He also oversaw Toyota's development of Lexus, approving development of the luxury car in 1983 to compete with Mercedes-Benz and BMW. The first vehicle, the LS 400, went on sale in the United States in 1989.
After stepping down from all executive roles, Toyoda continued to come into the office to consult with his successors, and took on roles such as chairing the company's commemorative museum, according to spokesman Naoto Fuse, who was formerly director of the museum.
The U.S. Automotive Hall of Fame inducted Toyoda in 1994, making him the second honoree from Japan, after Soichiro Honda.
"As a member of the automobile industry, this is indeed a great moment for me," he said in a statement upon his induction. "Ever since Toyota's establishment in 1937, I have been involved in this wonderful business, and as long as my engine keeps running, I intend to give back as much as I can for the industry's further development."
Toyoda was born on Sept. 12, 1913, near Nagoya, the second son of Heikichi and Nao. He grew up in Nagoya inside his father's textile mill, schooled from an early age in machines and business, according to his autobiography, Toyota: Fifty Years in Motion.
He graduated from the University of Tokyo with a degree in mechanical engineering in 1936 and joined Toyoda Automatic Loom Works Ltd., working for his uncle, Sakichi Toyoda, inventor of a weaving loom that automatically shut itself off when a piece of fabric broke.
At the time, Sakichi's son, Kiichiro, was heading an automobile division of Toyoda Automatic Loom Works. In 1937, Kiichiro founded Toyota Motor and took his younger cousin with him.
Toyoda, then in his 20s, started on the factory floor before being promoted to production planning and director. From the outset, he was given broad freedom to pursue interests ranging from fixing cars to helping establish the company headquarters in Toyota City. He became a director in 1945.
Toyota and Ford held discussions on jointly making cars in the United States until the Japanese attack on Pearl Harbor on in 1941 and the Pacific War interrupted contacts. Talks resumed after World War II but did not lead anywhere.
In 1950, during its occupation of Japan, the U.S. Army sent Toyoda to Dearborn, Mich., to learn about mass production from Ford. The United States needed Toyota to build trucks for its troops in Korea.
Toyoda concluded that Ford was barely ahead of the much-smaller Toyota in terms of technology. Back in Japan, he concentrated on making cars in small batches at maximum efficiency. He began using IBM machines to cut production costs, according to Kazuo Wada, professor of economics at the University of Tokyo and author of A Fable on Manufacturing: Ford to Toyota.
Building on the work of his cousin, Toyoda developed what became known as the Toyota Production System, which aimed to eliminate excess inventory of parts and other waste. The manufacturing system became so successful it was eventually adopted by other carmakers, and by manufacturers outside the automotive industry.
His wife, Kazuko, died in 2002, The New York Times reported.
Toyoda is survived by three sons, all of whom hold key roles in the network of Toyota-affiliated companies, or Toyota keiretsu.
Eldest son Kanshiro is chairman of transmission specialist Aisin Seiki Co., Tetsuro is chairman of parts maker Toyota Industries Corp. and Shuhei is president of seat manufacturer Toyota Boshoku Corp.
Funeral services will be held for close family members only, Toyota said.
Hans Greimel of Automotive News contributed to this report.