Toyota expands from hardware to software

TOKYO — "One new generation, one new business" was the message drummed into Akio Toyoda as he grew up inside the family's namesake company.

Akio's great-grandfather Sakichi founded the dynasty with Toyota Automatic Loom Works. Akio's grandfather Kiichiro gambled by venturing into autos, with Toyota Motor. And Akio's father Shoichiro made his mark by setting up a construction company that pioneered precast concrete housing, an architecture deemed more fire-resistant for a post-war Japan still haunted by devastating air raids.

Now, at the age of 64, after a decade at the helm of Toyota Motor Corp., Akio Toyoda is following in that family tradition. He announced last week the creation of a business to develop all manner of automotive software, for everything from self-driving cars and on-board operating systems to high-tech mapping.

"Ever since I was born, I was always told, 'One generation, one new business.' That was the mission, the environment in which I was brought up," Toyoda said in a recent media event here.

Toyota wants to become as good at designing bulletproof, user-friendly software as it has become at mass-producing reliable, high-quality cars. In a word, Toyota says it must change with the times and become a "software first" company after 83 years of obsessing over hardware.

"In the past, it was the quality, durability and reliability of Toyota's vehicles on which people evaluated us," Toyoda said during a small roundtable with select media. "The value of vehicles used to be generated by hardware. But nowadays, more value is created by software."

Toyota's gambit underscores the new reality that today's cars, programmed with hundreds of millions of lines of code, are essentially rolling computers, or on-the-go software platforms.

Toyota plans to pursue that new reality through a trio of new companies:

• Woven Core Inc. will focus on automated driving.
• Woven Alpha Inc. will pioneer new businesses in such fields as connectivity, on-board software and high-definition digital mapping.
• Both will be overseen by a new umbrella company called Woven Planet Holdings.

All three will be led by James Kuffner, the American computer whiz who is currently CEO of Toyota's automated driving development arm, Toyota Research Institute — Advanced Development, or TRI-AD.

Among the products that will be pursued by the Woven companies will be Arene, a new open automotive operating system that will allow for "programmable cars." The companies will also work with partners on an Automated Mapping Platform, an open software system that allows companies to create the ultradetailed, high-precision maps needed for automated driving.

About 560 people work at TRI-AD, and the unit officially targets 1,000. Toyota hasn't given a new figure but says it needs many more engineers than that to flesh out the Woven companies.

The Woven companies will be based in TRI-AD's office in downtown Tokyo.

Kuffner was appointed a board member of Toyota Motor Corp. in June, highlighting the Japanese automaker's urgency in breaking into the software sector. He joined Toyota only in 2016 after working on robotics and the self-driving car project at Google.

Kuffner said the Woven project marks a major turning point for Toyota.

"Software is increasing in complexity and ... importance in the industry. So what we have to do is be bold and invest now."

Toyota's push for more software firepower comes as rivals make similar moves in an attempt to streamline the complicated computer systems that run cars and allow them to interact with their mechanical and electronic architectures.

Volkswagen has said all of its new models will run on a new vw.os operating system by 2025 and last year unified its fragmented information technology units into an $8 billion subsidiary called Car.Software that is tasked with developing such computer systems in-house.

But nailing the technology is tricky for neophytes. Software problems have marred the launches of two important Volkswagen models: the eighth-generation Golf and the first-generation ID3 electric car. Earlier this month Volkswagen Group replaced its software chief.

Supplier Robert Bosch said this month it will combine its global automotive software and electronics activities into a new division called Cross-Domain Computing Solutions. It will launch at the start of the new year with 17,000 employees focused on automotive software.

Expertise in innovative software has made Tesla Motors a darling of Wall Street investors. But Toyota is financially well-positioned to pump money into its project.

Even as the COVID-19 pandemic hammers the industry, Toyota still expects a $4.7 billion operating profit this fiscal year and will spend $10.4 billion on R&D.

Toyota's Woven Planet and its Woven Core and Woven Alpha operating companies take their names from Toyota's origins as a loom maker. But Toyota intentionally left its corporate name off the ventures in an effort to make the businesses more inviting to partners who might be turned off by directly joining a Toyota operation. After launching the Woven companies, Toyota will stop using the TRI-AD name.

"Toyota alone cannot create the future," Toyoda said. "When we have as many people as possible willing to join us, then we can create a better, human-centric future."

Initial funding for the Woven companies was not announced. But there is little doubt about Toyoda's personal commitment to the push. In an address to employees last week, he stressed that he was "investing a significant amount of my own money in this company."

And Toyoda's son, Daisuke, is a senior vice president at its forerunner entity, TRI-AD.

"I want Woven Planet to be a true, new model for Toyota Motor Corp.," Toyoda said.

"Because Toyota was successful in the past, we tend to think, why do we need to change? But will existing business models ensure success in the future? That is uncertain," Toyoda said. "Even if something's been successful in the past, let's discontinue that and move on to new activities."