electric car player after entering the market with the SU7. Reuters also reported that China’s electric vehicle chassis and software could save global automakers billions of dollars and years of development time. This is very different from the competitive threats that Western and Japanese brands have spent decades preparing for.
Photo credit: Skoda.
Not all established automakers are in the same situation. Volkswagen has been trying to localize more aggressively in China while also launching a new generation of small, low-cost electric cars in Europe with projects such as the Cupra Raval and Skoda Epiq. Renault, meanwhile, tends to believe that affordable electric cars are still important, reviving models such as the Twingo while pushing for its overseas expansion. These shifts are costly and complex, but at least they signal clear strategic direction.
For several Japanese automakers, the situation looks even more uncomfortable. Honda has scaled back some of its electric vehicle plans to focus more on hybrid vehicles. Nissan has ended production at its factory in Wuhan, China, as part of a restructuring process. Mitsubishi has withdrawn from automobile production in China, and even Skoda, a European brand that has invested heavily in China, will withdraw from the Chinese market in mid-2026. These are not isolated footnotes. These are signs that China is quickly becoming an extremely difficult place for slow-moving traditional brands.
Image source: Autorepublika.
What makes Sato’s message particularly important is that it involves more than just Chinese competitors. This is also related to Toyota’s own cost structure and habits. Toyota has for years pursued what it calls its “Smart Standards Campaign,” a supplier-centric effort to eliminate excessive quality requirements that increase costs without adding customer value. In terms of supplier materials, the company acknowledged that it has been forcing suppliers to scrap parts because of cosmetic issues that customers will never see. This is consistent with reports that Toyota has rejected numerous wiring harness connectors and other hidden parts due to minor cosmetic flaws but no functional impact.
This is the real subtext of the crisis warning. Toyota isn’t suddenly giving up on quality. It acknowledges that standards, processes and cost assumptions established for the early years can become burdensome if not continually re-examined. In today’s market shaped by software speed, battery economics and ruthless Chinese competition, legacy automakers can no longer treat time, cost and manufacturing complexity as secondary issues.
Europe and the United States still have strong brands, deep dealer networks, engineering talent and decades of consumer trust. The advantages are real. Nor are they permanent advantages. Without competitive battery technology, faster software development, and products that people can actually afford, the gap will continue to widen. Toyota’s leadership transition took place on April 1, but Sato’s message before resigning was more important than a company or a succession plan. If even Toyota thinks the industry has entered a battle for survival, everyone else should be paying attention.
This article was originally published on Autorepublika.com and is republished with permission from Guessing Headlights. Use AI-assisted translation, followed by human editing and review.
