Is Toyota now fully committed to EV?

There has been a lot of reports and media attention on Toyota's very open resistance to car electrification. This comes as a surprise to many and shock to others because Toyota has long been the pioneer of clean energy cars with their first hybrid car Prius and their dominance in ICE and Hybrid vehicles sales worldwide. Toyota is also the first to commercially launch hydrogen fuel cell car with the Mirai.

Despite having the early lead in clean energy vehicles, Toyota currently does not sell any electric vehicles in major markets outside China, while its competitors have been pouring resources into developing EVs and preparing for the end of ICE vehicles. However, Toyota has said that it plans to sell 15 battery-electric models globally by 2025, part of a wider lineup of 70 battery-electric, hybrid and hydrogen fuel cell vehicles to offer “diverse choices” to buyers.

On 14 December 2021, Toyota announced that it plans to invest $35 billion into battery-powered EVs and roll out 30 models by 2030. Prior to this, Toyota announced that it will invest approximately $3.4 billion (380 billion yen) in automotive batteries in the United States through 2030. The venture will first focus on producing batteries for hybrid electric vehicles. Toyota has said that it plans 15 additional battery electric models, including seven different Toyota bZ (Beyond Zero) models, by 2025. Two of those bZ models—the bZ4X crossover, followed by an electric sedan—are due to bow by the end of the 2021 calendar year. One of the others will be an electric pickup.

In its first EV market, Toyota's three electric models are the battery-electric versions of the sister models C-HR and IZOA, which were introduced in 2020 and are built by Toyota’s joint ventures with GAC and FAW, as well as the Lexus UX 300e. The Toyota bZ4X, the first electric vehicle under the automaker's new bZ brand, will come to the U.S. in mid-2022.

Being the world's biggest auto manufacturer, and for a long time the leader of clean energy vehicles and the most valuable car company in the world, why is Toyota losing ground for electrification? There are several reasons.

Firstly, Toyota has invested heavily in hybrid technology and they want to recoup the investment first before moving to fully electric. That is why Toyota has consistently argued for hybrid technology saying that it s better than full EV as it overcomes range anxiety, has efficiency almost as high as full EV (well...) and that EV's are not that green after all.

Secondly, Toyota believes that electrification can only be commercially viable in 10 years or more. Hence, it is in no hurry to electrify its cars. It is betting on denser batteries like solid state batteries and hoping to turn the tables against the current EV leaders. Toyota is also hoping for breakthroughs in fuel cell technology so that it can be the first mover.

Thirdly, Japan has infrastructure limitations to expanding the grid. Unlike China which imports 30% of energy needs, Japan imports 96% in 2020! After Fukushima, Nuclear energy dependence is significantly reduced, and oil and natural gas became the substitutes. Therefore, it may be a politically motivated move for Toyota and Japan as a while to resist electrification.

Fourthly, despite Covid chip shortages, Toyota's market share in China and worldwide remains strong, so there is very little motivation for change. Think Kodak...Toyota, like other Japanese corporations, have very close relationships with their suppliers, even to the extent of cross ownerships, that results in resistance to change as it would impact manufacturer-supplier relationships.

Fifthly, electrification necessitates massive internal restructuring, change in mindsets, new thinking and innovation, which is never the strength of Japanese corporations. Like Germany, Japan has the propensity to seek perfection, so they do well in tasks for continuous improvements (Kaizen), not revolutionary changes with great uncertainty and imperfect information.

Success is not always a good thing. For Toyota and the Kodaks of the world, when you are the clear leader and raking in good profits, it is very difficult to convince yourself and your team to change, to make short term sacrifices, for a long term goal which you may not even be there to enjoy the success when attained. Moreover, I really think there is still a lot of skepticism on electrification in Toyota's power corridors.

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