Automotive: Toyota accelerates its EV mass-manufacturing strategy by five years

Toyota, a prominent advocate of hybrid and fuel cells cars, announced in June that it will accelerate its EV deployment by having half of its global sales electric by 2025, five years ahead of schedule. Toyota’s Executive Vice President Shigeki Terashi commented that the company is now facing higher than expected demand for plug-in vehicles. By 2025, Toyota aims to have sold 4.5M or more hybrids and plug-in hybrid vehicles, and 1M battery-electric and fuel-cell cars.

To achieve that goal, Toyota announced it will collaborate in supply deals with reputed Chinese battery makers BYD and CATL. Mr Terashi acknowledged that while Toyota is also a battery manufacturer through Primearth, its joint venture with Panasonic, “[…] there may be a gap between the amount of batteries Toyota can produce, and the amount of batteries Toyota may need.”

As reported by Reuters, Mr Terashi also said that while demand for EVs grows, profits will be slower in coming, given the economies of scale. The key to create a profitable battery EV operation could be in combining new mobility technologies, including on-demand ride services, with battery-powered electric cars, he said.

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Toyota, one of the three largest automakers in the world, has decided to step up its efforts to mass manufacture plug-in vehicles. After Volkswagen Group unveiled its “Roadmap E” strategy in 2017 with the MEB modular car platform for EV manufacturing, the “I.D.” models line-up, and several multi-billion-dollar battery supply deals, Toyota has been losing momentum in the fully electric mobility race.

A combination of factors may have influenced Toyota’s decision to speed up its e-mobility strategy by 5 years: China’s NEV production quotas; Japan’s new fuel efficiency standards; Toyota’s alliance with Subaru, Suzuki, and Mazda in the development of electric powertrains; a possible breakthrough in Toyota’s solid-state battery technology.

Toyota was the only foreign automaker whose sales in China grew in 2018. Sales of Toyota in China surged 14% to almost 1.5M vehicles while GM’s Ford’s and Volkswagen’s were double digit down or sluggish. China is implementing NEV quotas, however, forcing every automaker to obtain “new-energy vehicle credits” that amount to at least 10% of its total annual vehicle production in the country. In 2018, Toyota didn’t sell any NEVs in China through its stand-alone brand. Toyota began to sell NEVs in China in 2019 with two PHEV versions of the Corolla and the Levin.

In parallel, Toyota will face tougher fuel efficiency standards in its home country. To limit air pollution, the Japanese government will require an average 32.4% improvement in fuel efficiency by 2030 compared to 2016’s fuel consumption. This efficiency boost will be difficult to achieve with the use of a combustion engine alone, forcing Japanese automakers to use hybrid or fully-electric powertrains.

In the battery space, Toyota’s head of battery technology announced that a commercial solid-state battery could be unveiled for the Tokyo Olympics next year. While the battery joint venture with Panasonic could speed up the commercial deployment of Toyota’s solid-state batteries, this technology will face many hurdles. Toyota’s battery head admitted that solid state batteries “may not be cheaper that lithium-ion”. Additionally, battery supply deals between carmakers and battery OEMs usually last around 3 to 5 years. For this reason, the supply deals closed with BYD and CATL further signals to Toyota commercially deploying those batteries at the end of the next decade.

Nevertheless, Toyota could become a dominant player in the electro-mobility space very soon as, unlike other automakers, it has a successful track record in e-mobility, battery production, and raw materials procurement through its trading arm, Toyota Tsusho.