The global automotive industry experienced its first major shock of 2026, originating from Toyota. The world's top-selling automaker for six consecutive years abruptly announced a sweeping overhaul of its core leadership. Fifty-seven-year-old CFO Kenta Chikara has been promoted to President, while former President Satoshi Sato has been reassigned.
This leadership shakeup follows the release of a stark financial report: for the third quarter of the 2026 fiscal year, Toyota's net profit plummeted 43% year-over-year. More critically, the once-united front of Japan's major automakers—Toyota, Honda, and Nissan—is fracturing at an accelerating pace, with the Chinese market emerging as the ultimate proving ground that will determine their futures.
**The Paradox of the Global Sales Champion: Selling More, Earning Less** The year 2025 was filled with contradictions for Toyota. While the company achieved a new record in global sales, reaching 11.323 million vehicles and leading second-place Volkswagen by approximately 2.3 million units, its profit indicators flashed warning signs. Despite a 8.6% year-over-year increase in third-quarter net revenue, net profit collapsed by 43%. Toyota explicitly cited U.S. tariff policies as a significant factor pressuring its profitability.
The leadership change became an inevitable choice. The core mission for the new President, Kenta Chikara, is clearly defined: "To establish a robust profit structure and use those funds to finance Toyota's future." His primary weapon is the company's traditional strength: hybrid technology. Toyota plans to increase its annual production of hybrid and plug-in hybrid vehicles to 6.7 million units by 2028, accounting for nearly 60% of its total planned production. This strategy stands in sharp contrast to the current trend of some automakers scaling back their electrification efforts.
Despite these challenges, Toyota has raised its full-year forecast for the 2026 fiscal year, signaling confidence in a profit recovery. However, the question remains whether this confidence can overshadow the uncertainties looming in the Chinese market.
**A Divided Camp: Divergent Fortunes for Japan's Big Three in China** While Toyota's global position remains solid, the Chinese market has become a quagmire for Japanese automakers. The collective market share of Japanese brands in China has shrunk from 23.1% in 2020 to just 9.7% in 2025. The three major Japanese manufacturers, which once advanced in lockstep, now face markedly different destinies.
Toyota has emerged as the sole survivor. Its sales in China surpassed 1.78 million vehicles in 2025, registering a slight increase of 0.23% year-over-year. This resilience is attributed to its strong hybrid vehicle base and localized initiatives, such as the "China Chief Engineer" system. Nissan and Honda have not been as fortunate. Nissan's sales in China fell by 6.26% year-over-year, while Honda experienced a sharp decline of 24.28%, marking its fifth consecutive year of decrease. Despite granting greater autonomy to their local teams, neither company has found a successful strategy to reverse the trend.
The situation is further exacerbated by a global profit squeeze. From April to September 2025, Japan's seven major automakers collectively lost approximately 1.5 trillion Yen in profits due to U.S. tariffs. Supply chain vulnerabilities have added to their difficulties. The once-cohesive Japanese automotive camp is now clearly heading down divergent paths.
**The Ultimate Proving Ground: China's Market Will Dictate the Future for Japanese Automakers** For Toyota, the leadership change is just the beginning. The true test lies in China. As the world's largest automotive market and the forefront of the new energy transition, competition in China is exceptionally fierce.
In an effort to reclaim market share, Toyota has substantially transferred decision-making authority for developing China-exclusive models to its local teams. The GAC Toyota Bozhi 3X is a product of this new approach. Nevertheless, challenges remain immense. Chinese and American new energy vehicle manufacturers like BYD and Tesla are now counter-attacking in the Japanese domestic market. In 2025, Tesla's sales in Japan surged by 90% year-over-year, while BYD's grew by 62% and even launched a Japan-exclusive model.
This reversal of offensive and defensive positions reflects a broader contest over technological roadmaps and market timing. Toyota is betting heavily on hybrids, aiming to break through with cost advantages, while Chinese brands are defining the new rules of the game with pure electric vehicles and intelligent technology.
Former President Satoshi Sato once stated plainly that Japanese automakers are facing a survival crisis. Enhancing supply chain competitiveness and competing for the future of software-defined vehicles have become their only viable paths forward. Toyota's leadership transition is a microcosm of the Japanese automotive industry's response to this crisis. However, in the tide of electrification and智能化, relying solely on cost reduction, efficiency gains, and hybrid advantages may not be sufficient to reverse their fortunes.
The ultimate examination in the Chinese market has already begun. The divergence among Japanese automakers will continue. Only those who can keep pace with China's rhythm will secure a place in the future global landscape.