Toyota — Dead Tech Walking?
David Waterworth with Dr Paul Wildman
Due to the overwhelming and positive interest shown in our first article, we thought to do a second article as another take on the Toyota/Japanese car-manufacturing situation. Is Toyota not circling the drain, after all? Is Toyota dead tech walking?
According to Statista, Toyota has consistently produced and sold about 8 million cars a year for the past two decades. It does not appear to be losing market share, or reducing production. So, is all the hype (some of it perpetuated by me) just hot air? Is there any evidence of Toyota circling the drain? Not as far as I can see. However, as Paul and I have asserted here, should the Japanese automakers misjudge the timing of the transition to electric, it could have disastrous consequences for not only the automotive sector, but also the domestic economy, and globally.
Thankfully, according to Rethink Energy, it appears that the Japanese auto industry is starting to awaken to the urgent need to electrify and is taking tentative steps forward.
Suzuki has announced that it will be spending US$34.5 billion through fiscal year 2030 on R&D and capital spending to allow it to make the transition to producing EVs. The money will be split evenly between research & development into autonomous driving and electrification, and battery manufacturing incorporating renewable energy facilities.
Suzuki intends to produce “kei” cars in Japan by mid 2023. Obviously, the Wuling Hongguang Mini has made an impression. It’s hard not to when the model has landed almost a million sales in the past few years. Suzuki’s micro car will be marketed to urban commuters who do not require long-distance capability. Suzuki hopes to sell them for around $7,000. Impressive, but the Japanese automaker is starting from a long way back.
In the same statement, Suzuki announced that it would continue R&D into hybrids and ICE vehicles. Suzuki justifies this continuance citing a lack of charging infrastructure and concerns over raw material availability. Yet, hybrids are a very expensive strategy to follow, and as EV batteries get cheaper, it’s our view that hybrids will become stranded. “This split focus is exactly why Japanese companies like Toyota, Suzuki, Mazda, etc. are so far behind in EV production figures.”
Are the minor automakers finally letting go of Toyota’s influential leadership? After all, Suzuki didn’t mention hydrogen in its R&D plans, and last November, Mazda announced investments in EV technology. Yet, Japan is at least 5 years behind, say, BYD and Tesla, in technology and manufacturing nous. It will take them another 5 years to bring even a 2nd-generation EV to market, and then they will be a decade behind the Chinese and Tesla. Further, we strongly recommend not buying an EV that is not gen-3 or above.
Nissan is planning to invest half a billion dollars into Renault’s Ampere electric vehicle division. At the same time, Renault has reduced its hold over Nissan by decreasing its voting power from 43% down to 15%. Renault will still profit from the alliance, but Nissan will gain more autonomy. How it will use that autonomy is yet to be seen.
Sony and Honda have established a joint venture, “Afeela.” At CES, it was explained that they intend to complement each other in the production of high-value EVs. (Not that we need any more of those in the market – bring on the budget cars for “everyman!” They don’t need to compete with Tesla — there are plenty of Tesla competitors in the market.) This will certainly be infotainment on wheels.
“While Honda will provide the physical architecture of the vehicle, Sony will provide the software, focusing on infotainment features and self-driving capabilities. In an era of semiconductor shortages and battery supply chain concerns, it feels like there may be some skewed priorities here, but the partnership may bear fruit in less tumultuous times should they ever arrive. Regardless, more commitment towards EVs from Japanese companies is always welcome given the alternative.”
Toyota, on the other hand, is committed to engaging the EV market with the BZ4. Fully Charged vodcast presenter Jack Scarlet says Toyota’s BZ4 is surprisingly good! However, the sales figures tell a different story. Toyota has sold about 600 in the US, 7 in China, and 2,500 in Europe. In all, it is a very disappointing 2nd-gen car in capability and technology.
With those sorts of numbers, one should ask, “When will the pivot to EVs gather some steam? Or get charged up?” As the leading Japanese automaker, and one of the largest carmakers in the world, Toyota has a lot to lose and a lot to gain with a tad of a toehold in the EV market. In Japan, it has a lot of responsibility for the current situation. In an amazing statement recently, Toyota scientists justified their lack of EVs by saying that they assumed a shortage of lithium was coming and so needed to continue to produce HEVs. You can win any argument by just assuming your opponent’s lack of supply — not very scientific and perhaps indicative of a very reactionary and low level of grasp of the situation. This helps to show how out of touch with reality Toyota is. I would love to assume a shortage of BS. Sadly, that doesn’t make it true.
Paul reminded me recently of the time in 2017 when Toyota sold its shares in Tesla, and he posed the question: Is Toyota having a cockbluster moment? (Sorry, dear editor, this was a “Freudian slip” — we meant to say filibuster. No, wrong again, how about Blockbuster!)
Was 2017 Toyota’s Blockbuster moment? In several ways, we can see 2017, when Toyota sold its Tesla shares, as Toyota’s Blockbuster moment. It was in 2000 that Blockbuster’s CEO laughed at Netflix’s offer to sell itself to Blockbuster for $50 million. Only 10 years later, by 2010, Blockbuster did not exist and Netflix is worth $160 billion. Blockbuster viewed the whole dotcom thing as overhyped, just as Toyota today “believes” the whole EV thing is much overhyped.
So, in effect, Toyota is strategizing a MOTS (more of the same) automotive future and/or it is assuming it’s too big to fail and can drag the market whichever way it says. It is strategizing that there is, in effect, no disruption in the automotive market.
Toyota is also making the mistake of strategizing the issue as electric drivetrains alone (i.e., MOTS, with slight modification). However, Tesla, which is leading the revolution, is showing it’s about EVs, internet of things, autonomous driving, elimination of the middle man, bottom up (every nut and bolt) EV-only design, vertical integration in manufacturing (the exact opposite of Toyota’s just-in-time method). That is Disruption+. We could call this the “Musk Method” of “learn from partners, then go it alone.” The must-have Musk Method of vertical integration is the absolute opposite of Toyota’s Kaizen and the distributed production method that Toyota has refined and refined to the global apogee of this methodology.
“If a third party can’t build the quality product for my vehicle, I’ll do it myself,” said the Little Red Hen. This is the Musk Method.
Now Tesla is many times the size of Toyota (by market cap). Even more interesting, Tesla continues to innovate faster than Toyota can issue protestations of love for ICE and hybrid vehicles off into its sunset. Given the rapid uptake of EVs and Toyota’s reluctance to change, what will the company look like by 2027? We especially must consider this question in reference to the Osborne effect — when we know the market is swinging to EVs in a few years, why buy an ICE car now? (It won’t be worth anything when it comes time for trading it in.)
What of the general public? There are still some trotting out the old arguments, last year’s FUD — EVs can’t handle the cold (sorry, Norway) and all our electricity comes from coal anyway (strange, thought I saw solar on the rooftop). Are Toyotas reliable? You betcha. Will they be on our roads for decades to come? Most certainly. But with the way the world is turning, ICE vehicles, even in a hybrid electric vehicle, are dead tech walking.
Toyota may well have had its Blockbuster moment. We hope for its second Blockbuster moment when it changes course and fulsomely embraces EVs as the future. I certainly hope the Lady turns; the world needs the whole Japanese auto industry to make compelling and affordable cars, and these will need to be EVs, especially Toyotas. Let’s put the “ICEing” on the automotive cake.
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