Why Toyota – the world’s largest automaker – isn’t all-in on electric vehicles

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About two decades ago, Toyota Motor became the automaker of choice for American environmentalists and environmentally conscious consumers with its Prius hybrid, an “electrified” vehicle that was among the cleanest and most fuel-efficient vehicles ever produced.

Amid rising gas prices, demand for the vehicle grew, inspiring other automakers to roll out a litany of hybrid models. Prius vehicles, including a plug-in hybrid electric model, remain among the most fuel-efficient gas-powered cars in America.

But as the auto industry transitions into a battery-powered future, the Japanese automaker has fallen out of favor with some of its former supporters, ironically due to the Prius and Toyota’s hesitancy to invest in all-electric vehicles.

“The fact is, a hybrid today is not a green technology. The Prius hybrid runs on an internal combustion engine that emits pollution that can be found in any gas-powered car,” wrote Katherine García, director of the Sierra’s Clean Transportation for All campaign. Club, in a recent blog post.

Greenpeace last week placed Toyota at the bottom of a survey of 10 automakers’ efforts to decarbonise, citing slow progress in the supply chain and sales of zero-emission vehicles such as electric vehicles totaling less than 1% of total sales. .

While automakers such as General Motors, Volkswagen and others have pledged to invest billions of dollars in recent years to develop all-electric vehicles that don’t require gasoline engines, such as the Prius, Toyota has lagged and only recently announced similar investments. It also continues to invest in a portfolio of “electrified” vehicles – ranging from traditional hybrids like the Prius to its recently launched, but disappointing, electric crossover bZ4X.

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The strategy has pitted the world’s largest automaker against many of its rivals, raising questions about its commitment to a sustainable path for the industry, despite the company’s goals of being carbon neutral by 2050.

Toyota is not alone in such plans. Stellantis, Ford and the other Japanese automakers are similarly investing in electrified hybrid models. But in the hands of the patriarch of mainstream hybrid vehicles, a conservative approach to EVs is noteworthy.

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Toyota executives, while increasing investment in all-electric vehicles, argue the company’s strategy is justified — not all parts of the world will adopt EVs at the same rate due to the vehicles’ high cost and lack of infrastructure, say they .

“As much as people want to talk about EVs, the market isn’t mature enough and ready enough…at the level we should be to have mass movement,” said Jack Hollis, executive vice president of sales at Toyota Motor North. America, last month at a virtual Automotive Press Association meeting.

Hedging bets

In December, Toyota announced plans to invest 4 trillion yen, or now about $28 billion, in a range of 30 battery-powered electric vehicles by 2030.. At the same time, it continues to invest in hybrids such as the Prius and other potential alternatives to battery-electric vehicles.

“We want to provide everyone with a way they can contribute most to solving climate change. And we know that answer is not to treat everyone the same,” said Gill Pratt, chief scientist at Toyota and CEO of Toyota Research Institute, at a media event in Michigan last month.

Weeks ago, the company announced it would spend up to $5.6 billion on hybrid and all-electric battery production in Japan and the US to support its previously announced plans. That may sound like a lot, but it dwarfs others like GM and VW.

For example, GM has set a goal of offering only zero-emission electric vehicles by 2035, including the Cadillac and Buick brands by 2030. Several other automakers have made similar vows or set targets for 50% or more of their vehicles sold in North America. to be fully electric.

Toyota aims to sell 3.5 million electric vehicles per year by 2030, which would be more than a third of current sales. Those sales include about 1 million units of the luxury brand Lexus, which plans to offer EVs exclusively in Europe, North America and China by then.

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Toyota Motor Corporation cars are seen at a briefing on the company’s battery electric vehicle strategies in Tokyo, Japan, Dec. 14, 2021.

Kim Kyung Hoon | Reuters

Paul Watati, industry analysis manager at AutoPacific, believes Toyota is “definitely on the conservative” side when it comes to electric vehicles, but that’s not necessarily a bad thing for such a major automaker.

“I think they hedge their bets,” he said. “From a global perspective, many markets are moving at different speeds. The US is slower than Europe and China in EV adoption, but there are other markets where there is no infrastructure at all. A diverse approach to powertrains makes sense for a global automaker.”

By 2021, Toyota sold 10.5 million vehicles in approximately 200 countries and regions, more than any other global automaker, including those of its subsidiaries Daihatsu Motors and Hino Motors. Volkswagen – the world’s second largest automaker – sold 8.9 million vehicles in 153 countries, and GM and its joint ventures sold 6.3 million vehicles, primarily in North America and Asia.

Only one solution

Toyota believes all-electric vehicles are one solution, not the solution, for the company’s goal of becoming carbon neutral.

“In the distant future, I’m not investing on the assumption that electric batteries are 100% of the market. I just don’t see it,” said Jim Adler, founder of Toyota Ventures, the automaker’s venture capital unit. “It’s going to be a really mixed market.”

Toyota executives expect different parts of the world to use electric vehicles at different speeds, based largely on available energy, infrastructure and raw materials needed by the batteries to power the vehicles.

2022 Toyota Mirai hydrogen powered fuel cell electric vehicle

Toyota

In addition to hybrid and plug-in electric vehicles, Toyota has invested heavily in hydrogen fuel cell electric vehicles, including a second generation of its Mirai.

Hydrogen fuel cell vehicles operate just like battery electric vehicles, but are powered by electricity generated from hydrogen and oxygen, with water vapor as the only by-product. They are filled with a nozzle almost as quickly as traditional gas and diesel vehicles.

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“BEV, fuel cell, plug-in hybrids, all those reduction tools are going to happen, and they’re all important,” Hollis said.

Yet fuel cell vehicles face the same challenges as fully electric vehicles: cost, lack of infrastructure and consumer understanding.

Toyota said it is also investigating e-fuels, which officials say are a carbon neutral fuel to replace gasoline in non-electric vehicles.

Cost and materials

And middle-of-the-road options tend to have lower price tags.

For example, a 2022 Toyota Prius hybrid with an EPA rating of up to 56 mpg combined starts at about $25,000. That’s about $17,000 less than the automaker’s all-electric bZ4X crossover.

A 2023 Toyota bZ4X electric vehicle (EV) at the Washington Auto Show in Washington, DC, on Friday, January 21, 2022.

Al Drago | Bloomberg | Getty Images

The batteries in electric vehicles are extremely expensive and prices continue to rise due to inflation and the demand for materials such as lithium, cobalt and nickel needed to produce the battery cells.

According to consultancy AlixPartners, raw material costs for electric vehicles have more than doubled during the coronavirus pandemic.

That makes Toyota’s hybrid strategy relatively economical. Toyota also states that there simply aren’t enough of such minerals to go around.

“In the next 10 years, there will be huge bottlenecks in lithium supply around the world,” Pratt said. “Just look at the number of mines that have to be made. There will also be a bottleneck in battery-grade nickel because the number of refineries that have to be paid when demand rises so quickly.”

The Metals Co., a Canada-based start-up, estimates that there is significantly insufficient production of battery-grade nickel, cobalt and manganese sulfate to meet US EV targets by 2030.

The publicly traded mining company predicts that even if all projected nickel sulfate production from the US and countries with free trade agreements started producing electric vehicles by 2030, it would deliver less than 60% of the EV targets set by automakers during that period.